When Tom Pickens and his wife, Kelly, suddenly died in a plane crash, the shock left their children and grandchildren in disarray. The Pickens family had lost not only its beloved patriarch and matriarch, but also the leaders of the family’s $500 million produce business. Although Tom and Kelly were in their late 80s, they had continued to run and own the business Tom had founded decades before. (This is a real case, with identifying details changed.)

Amid their grief, Tom and Kelly’s four children timidly assumed leadership roles in the business. While they had grown up with the business and some worked there, it had always been Tom’s company. One son, Paul, had the COO title, but he, the board and senior executives always deferred to Tom’s strong perspectives on everything.

The initial eagerness to step into ownership gave way to frustration and tension as the siblings (in their 50s and early 60s) struggled to make core strategic decisions. Paul (now the CEO) was uncertain about how to share ownership decision making with his siblings, who now owned equal shares of the business. Though they had participated in educational programs, worked with facilitators and attended family meetings for years, nothing had prepared them for the “real thing” — life without their father at the center of business decisions.

Further complicating the transition, the third generation, now in their mid- to late 30s, were starting to ask questions. Cousins who were store managers and product leaders wondered, “When do we get to make our mark on the family business?” Branch tensions emerged. Cousins who were not involved in the business began to want much more information about the company’s financial performance and dividend payouts. The family asked themselves: “What is going on here?”

What are double transitions?
Even for the most thoughtful families, there are layers of emotional and practical challenges involved as one generation hands off power and decision-making responsibility to the next. But that transition becomes exponentially more complex when an owner-manager continues to control the business well into his or her 80s or even 90s. Think about England’s Prince Charles (now 70), who has waited for decades for the one job he was born to have, without any control over the timing of his own destiny. The passion for the family “firm” felt by his eldest son, Prince William (now 36), is surely diminished by the knowledge that he, too, may have to wait decades before he gets his turn at the helm.

The double transition dilemma is one we see frequently in our work advising family businesses. As was the case with the Pickens family, when a controlling owner maintains a central role for too long without creating space for the next generation to lead, it can unintentionally leave not one, but two generations of future controlling owners and business leaders adrift.

When the second generation’s turn at the helm finally arrives, they’ve had little chance to develop their own vision for the family enterprise and a plan for making decisions together as owners. In a well-planned generational transition, this next generation would have had years, even decades, to think and work through these issues together, so when the mantle is passed, they will be ready. But in the double transition scenario, the second generation of owners must rapidly organize themselves to lead while also scrambling to realize their own vision for ownership.

This rapid transition would be difficult enough, but it’s made infinitely more complicated because the second-generation owners are already behind the eight ball in developing the third generation. The result is often a messy, complicated double transition in which the newly empowered generation, finally given the opportunity to lead and to enjoy its position of power, must scramble to pull its own act together and, at the same time, figure out how to prepare their children for future leadership roles.

G2 must find a common vision
After their father’s sudden death, the four Pickens siblings were immediately caught up in tensions they had had no practice managing. Paul and Jackie felt it was crucial to preserve their father’s vision for the company and sought constantly to represent “what Dad would have wanted.” Daniel and Annie saw Tom’s death as an opportunity to refresh the company’s strategy and grow in new ways. The siblings were alarmed at how quickly their disputes began to spiral out of control. Without experience negotiating such weighty issues, they struggled to keep their emotions in check.

No matter how much time they’ve spent in the business as individuals, a second generation that has been waiting in the wings while an aging parent hangs onto control has likely not solidified their own working relationships. They are used to seeking their parent’s counsel and relying on his or her experience in challenging situations. As a result, they are almost certain to face conflict, either because they lack alignment as owners or because they are simply inexperienced in decision making. The Pickens siblings’ struggles with their own interpersonal dilemma were made more painful by the knowledge that their children were “inheriting” their conflict without having enough experience to form independent opinions.

G3 must engage and get up to speed
Acutely aware that their parents’ generation had yet to have its turn at the helm, the third Pickens generation had not pushed for meaningful engagement in the business. In fact, the two senior generations never considered bringing the third generation into important decision-making forums. As the third generation watched their parents descend into infighting and decision stalemates, they felt powerless and turned off.

Some of the 14 Pickens G3s worked in the company, but none of them felt truly informed about the business or able to imagine themselves in leadership roles. Many kept themselves emotionally at arm’s length, wary of stepping into what they saw as a “hornet’s nest” of disagreement among their parents. Some, discouraged by their parents’ leadership and uncertain of the company’s future, considered pursuing careers outside the business. They wanted to engage and continue Tom’s legacy, but they did not feel authorized to voice their hopes and ambitions.

Neither generation had truly been allowed to take full psychological ownership of the company, even though they cared deeply about its history and Tom’s legacy. The second generation could not fully embrace the reality that they — not their father — were the owners of the company, and its fate would rise and fall with their decisions. The third generation felt even more like interlopers.

The good news is that there is a way to avoid the double transition conflict — or at least to limit its damage — without tearing the business and the family apart in the process.

Avoiding the double transition
All business families must understand that smooth transitions across generations take years to accomplish. Even though the prospect of discussing the future seems awkward, the alternative is to work through the handoff in a crisis atmosphere. In the best-case scenario, all three generations will play an important role in continuity planning while there’s time to do it properly. To avoid the crisis:

1. The controlling owner must ask: Do I really want this to be a family business? It’s OK if the answer is no — not every great business needs to be handed down to the next generation. But if the answer is yes, the business leader must prepare a plan to give the next generation the authority to make meaningful decisions by themselves (without Dad or Mom as the mediator) and must commit to a timeline to hand over control. Identify who will take over which roles and clarify the authority behind those roles. Communicate clearly about when you will step down, first from the small roles and later from major leadership tasks.

2. The current leaders must build the governance needed for the future. Because there will no longer be one decision maker going forward, second- and third-generation family businesses need a board of directors (to represent the interests of the shareholders and oversee management) and an owner forum (a venue where owners can align on their purpose for owning the company and the high-level guardrails for how the business should perform). With these governance structures in place, future generations will be better equipped to operate in separate management, board and owner roles.

