When founders create successful family businesses, they show the world how astute they are. They have climbed the proverbial mountain to attain their level of success. They have demonstrated a unique ability to take an idea, create a value proposition, and get people to buy it. They have shown the world they can be objective, anticipate hurdles, and “see around corners.”
And yet, most founders flounder when it comes to developing succession plans. Despite the rational reasons placed in front of them and despite their apparent agreement to work on developing a plan, they don’t. They know they are mortal; they know they will not be running the business forever. Therefore, they know a plan should be developed for the company and their family. It’s the rational thing to do. Right?
They hire excellent trust and estate attorneys and corporate attorneys—and they all say you must plan for the future. They pay their fees, and yet they don’t follow through. Why not???
Why Founders Avoid Succession Planning
There are many reasons. Some say they don’t want to lose control; some say ego, some say they don’t want to retire, some say they don’t want to confront their mortality, some say they’re having too much fun, some say they wouldn’t know what to do if they weren’t running things, and some say the business would fall apart if they weren’t there. There are thousands of other reasons given, as well.
The bottom line is that no succession plan is being developed, which means there is no plan in place.
No plan means that when the founder is no longer there, those who follow must pick up the pieces and try to keep the business from falling apart. This transition period will be at a time when the once strong company will appear weak and out of control. What will customers, suppliers, banks, and employees do? No one knows until it happens.
So why wasn’t a plan developed? With the founder gone, it’s too late to answer that question. Everyone left in the business is scrambling to keep their head above water and survive. Not a pretty picture.
Two Limiting Fears
A banker once told me that the world runs on fear and greed. That’s also not a pretty picture. However, it might be helpful to explore the fear portion of that theory. Are there unconscious fears the founder could have that would prevent them from developing a succession plan?
Let’s discuss two fears: incompetence and irrelevance.
The successful founder is known to be competent and relevant. Competency and relevancy are attributes that are internal and external. While the founder’s self-image contains knowledge that they are both competent and relevant, these attributes are enhanced because their world knows and acknowledges that, too. So, when they are confronted with the idea of developing a succession plan, what does the founder experience, perhaps without realizing it?
It’s the fear of loss of being perceived as competent and relevant. Many founders have worked for 35 years or more and have lived with the knowledge that they are competent and relevant. It’s part of their identity. Now they are being advised to, in their eyes, change their status voluntarily because that’s what’s good for the business and their family. But what about them? What happens to them?
No one approaches that issue. So what does the founder do? Nothing! Why should they become irrelevant and thought to be no longer competent? Part of their identity is relevant and competent. Why lose that part of their identity?
The founder cannot think of a different path from the one they are on, especially when they are in an emotional state of loss. Can this emotion be de-escalated? Is the trusted advisor the person with the skill set necessary to do that? Possibly.
To be continued…
Recommended Reading
- The Succession Solution: The Strategic Guide To Business Transition
- Secrets to Succession: The PIE Method to Transitioning Your Family Business
- Family Business Succession: The Final Test of Greatness
- Family Business Succession: Your Roadmap to Continuity
- Dynastic Planning: A 7-Step Approach to Family Business Succession Planning and Related Conflict Management
- The Art, Science, and Law of Business Succession Planning: The Questions Every Family Business Owner Should Be Asking
Further Reading at Family Wealth Library
- How to ACE your Family Business Succession Planning
- How to Talk About Succession Planning In Your Family Business
- Family Planning for Succession: A Necessary Step For the Desired Outcome
- As Easy as 1 – 3 – 2; Wait, What?
Become a Member for Your Expertly Curated Advice
Joining the Family Wealth Library means access to the information the legacy builders need to navigate family dynamics and protect our wealth. We can keep what is ours by managing familial challenges and building trust and transparency.