Transitioning the Intangible

December 3, 2014|Amy Biersteker

Transitioning a business is not an event but rather a long-term process. Behind the obvious transition of ownership and day-to-day management is the more subtle transition of authority and leadership.

Mechanically, handing over authority is relatively simple. In reality, it is very difficult for entrepreneurs to let go of the control of their business. It takes time to gain confidence in a prospective successor. Add to that the preparation required to ensure that leadership goes hand-in-hand with that authority and it’s easy to see why transitioning is such a long-term process.

 Leadership is the key to transitioning a number of intangible but essential assets. Effective leadership of a family business encompasses much more than just making the business decisions. Equally important is having a personal passion for the business and the family’s connection to that business, and the ability to transmit that passion to other members of the family and business. Leadership is also required in the transition of the purpose, power and professionalism of the family business.

Leading the way . . . to what?

Leadership is one of the foundations of a successful business. To many, leadership means power and control. However, leadership of family businesses encompasses much more. Here are some of the often forgotten aspects of leadership:

  1. Future focused: Leadership requires a focus on building the legacy of the family business. A leader should be able to envision and describe where the family and the business can go – the horizon that is the ultimate destination. Good leaders not only understand and believe in the purpose of the business but are also able to articulate what the business could look like 30, 40, or more years ahead, and how the current and future generations will benefit from being a part of it.

  2. Principles: It is critical that the leader truly believes in the principles that are upheld by the family and can help the next generation continue to live up to these principles.

  3. Multi-generational: Leadership at the different generational levels is very important to a successful transition. When working with entrepreneurially-led businesses there are often three different generations to consider. The first generation is referred to as G1, the children as G2 and the grandchildren as G3. It is important to cultivate leadership in all generations, both within the family and in the business.

  4. Complimentary leadership styles: There are many different styles of leadership, a number of which will likely be at work in family or non family-owned businesses simultaneously. The director-type person who drives the wealth engine may not be the best person to keep the family or principals communicating, while the visionary may not be the individual best suited to leading a team mandated to develop internal systems and processes. It’s highly unlikely that one person can provide all the leadership styles required to accomplish the goals and objectives of the family and the business.

    Often, we hear comments about how family members don’t have the skills to be involved in the business. When we dig further, we often find that there is a family system overlapping the business system. In these situations, families – especially parents and siblings – have put other family members in a box and labelled them.

    It is also vital to assess each individual’s natural abilities and instinctive talents. Everyone should understand how they instinctively act when in group and work environments.

  5. Mentoring and development: Ensuring others both inside and outside the business are mentored is an important part of the leadership role. It is also critical in developing leadership for subsequent generations. G1 cannot fully understand what it is like to be G2 or G3 in a family business. The business has been created by G1 and the business reflects who they are. However, G2 is defined by the business. They have to work twice as hard and be twice as smart to be accepted by those around them.

 

Successor development plan

Grooming a successor begins with the founding generation displaying leadership by creating a successor development plan, which includes:

  • Training and development
  • Selection process
  • Roles and responsibilities
  • Contract/agreement

 

If the second and subsequent generations feel the passion for the business, then there is a good chance they can develop other key leadership skills as they become more involved in the business. Mentoring and personal development plans should be implemented for all prospective successors.

As leadership skills develop, selection of a successor(s) should be formalized with an assessment of required versus current skills, and an action plan created to address any gaps.

Need to develop leadership skills within your organization? Schenck’s Guided Planning for Success team can help. Contact Amy Biersteker at 920-996-1350 or amy.biersteker@schencksc.com to learn more.

Adapted from an article by The SuccessCare Program. 


Amy Biersteker, MSE, has more than 20 years of experience working with organizations to develop leaders and their teams. She provides strategic business advice to clients on a variety of issues, including recruitment, organizational development, process improvement and leadership development.