3. The second generation shouldn’t wait to prepare the third generation for future ownership. This generation is likely to be more diverse and less connected than their parents. They will need education about the business and about the role of business owners. They will need an opportunity to decide if they want to be part of the business or if they would prefer to opt out of ownership. Start conversations with the third generation early; get their questions and their perspective on the table. Find ways to involve them in smaller decisions about the business and hold them accountable, as a way of building their decision-making muscles and fostering their ability to make decisions together.

Managing through the double transition
As difficult as the double transition can be, we have seen families navigate this situation successfully. Inevitably, the burden falls on the second generation. They must acknowledge the challenge, then move quickly to find ways to work together. As hard as it is, they need to exercise the discipline to put emotions and egos to the side so they can make essential decisions, clarify roles, support each other in those roles and invite the third generation into genuine engagement with the business.

The Pickens family was able to navigate the transition because they were committed to seeing the business go forward and because they found “common cause” as family members to get the hard work done. By refocusing their energy from debating “what would Dad have wanted” to “what do we want this business to be,” they were able to forgive small slights, communicate their expectations, remember basic shared values and mobilize deep family connections.

The sense of accomplishment when families succeed in the double transition is immense. However, anyone who has completed this work will say the business and the family would have been better off with more time to plan and prepare.  

Marion McCollom Hampton, Ph.D., is a co-founder and senior partner at BanyanGlobal. She has been active in the family business field for 30 years and is a fellow of the Family Firm Institute. Nick Di Loreto is a principal at BanyanGlobal. He has worked in the family business field for the better part of the last decade with clients across the globe.

Copyright 2019 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.                            

The family that owns Milo B. Butler & Sons Ltd. is a legend in the Bahamas. The company’s founder, Sir Milo Boughton Butler (1906-1979), was the first Bahamian-born governor-general of the Bahamas; his picture is on the Bahamian $20 banknote. Sir Milo was also an entrepreneur who started out with a grocery in 1928 and expanded into a wide range of ventures, including livestock, ice delivery, rental properties and a nightclub.

In 1963, Sir Milo founded Milo B. Butler & Sons Ltd., which at first traded in cattle, ice, agricultural products and prepared foods. The company, incorporated in 1967, today is a Nassau-based wholesale and retail distribution business led by the third generation. The family’s holdings also include a commercial development company, plus investment interests in several local companies.

The Butlers are currently in transition. Franklyn Butler II, 35, who had led the business since the sudden death of his father, Franklyn Sr., in 2008, has ceded the CEO post to his brother Damian. Franklyn’s cousin Antoine, 41, who had chaired the family council since its establishment in 2012, has left that position to join the business as operations manager. Faith Butler, an associate professor in the School of Education at the University of the Bahamas, is the new family council chair.

Franklyn, who was only 26 at the time of his father’s passing, had to institute a governance process and manage family disagreements over share ownership and adding independent directors. More recent challenges have included buying out family members and bringing the fourth generation along. Today there are about 21 family shareholders and about 50 to 55 total family members.

As Franklyn and Antoine redefine their roles in the family and the business, they consider our question: What will be the priorities going forward?

Franklyn Butler II, Chairman and Former CEO:

“I think the priorities in the case of the business are going to be about performance measurement of the business and family members in the business. In the context of the family council, how does [Antoine] get other participants to buy in to the vision and philosophy that the family council has created for itself?

“Both transitions are creating opportunities for more engagement, and it is actually going to be the best test of whether what we’ve been doing has been successful, quite frankly.

“The other challenges are going to be: How do we get shareholder commitment to continued reinvestment in the business? How do we measure value creation for the shareholders as we move forward? What direction do the shareholders want from the business? Because now that we’ve got governance, they’ve got to communicate that.

“When you’re in crisis, there’s a leader who kind of just drives the process. [Through] most of my tenure, I pretty much drove the agenda with very little [family] participation, I would say. And now the family’s got to speak to what business it wants to be in, what does performance look like for them, how do we deal with short term vs. long term, how do we deal with debt? We’ve been pretty much risk-averse. How much risk do we want to take on?

“We bought some people out, I guess, three or four years ago. And now we’ve got to buy out additional shareholders, and the question is, do you do that from cash flow, or will you take on debt to release some of these shareholders? Do we buy 25% of your interest up front and then pay you the rest over 10 years? Those are going to be the kind of financial exercises that we’re going to be going through. When I started, we just bought people out outright, because we were trying to get naysayers to kind of go in peace. But now I think the business is certainly more in control of its own destiny — because we have governance.”

Antoine Butler, Operations Manager and Former Family Council Chair:

“We have family members who want to sell their shares, so we’ve been trying to accommodate those family members. It’s really about giving family members the information when they ask, in reference to the financial status of the company: Is the company in the position to buy out their shares?

“Before [the family council], we just basically had — and we still have it, to a certain extent — an open-door policy. You [could] come to the company offices and just walk to [the CEO’s] office and talk with him. In a way, the family chair and the [council] have become a buffer for helping to prevent some of that. So that the CEO can continue to focus on what is important, which is keeping the doors of the company open.

“There’s still a lot of education that’s needed. But it has gotten a lot better. A lot of people would come to me and ask what’s happening, and I would then be able to give them an idea why certain things were being done in the manner that they were.

“And [family members] even make suggestions: Why don’t we do this? And so then we have more things to put on our agenda, at our next committee meeting or at our next assembly. A prime example that has been suggested is another family reunion.

“Right now, one of the major issues that we have is work being done to our facilities. So family members are wanting to know why we are investing more into capex [capital expenditure] projects as compared to paying dividends. Once it’s explained to them, then I think it’s a lot easier for them to understand the sacrifice we’re making at this point in time. We’re trying to improve the facility so that we can accommodate being able to make more money and pay out more dividends in the future.”

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

In October 2015, Jeff Westphal, the second-generation CEO of Vertex Inc., announced he would leave that position at the King of Prussia, Pa., company, which provides corporate tax software and services. Westphal, who remains chairman and co-owner of Vertex, said at the time he realized he was better at building a business than at scaling it up.

Westphal understands that a business needs different leadership at different points in its life cycle, and it was time for a change at Vertex. He credits his company's independent board for supporting him through the transition. Former director Rich Teerlink, who joined Vertex's board shortly after retiring as chairman and CEO of Harley Davidson, "helped me to see that my role was to professionalize and then help re-create the platform for the next generation of growth," Westphal says.

