In last month's issue, I introduced the four cornerstones of succession for assuring the continuity of your dealership into the next generation. We discussed that an exceptional family-owned business which maintains profitability and momentum through the transfer from generation to generation was indeed likened to Aesop's fable, "The Golden Goose," which we all remember was deemed valuable for its ability to lay golden eggs. Today, the term "golden goose" has become the common metaphor used to describe a very valuable long-term asset, capable of generating a continuous flow of abundance. Previously I described the first two cornerstones of succession, Business Success and Personal Financial Planning. We will now reflect upon the third and fourth cornerstones: Successor Management Development and Inter-Family Communication.
Succession Cornerstone #3: Successor Management Development
It would not make any sense to hand over a business to someone who did not respect its value. With respect to business succession, the continuity of proven successful management philosophy and systems are vital to maintaining the value of a business. The obvious fact is that establishing a successful management culture with highly competent successor managers are critical to future business operations and the creation of a golden goose. Profitable first generation family businesses are reasonably common. Profitable second generation family businesses are significantly less common due to the difficulty of establishing a successful management culture and preparing capable successor managers. Highly profitable second and third generation family businesses are rare for the same reason. If your children are not good managers and if they are unable to develop and maintain a competent management support team, succession will be a struggle and creation of a golden goose will only be a dream. Unprepared family successors will become "succession casualties" as the complexities and demands of contemporary business run over them. Your first challenge is to determine if your successors are capable of managing your business. Then, assuming they have the moxy and drive, your challenge is to adequately prepare them to manage the business profitably and properly. Otherwise you might as well grab the ax, because in your absence, your goose will suffer and probably become a victim of neglect.
Successor manager development also always involves establishing adequate support managers. Only the merciless rocky road of starting a business from scratch develops the complete manager. Even then, entrepreneurs commonly build businesses that outgrow their management capability. Your successors will need help managing the business. You should take an active role in identifying and training the support managers who will augment your children to create a complete management team. The livelihood of your business and opportunity to create a golden goose will be at risk.
Succession Cornerstone #4: Inter-family Communications
An ordinary business takes a major step toward becoming a golden goose when inter-family relationships build a caring environment that achieves hyper-productivity through teamwork. Communication is the medium for conducting relationships. Relationships are the bonds that hold a family together and give it strength, resilience, power and energy. Inter-family communication is also the medium for teaching heirs and successors how to be good business managers. The better the communication between parents and children, the more prepared children will be to operate the business. Unique team relationships modeled by family members, partners and key managers are what make a family business special. The feelings generated by family unity in the process of business succession can be very gratifying to family members, partners and all concerned. However, there is a price to be paid to achieve these relationships. Inter-family relationships are like most dynamic situations; you get out of them what you put into them. The foundation to a good relationship is communication. Capitalizing on these assets to build synergy and tenacious teamwork are fundamental steps to creating a golden goose.
Depending upon experiences, attitudes and practices, enhancing communication can be a complex endeavor. This must also be a group undertaking. Regardless of how bad you want to communicate, the parties to a relationship must want to communicate and be willing to subordinate their personal agendas in order to build quality relationships. Talking is relatively easy. The toughest part in communication is listening and understanding through the confusion of our own existing mind set. Communication is facilitated by forming a Family Business Council and making a group commitment of time and effort to exchange feelings and discuss the impact of those feelings on the succession challenge at hand. Fortunately this is not one of those "either you have it or you don't" issues. Where there is motivation and a willingness to listen, communication can be achieved. Motivation and willingness can improve with time. It is amazing how a team attitude can be created and even grow during the succession process when family members and managers can effectively share opinions and collaborate on management issues.
"The Cornerstones of Succession"is an excerpt from "The Golden Goose" © 1997, Loyd H. Rawls. Publication, reproduction or use of this article other than that of this publication is strictly prohibited without the express permission of the author.