Stories abound of family business leaders who remain at the helm into their 80s. Westphal understands the reluctance to leave. "Letting go of leading an organization that you not only care about, but that you love, is an emotional experience," Westphal acknowledges. "I had my emotional moments through the process. And I reflected to myself, 'You know, I can really have great empathy for people who do hold on, perhaps, too long.' "

Another temptation that must be avoided: training the heir apparent to be the CEO's clone (especially if the prospective successor is the CEO's child). A new set of skills and processes are required to meet the challenges of the future.

There are other family issues, as well. "Benevolent dictator" leadership might persist past the second generation, but inevitably inclusivity is needed as the family stakeholder group grows and more non-family executives become involved in decision making. A study by Stephen P. Miller of the Kenan-Flagler Business School at the University of North Carolina found that companies with autocratic senior family leaders were less likely to produce effective next-generation leaders.

Westphal's successor is a non-family member, company veteran David DeStefano. Vertex's third-generation family members range in age from the upper 20s to the late teens.

Many family business owners in this situation would have opted to sell the company. "I was aware of that scenario, and always worked toward making sure that wouldn't happen to us," Westphal says. Vertex engaged advisers to "put ourselves in a strategic position where we wouldn't need to exit the business just because we weren't going to have a qualified family leader for, perhaps, some time. And while we're excited and enthusiastic about how our young G3ers are preparing for future governance of the company, we're delighted that we've got strong professional leaders who can lead the company in alignment with our shared values."

The leadership change "has re-energized the company, there's no doubt," Westphal says. "And, frankly, I'm re-energized. I didn't realize how burned out I was becoming until I let go."

All too often, shortsightedness prevents family firms from making the right leadership decision. CEOs must be able to view situations from outside their own perspective.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Let us now praise family business founders. They are able to transform a great idea into a thriving enterprise that provides their family not only with financial security but also with inspiration that guides them for generations to come.

Along with their stellar entrepreneurial vision, many founders have a need to maintain control, particularly when relating to their children who join them in the family business. Even when "the kids" are well into their 40s, a strong-willed patriarch or matriarch may find it challenging to view them as accomplished businesspeople and take their suggestions seriously.

But if the business is to last through the second generation into the third and beyond, the family must prepare for new leadership—not just a new person to succeed the founder at the helm, but also a new type of leader who can address the inevitable challenges of business growth, product maturation and changes in technology and the marketplace.

If the business is to achieve the kind of growth that will ensure survival through multiple generations, the founder must learn to trust others: at first his or her own offspring, then talented non-family members who take on executive roles, and ultimately—if the stakeholders are serious about growth—independent directors.

At the same time that the company is growing, the family itself is growing and changing. As they reach the third generation, family members must prepare for the possibility that not everyone in the family will have the right skills to join the business—or that not everyone will want to, or that the business won't be able to support everyone who wants to work there.

At the cousin stage, maintaining a connection to the business and the family often requires conscious effort. If some family branches have moved away from the hometown, the cousins may barely know each other. They may view their joint ownership as more of a business relationship than a shared family treasure. Shareholder liquidity may become an issue. Family members not working in the business may agitate for dividends at the same time that the business needs capital for growth.

Family members in later generations may not be willing to fall in line behind a patriarchal or matriarchal "benevolent dictator," so consensus building will be required. Many families are surprised at how difficult this is to achieve.

Some families find the best solution for the business is to consolidate ownership (or to consolidate all the voting shares) in one branch. In many cases, such buyouts result in hurt feelings.

All of these are common dilemmas that are a natural consequence of family business growth. The families who know what to expect will be better prepared to address the difficult decisions when the time comes.

Astute founders take the time to educate themselves on the issues their families will face in later generations. They give their children and grandchildren the tools they will need to work together on developing procedures that will ensure the continued success of the family enterprise.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

If you're a senior family business leader preparing for retirement, you likely have done a lot of thinking about choosing and developing your successor and transferring ownership of the company. Are you also planning what you will do after you step back from leadership?

In a feature article in this issue, I explore how business leaders plan for a fulfilling life after they leave the top job. Part of that planning involves letting go of the leader's role.

Stephanie Brun de Pontet of the Family Business Consulting Group says retirees who have the easiest transition are those who have developed an identity outside the family firm. If the only way that you define yourself is as the leader of your family business, Brun de Pontet says, "it's extremely hard to walk away" from that position.

The broader your network, the easier it is to find fulfillment after retirement, because you have more venues outside the family company where you're "already a known entity," Brun de Pontet says.

Phil Clemens, who stepped back from the CEO's role at the Hatfield, Pa.-based Clemens Family Corporation in 2014 and retired as chairman in 2015, compares a reluctant retiree to an aging athlete seeking one last major-league contract despite obviously declining performance. Rather than hang on and make the kind of errors that you wouldn't have made in your prime, "It's much better to go out on a high note—and then go do something else," says Clemens.

Those senior leaders who were successful and enjoyed their jobs might need to reframe their thinking. Dave Juday, who retired as chairman of Sycamore, Ill.-based IDEAL Industries in 2014, says he had to suppress the urge to keep control of pet projects and continue attending key meetings. "I had to keep saying [to myself], 'No, no, no; I'm not going to do that,' " he recalls.

Being away from the day-to-day running of the company "actually is pretty comforting," Clemens says. "You get to focus on what the next part of your life is, and not worry about what's happening" with the family business, he points out.

What's definitely not worth worrying about, according to Clemens, is how the sucessor CEO may have changed operations. Change is inevitable and does not equate to criticism of the retiree, he emphasizes; it just means the former and current leaders are different people and have different ways of doing things. "Accept change as the inevitable, not as the enemy," Clemens advises.

Sometimes the new leadership team is interested in their predecessor's input—but the retiree mustn't cross the line. "I'm available to both my successors, if they choose to ask me questions," says Jim Ethier, who stepped down as CEO of Chestnut Hill, Tenn.-based Bush Brothers & Co in late 2009 and retired as CEO in 2015. "I will share my thoughts with either of my successors, just between the two of us. But I won't go any further than that."

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

About six or seven years before Dave Juday retired as chairman of IDEAL Industries in 2014, he decided it was time to make a major change—so he grew a beard.

Juday is the grandson of J. Walter Becker, founder of IDEAL, a Sycamore, Ill.-based maker of products and tools for the electrical and telecommunications industries. Seeing the beard in the mirror reminded him that " 'This is a different era; I've got to be a different person,' " explains Juday, now 72. He also began coming to work an hour later than usual.

What's more, he says, "I worked very deliberately to not only say—out loud with some frequency—that I needed to move on, but [also] to make myself believe those words."

Family business succession planning involves many steps and many complexities. A new leader must be identified and developed, ownership transition and estate planning sorted out and stakeholder buy-in achieved. Along with all that essential (and difficult) work, the future retiree must let go of key roles and pick up new ones.

Ignoring the introspective aspect of retirement planning can have dire consequences. A 2013 study by the U.K.'s Institute of Economic Affairs found that retirement increases the probability of suffering from clinical depression by about 40%, and decreases the likelihood of being in "very good" or "excellent" self-assessed health by about 40%.

If you're a family business leader, much of your identity is linked to that role, especially "if you've been at the head of the business for many years, and it's a central part of the community, and a central part of your family's narrative arc," says Stephanie Brun de Pontet, Ph.D., a senior consultant at the Family Business Consulting Group. "It's not surprising that it's very core to who you are and how you see yourself, and how others see you."

"Being the chairman of a company our size, no matter how humble you think you are, that's heady stuff," says Juday. (IDEAL has 1,200 employees and operates facilities worldwide.) "I knew it was going to be difficult to give up all of that," Juday recalls, "but I believed in my heart that [succession] was far more important than any discomfort I might feel."

Now what?

Phil Clemens, 66, a third-generation member who relinquished the CEO's role at the Clemens Family Corporation in 2014 and retired as chairman in 2015, advises those nearing retirement to identify "something else of meaning that's going to occupy their time and their focus" after they exit the family business.

"I'm somewhat startled by how much value it appears I can bring to startups, not-for-profits and even some medical people with my experience and background," IDEAL's Juday says. "The maturity and the years of hard knocks provide me with a background to be helpful in many arenas."

One of Clemens' current activities is family business consulting, an activity he began well before he retired. Clemens, who spent 20 years of his career in human resources, helped senior executives in his company transition to retirement and then began counseling those in other organizations. "By helping others, I was in a learning process," he says.

Juday says he learned a lot about transition issues from sitting on other family business boards and attending programs at Loyola University Chicago's Family Business Center; he also served on the Loyola center's board. Involvement with the center "was very beneficial for me, on a lot of levels," Juday says.

To prepare for his transition, Juday says, "I worked very diligently to identify things that would be fun for me to do, and at the same time take advantage of what I have learned over the years." Since his retirement, he has been actively involved with a business incubator in Wisconsin, an economic development group in northern Wisconsin and a workforce development program in Illinois, along with several philanthropic projects. He also is funding or advising several start-up companies.

Setting a timeline

Jim Ethier, 73, stepped down as third-generation CEO of Chestnut Hill, Tenn.-based Bush Brothers & Co., maker of Bush's Best canned baked beans and other products, in late 2009 and retired as the company's chairman in 2015. Ethier now does some family business consulting and holds several board directorships. "My exposure to family businesses in general indicated to me that one of the problems was when the senior generation didn't have a deadline" for retirement, says Ethier. "You tend to focus on succession if you know that you have a timeline."

Leaders should be transparent about their plans, says Brun de Pontet, who is writing a book on retirement in the family business. "Very often you'll have CEOs who have a retirement plan in their head, but they've not really verbalized it to anybody," she says. That causes confusion and uncertainty in the family and business systems, she says.

Brun de Pontet says a solid transition process involves "a minimum of five years of intentional planning." The board should monitor progress, she says. "The senior leadership team needs to be held accountable by the board for having a plan for continuity," she says, "and that should be a topic that comes up as part of the governance process on a very regular basis."

Sometimes leaders hang on too long because of "an unhealthy belief that they are more valuable to the company than they really are," Juday says. "We all like to think we work hard and create great value. Sometimes we work at trying to convince ourselves and others of that rather than doing the work that needs to be done."

Juday says senior leaders might worry whether their achievements meet standards set by previous generations. "If a person is approaching retirement with a sense that he needs to make a big splash to make up for lost time, it's highly likely to be a misguided effort," he warns. A strong, independent board can help prevent mistakes, he notes.

Juday says he lobbied for an acquisition that would have moved IDEAL, known for low-cost production of electrical connectors, into production of data connectors. "I was trying to push my preconceived notion farther than good business judgment would have it go," Juday acknowledges. IDEAL ended up not making the acquisition.

The importance of ritual

A retirement party is more than an occasion to raise a glass; it's a meaningful event for stakeholders, according to Brun de Pontet. A party gives attendees "permission to recognize and celebrate the change, as well as acknowledge the discomfort and the sorrow that also is part of that transition," she says.

Ethier says he was initially "not at all in favor of" the party Bush Brothers threw in his honor in late April 2016. "Finally, one of my senior executives simply sat me down and said, 'Jim, every once in a while a company needs a party, and you're the excuse.' And it became the 'Bush Prom,' and it was quite a party."

The year before the party—in late June 2015—Ethier created a symbolic ritual as he ceded the chairman's post to his cousin Drew Everett at a shareholder meeting, held at the MeadowView Conference Resort and Convention Center in Kingsport, Tenn. "I picked up a paper crown at Burger King on my way to the MeadowView conference center," Either says. He marked the passage by placing the crown on Everett's head.

"The family greeted him with wonderful applause, and recognized that he was ready," says Ethier.

He also had another successor: Tom Ferriter, previously Bush Brothers' president and chief operating officer, succeeded Ethier as CEO in November 2009. Ferriter is the company's first non-family chief executive.

Like Ethier, Clemens participated in a transition ritual. His second cousin and successor, Doug Clemens, assumed the CEO position in September 2014 and became chairman in September 2015.

To mark the handoff, Phil Clemens passed a commemorative baton to his cousin at the 2014 shareholder meeting and at a special year-end management event. All shareholders and management team members received batons, engraved with the saying, "Clemens Family Corporation, 2015—Passing the Baton to the Fourth Generation; The Legacy Continues."

Phil Clemens says members of his large family—about 680 family members and nearly 300 shareholders—no longer approach him with opinions or questions about the business, "because they know that I'm no longer carrying the baton," he reports.

The analogy can help senior leaders understand their roles at various stages in the succession process, Clemens says. "Once you pass the baton, you'd really look stupid [if you tried] to run after the guy you passed it to and grab it away from him," he says.

Some senior leaders try to "retire on the job," Clemens says; they cede key tasks to the next generation but don't vacate the top post. "People don't know: Are you in charge, or aren't you in charge?" Clemens says.

"To me, that baton becomes so important. Know when you're holding it; know when two of you are holding it together; know when you're letting it go," Clemens says. He notes that if a relay runner relinquishes the baton before the next runner is ready to take it, the baton falls to the ground. "Make sure that you are totally in sync with that person who's going to be picking up the baton," Clemens says.

'Going dark'

To prepare the company for the transition, advisers recommend a "weaning" period, with leaders taking extended vacations or shortening their workweeks as their retirement date approaches.

Clemens started this process in his last year of employment. "The first three months I took a week off; the second three months, two weeks off; the third three months, two consecutive weeks off; and the last quarter, three weeks off," he reports.

During that year, Clemens' company announced plans to build a new plant in Coldwater Township, Mich., representing a major expansion of the business. "I told my senior leadership team, 'I'm going to be staying totally out of the process,' " Clemens says.

He agreed to attend the groundbreaking for the new plant, under one condition: "that I have absolutely nothing to do." He insisted that his presence not be publicly acknowledged; he would attend solely to support the new leadership team, who would be the public face of the company.

"It was really nice to be there," Clemens says. "It was also nice to see the team picking up [the responsibility] and running."

After he officially stepped down, "I 'went dark' for a year," Clemens says. He stopped all business activity and relinquished board and committee memberships. He remained "on call"—that is, he would be available if the new leaders called him; he would not call them.

Clemens maintains an office at company headquarters, though he's rarely there. "It's interesting; when I do show up at the office to clean out my mailbox, oftentimes I hear people saying, 'Well, we had a Phil sighting; we actually saw him around here,' " he says with a laugh.

At Bush Brothers, "When I announced that Tom Ferriter would be my successor as CEO, it was virtually in conjunction with the initiation of a new strategic planning exercise," Ethier says. "That was very deliberate. And I didn't darken the door for three months. So that in creating the next strategy, the organization would not see me in the room and be looking to see what my expression was. They would have to look to Tom for leadership."

When Drew Everett was named his successor as chairman, "Again, I disappeared for three months," Ethier says. To reinforce the symbolism, the weekend after the announcement Ethier cleaned out his office and turned it over to Everett.

As Juday's retirement date approached, he stopped attending some key company meetings, including budget meetings and the annual planning meeting. He restricted his involvement to "high-level policy, and culture and family governance," he says.

Juday also changed the tone of his small talk with employees after it became evident that IDEAL's CEO, Jim James, was set to succeed him as chairman. Juday realized that questions he asked out of curiosity and admiration, such as "What are you working on?" and "What did you invent this week?," might be misinterpreted. "I had to back off of that, to be sure I wasn't seen as keeping track of what was going on—trying to get the skinny off the grapevine to check up on Jim," Juday explains.

Roles on the periphery

Fulfilling peripheral roles can be found that add value to the family business and don't step on successors' toes, retirees say.

Ethier has become Bush Brothers' historian and mentor to the younger generation. While the company published a history book to commemorate its centennial in 2008, Ethier says, "I'm trying to outline some history in terms of stories that are more personal because they are my recollections, or the recollections that have been handed to me regarding my grandfather and my uncles."

Ethier meets with interns, new employees and next-generation shareholders to discuss company history. "I've used a lot of these stories to illustrate why we have the culture that we have," he says. "And in the process of doing that, it finally occurred to me that I need to write some of those things down."

For the past 10 years or so, Ethier has hosted luncheons for small groups of Bush Brothers employees from different departments. The luncheons are held in the home, built by Ethier's grandfather, where his mother was raised and, a generation later, where he grew up. "They receive from me—usually as a result of [asking] questions—some insight as to why we do things the way we do them," Ethier says.

"I still am comfortable wandering around the organization; I just don't give any instructions," Ethier says. "And my two successors don't seem to be in any way threatened by it. If anything, they encourage more of it."

Clemens started working with next-generation members—representing two generations of his family—about 15 years before he retired. "We didn't call it succession planning; I called it 'Lessons in Leadership: What Do Leaders Need to Know?' " he says. As part of a lengthy training process, he shares his insights with promising young family members. The Clemens family prefers for a qualified family member to serve in the highest leadership position. "In order to make that a reality, I had to make sure that I had family members who were going to be qualified," Clemens says. "Our family is very resolute that if we don't have a qualified family member, we will go to non-family."

Dave Juday was asked by his successor, IDEAL chairman and CEO Jim James, to oversee construction of the company's new 222,000-square-foot manufacturing facility in Sycamore, Ill. Since the completion of the project, Juday has offered to take politicians and other visitors on tours of the new plant.

Juday says he's delighted to "show off all that we've done, and who we are, and the role we play in the community. I love that stuff. It does not get in the way of anybody else."

Reframing

In counseling retiring CEOs, Clemens asks them to recall their first year in the job. "What were you prevented from doing because of somebody else being around?," he asks. "They'll all remember stuff that they want to do that they couldn't, because their predecessor was there." He then asks them to consider their successors. "Do you want them to view you like you saw your predecessor," he asks, "or would you like them to see you as a real asset, and not a liability?"

Juday says that after he stepped back, "I expected to feel a greater sense of loss. I expected to feel a need to check on people more than I did. And I was surprised to find out how busy I really could be with significant and major projects."

Moreover, Juday says, "It felt like a really good transition. I really did convince myself, deep in my heart and deep in my soul, that this was the right thing to do for the company and the family."

Consultant Stephanie Brun de Pontet says business leaders who shift smoothly into retirement tend to be "people who have consistently found ways to be engaged in their community—whether that be because they're very involved in their church or because they're very involved in some aspect of civic life."

"Be serious about the spiritual side of yourself," Juday recommends. "Playing golf or having lunch with the guys, while fun, does not provide that heartfelt satisfaction which is so important to us in our working years." He recommends contributing to worthy causes in a way "where your presence can make a difference"—not just by donating money.

Brun de Pontet suggests that competitive individuals seek out projects with measurable results, like non-profit capital campaigns. "Saying, 'I'm going to spearhead this project, and there's a metric that I'm going to go and hit' is similar to setting business objectives," she says.

However, Brun de Pontet cautions, "It's important not to rush into things. As we age, we want to continue to feel relevant and feel like our voice matters. So I think sometimes folks are too quick to say yes to opportunities that may come their way because they may have some fear that nothing else will come along. I think it's helpful to take a breath and be a little bit discriminating in terms of how you really want to spend your time, and be intentional."

Building a new routine

Brun de Pontet advises business leaders nearing retirement to talk with their spouses about their vision for this new phase of their lives together. Questions to explore, she suggests, include "What do we each, individually, want to spend our time and energy doing, and what might we want to do together?"

"You have to work on the relationship with your family in a very different way," Clemens says. "It's funny; when I retired, my wife told me I'd better go out and get a job. But now that I've gotten really busy, she [has asked], 'Aren't you going to be taking some time for us?' When you set your own schedule, you can make it as busy as you want."

Juday cautions retirees to pay attention to their health. Eighteen months into his retirement, he suffered a heart attack, which he attributes in part to stress from a complex estate-planning project and from another project he was pursuing outside the family business.

"I put myself in a stressful situation that I didn't realize was as demanding as it was," Juday says. "During our working years, we learned to manage the stress that came with our job. It is not uncommon for a retiree to assume roles that [involve] stress, but of a different level, which we have not learned to manage."

Often "a big piece of what is getting in the way" of succession is the senior leader's lack of a future plan, Brun de Pontet says. Nagging questions, she says, can range from the existential—"Who am I?"—to the mundane—"Who's going to manage my correspondence?"

Above all, Clemens says, "Don't be afraid to talk about this."

RESTRUCTURING BEFORE RETIRING

In some family companies, governance must be revamped in order to prepare the family and business systems for the senior leader's retirement. Such restructuring projects can take years.

Jim Ethier's retirement as chairman of Bush Brothers & Co. in 2015 marked the culmination of extensive governance work. Efforts to strengthen the family and the business were well under way when Ethier ceded the CEO title to Tom Ferriter in 2009.

Family education was a high priority. There are about 100 Bush family members, 60 of whom are shareholders. "The family was resolute that they didn't want to sell the company, so it seemed to me that that meant we needed to educate them as to their role in governance," Ethier says.

In 2005, Ethier began sending family members to an executive education program on family business governance offered by Northwestern University's Kellogg School. Over a ten-year period, 43 family members attended the program, as well as about a half-dozen senior executives and three independent board members, Ethier says.

A Bush family council had been created in the 1990s, but the effort failed after a few years. Starting in 2007, the family revived the idea, establishing a new body they called the "family senate." That project "needed some nurturing," Ethier says. "And then we worked to develop a shareholders' agreement, and that took considerable time and education."

Separating the roles of chairman and CEO, Ethier says, involved "articulating what each of those roles were responsible for" and ensuring that family members understood the distinction. With Ferriter running the company, Ethier turned to mentoring future chairman Drew Everett and to his agenda for the family: "creating a new structure—not just of a family company, but a family enterprise."

In 2010, shortly after he stepped down as CEO, Ethier focused on creating a private trust company. That involved two years of work; Shoebox Private Trust Company was chartered in Tennessee in October 2012.

The initiative was undertaken to simplify many aspects of communication with trustees, Ethier says. "A substantial amount of the ownership of the company was held in some type of trust, and those trusts were distributed among a great many institutions," he explains.

Creating the private trust company—the state's second—involved establishing relationships with the Tennessee Banking Commission and pursuing some state legislative changes, Ethier says. "You might say that gave me something to do when I wasn't taking a nap," he adds with a laugh.

The roles of the operating company board, the family senate and the private trust company had to be clarified and communicated to the family, Ethier says.

At IDEAL, the appointment of non-family member Jim James as chairman and CEO represented a departure from the tradition of having a family chairman and a non-family chief executive. Prior to the hiring of James, IDEAL underwent a management change that required former chairman Dave Juday to delay retirement. The tumultuous period helped him clarify the qualifications needed in a new CEO and in the person who would succeed him as chairman, Juday says.

Juday's daughter Meghan had taken the lead in revamping the family council to meet the needs of the fourth generation; she also joined IDEAL's board.

Dave Juday says a major turning point came when he realized that, because of a changing economy and an expanding family, each generation would have a more difficult job than the previous one. He had to pick a successor with "significantly greater ability than mine," he says.

"I was the last of the benevolent dictators," Juday says. "I realized that the governance model I inherited wouldn't work." The family council model that he and his sister had created was too formal to function well in the fourth generation, he says. "[It] was very structured, very rigid; it was very policy- and procedure-driven. We had terms and term limits, and succession plans for our family council chairs, and [formal] membership... It was very, very prescriptive."

Meghan Juday spearheaded the family council's shift to a focus on process, centered on task forces of family volunteers who research ways to resolve disputed issues. "It was clear to me that the direction she was going was exactly where we needed to go," her father says.

A little over a year into his retirement, Juday began working to resolve a complex estate-planning problem. The family needed to create a trust to replace the trusts that had owned the majority of the company's stock. Those trusts, formed in the 1950s, were due to dissolve because of "rules against perpetuities."

The previous generations' estate planning essentially had assured an income for them while passing on the growth of the business to succeeding generations; however, the entities they created would work for only a single generation.

In June 2015, Juday began drafting plans for a set of new trusts to replace the previous trusts and resolve the issue for the long term. The new plan results in assured income for the older generation with the growth accruing to younger generations, while avoiding the "rules against perpetuities."

"The entire project was premised on paying capital gains up front," Juday says, "That is counter to everything that lawyers, accountants and bankers preach day in and day out. We have invested a lot in our family governance and believed that we could take the risk of paying the tax now, which implies that we aren't going to be facing any pressure to sell the company in the foreseeable future. That part was easy for us. We came together nicely as a family. However, the professionals needed convincing."

A lot of work went into explaining the elaborate plan to the family. "Of course, with this many people, we had some different interests," Juday says. "We had a total of 25 webinars on five topics, each building on the previous, and getting buy-in with each one" before proceeding to the next. "After all the webinars were completed and bought into, we created an individual model so each shareholder could see a very specific 'before and after' of their holdings and cash flows."

Shareholders, company officials, trustees and attorneys have signed off on the documents, Juday says. "There are many hurdles to be overcome in this kind of transaction. We have conquered most," he says. Transactions must be monitored to make sure the transfers are being properly executed, he says. "But, for now, we are confident that we have what we need in place." — B.S.

HOW TO PLAN FOR YOUR NEW LIFE

1. Recognize that it's wise and healthy to step down from leadership well before you're on your deathbed. If you're not convinced of this, seek out stories of succession crises by networking with other businesses, attending conferences and programs or reading the family business literature.

2. Be serious about preparing for life after retirement. Start early; don't relegate your life plan to the bottom of the succession planning priority list.

3. Assess your interests and tap your network to find meaningful projects that are a good fit with your passions and your talents. Don't jump at the first opportunity; take time to think about the most rewarding ways to invest your energy, and how much time those projects will require.

4. Be transparent with stakeholders about your plans and your timeline. Ask your board to hold you accountable for meeting that timeline and alert you to red flags. Allot at least five years for the transition process.

5. Discuss with your spouse or partner how you plan to spend your time. What will you each do separately? What will you do together? How much traveling would you like to do together? Will your spouse join you when you travel for board meetings, speaking engagements or consulting assignments? Is there a major project you might tackle as a couple?

6. Consider peripheral roles you could play in the business or the family. Discuss these with your successor to ensure you won't be stepping on his or her toes.

7. As your retirement date approaches, begin taking longer vacations or working fewer days per week. Don't call in or check email on your days off. Allow the future leadership team to function without your interference.

8. Don't meddle; allow your successors to make mistakes. They will learn from them. If you have an effective board, the directors will steer your successors away from grievous errors.

9. After you leave, don't offer an opinion unless you're asked.

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.
 

At a conference table in the sleek, contemporary headquarters of Friedman Realty Group, a real estate investment and management firm in Gibbsboro, N.J., Brian K. Friedman and his son, David, are reflecting on issues that have taken center stage for them: analyzing risk, their business future and structure, as well as continuity, succession planning and exit strategies.

With them is Nancy Drozdow, principal and founder of the Center for Applied Research (CFAR), a consulting firm that has offices in Philadelphia and Boston. Brian and David Friedman (no relation to the author of this story) have been working with Drozdow for two years. "Second-generation businesses often have a need for future planning and reorganization, and a medical event can be a strong signal for outside help," Drozdow explains.

The Friedmans know that now.

These two men had to become more deliberate about their plans for the future of their business after Brian Friedman suffered a stroke following surgery in 2004. They also have had to become more self-aware.

"Of course, I've learned a lot about life, about risk and, most of all, about my family and myself," says Brian Friedman, the president of Friedman Realty Group.

"They are both working really hard, individually and together," notes Drozdow. "Like most of us, they didn't expect that a crisis would force them to look squarely at themselves and their business."

Lightning strikes

Brian Friedman hadn't planned on undergoing major neurological surgery, the results of which could not be predicted with certainty, at age 50. Still, the surgery was not optional. Without it, a brain bleed would be fatal.

Brian awakened after the procedure to discover that a stroke, attributable to the surgery, had left him with vision and language impairment.

"It was a shock, and yes, I was frustrated," he recalls of those early weeks and months. Brian's business had been the driving force in his life. Rehabilitation took a totally different kind of energy and commitment.

"You ask yourself, 'Will I ever be able to do what I used to? Will life ever be the same? What will happen to my family?,' " Brian reflects.

A decade later, he has most of the answers. He recovered and was able to return to the office. And his son David is proving to have strong potential as a successor. In the aftermath of Brian's illness, David stepped up to the plate not solely out of a sense of duty, but because the business his father launched attracted him, and tapped into his own skills and interests.

The Friedmans are taking steps toward succession. Brian's situation forced them to begin thinking about transition sooner than they otherwise would have, and to have explicit conversations about matters they might not have discussed openly.

As David continues to learn from his father, their story remains a work in progress.

"Brian is still figuring out what he wants for himself now, and David also is aware that even though he has learned a lot already, he still has more to learn," says Drozdow.

"We're experts in real estate," Brian says, "but not in how a father and son can define their roles."

Building the business

Brian Friedman's earliest years were spent in Philadelphia and then in nearby South Jersey. His father, an accountant, began investing in distressed properties with his accounting partner in the early 1970s. Brian began working with them in May 1975, about the time of his college graduation. Property management was a good fit for him.

About three years later the company, Associated Property Management, sold all its properties. At that time Brian bought out the APM partners and changed the name of the firm to Friedman Realty Group Inc. "I loved the business, and I saw that I could expand it," Brian says.

Initially, Friedman Realty focused on apartment communities, office buildings and retail shopping centers in the Philadelphia-South Jersey region. Its more recent area of emphasis is value-added apartment ownership and management, with a specialty in improving existing properties both inside and out, and enhancing them with added amenities.

Life was full, exciting and challenging when Brian Friedman's health issues intervened. His wife, Marcy Dash Friedman, owns and operates an interior design firm. David was just about to start his freshman year at the University of Maryland. David's younger brother, Eric, was still in high school.

After a few months of rehabilitation, Brian went back to the office part-time. Yes, he needed help, and he needed to accept that fact. "It's not easy to do when you prefer doing things yourself, but I really had no choice," he recalls of those transitional times after the surgery.

David, who had had summer internship experiences in unrelated businesses, joined Friedman Realty upon his college graduation in 2008. His parents were careful to ascertain that coming aboard was truly something David wanted to do—that concern for his father's welfare was not his only motivation.

When David entered the business at age 22, Brian gave him this advice: "Watch what I do. Learn my way. Be a sponge, and ask questions in private."

A son learns the ropes

David Friedman and his father are different—in some ways, very different. Nancy Drozdow of CFAR has helped them to see and understand those traits.

David was always studious and scholarly. His parents would often say that their older son had an "old soul." Brian is more instinctive, and has strong opinions. The company he leads now includes a headquarters staff of nine and an outside regional staff of about 55.

David, now 30, remembers his early days at the firm. "I recognized from the start that I might be seen as 'the boss's son,' and I certainly didn't want that image," David says. "I wanted to be the guy who worked harder than anyone else, not the guy who got away with things because of who my father was."

David's first office in the company's former headquarters was a tiny, dark space, but he didn't mind the stark environment. "That was fine with me," he says. "My goal was to prove myself by adding value to the company."

As is true of many fathers and sons in business together, the working relationship between the two had to be defined, and there was a bit of a learning curve. "My dad had been at this many years more than I had been," David says, "but I also wanted to carve out a place for myself if this was going to work."

David's calm, quiet demeanor contrasts with his father's admittedly more impatient nature. "David can involve himself in long conversations with our property managers, while I tend to be quicker and shorter," Brian says. "But it's an example of how I can learn from him."

By the time David came into the company, his father had gone through his rehabilitation and adjustment to a somewhat altered lifestyle. The determination that has guided him to success in business and life, Brian believes, has motivated him to conquer his limitations.

While Brian has recovered much of his language acumen, he still occasionally is slow to access words. David has had to learn to recognize when his father needs help in expressing himself—and how to offer his assistance.

"Sometimes, I want and need to be an extension of my father," David says. "When he can't express what he wants to, I can do it for him—but I always wait for him to try."

Learning from each other

Brian has been capitalizing on David's technological skills. The younger Friedman recently spearheaded a redesign of the firm's website.

Brian has had to make space for David to expand his responsibilities. David, for his part, has needed to absorb and learn from his father's long experience and considerable knowhow. Both have been gaining the insight that knowledge flows both ways.

"David is absolutely prepared to do property management and does it extremely well," Brian says. "I want to be more cautious about having him do asset management too soon, and completely on his own. The buying, selling and refinancing can get very complex."

Yet Brian has discovered that good things can happen when he is open to his son's suggestions—and David has learned that having the courage to express a differing opinion can pay off. They recall a disagreement over a property in a nearby South Jersey town that David felt had enormous potential. His father was skeptical, wary of its small size. David prevailed, the company purchased the property, and it has proved to be a successful acquisition.

"This was a case of the son convincing the father," Brian says. "And I'm not easy to convince!"

"That kind of flexibility is really important for both father and son," Drozdow notes. "Even though there are skills David may need to [acquire], he has the talent and aptitude. And it's being recognized."

Brian's staff, and his son, look to him as an expert in his field. In 2004, Brian wrote a book, The Real Estate Recipe: Make Millions by Buying Small Apartment Properties in Your Spare Time. He wrote it with his then-teenage sons in mind. "I just wanted them to know that this isn't such a profound mystery," he says.

At this point, Brian is not ready to step completely away from leadership, though he and David are preparing for transition. "All of these buildings we own are my 'children,' " Brian says. "It's hard to let go."

Friedman Realty Group has weathered market fluctuations and changing trends in housing, but Brian's health crisis was by far the greatest challenge he and David have faced. They believe they passed that test.

"We're stronger as a family," Brian says, "and I've surely learned that in business and in life, it's how you handle the tough times that defines who you are." Drozdow, their adviser, says Brian and David are doing the hard work they need to do, with loyalty and love as their motivation. "Decisions have to be made," says Drozdow. "But I am awed by their progress, and they should be, too."

Sally Friedman is a writer based in the Philadelphia area.

Copyright 2016 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

Much of the buzz about succession planning has focused on the younger generation—assessing and developing their competencies, sending them to seminars and building individual growth plans. But who really understands what it’s like to walk in Dad’s shoes? The senior generation must determine when (and how) to retire, and what new passion will replace the business.

Many dads and moms don’t want to leave the business. Especially for the accomplished founding entrepreneur, letting go is uncharted territory. After all, there is always one more deal on the horizon, and the possibility that everything that has been accomplished is somehow lacking. Instead of celebrating all the good work that has been done, the founder focuses on the road not taken, the marriage not completely fulfilled, the friends who have passed on, the shrinking retirement account, the grandkids too busy to visit.

Developmental psychologist Erik Erikson identified eight stages through which a healthy individual should pass from infancy to adulthood. Making a successful transition to the next phase of one’s life requires a lifelong effort to build psychological health, according to Erikson. Sometimes later in life we must revisit earlier stages that we missed, in order to make the process complete.

A pathway through life

The process begins with the infant’s ability to trust his or her caregivers —a basic requirement for building any solid relationship. Is the world a predictable place? When I am hungry will I be fed, and when I need comfort, will I be picked up? The alternative is mistrust, or fear that no one will support me, which develops into a belief that caution and fear are the only ways to protect myself from the worst possible outcomes. Most of us with loving, consistent parents develop the capacity for trust during the first year or two of life and carry it through the rest of life’s stages.

Autonomy marks the toddler’s psychological development—discovering the world, getting up to fall down again, trying things I don’t yet know I can’t do. Learning to say “no” is a sign that I now know I am a separate individual, capable of standing my ground even against my parents, the most powerful people in my life. If autonomy is blocked, a child can become stunted by shame. Blame, not forgiveness, can surround me after transgressions such as spilling a bowl of cereal or dropping the family heirloom that Grandma prized. Autonomy or independence is critical for healthy lifelong development. Acquiring it early is essential for any future business leader who will have to navigate complicated family -relationships.

If autonomy is gained, the healthy child develops initiative during the third, fourth and fifth years of life. The circle of the family opens up so I can reach out and make friends with other people my own size. I learn to share toys, perhaps with a new baby sibling; to give and take, even with tears; to feed myself, especially the things I have decided that I like. I learn to play without any sense of time, to enjoy making things for their own sake. I choose to dance, while my brother plays with Legos by the hour.

But some children don’t have the chance to develop initiative. Instead, they hear negative messages that get buried in their neural pathways: “You’re not tall enough … you’re not old enough … you don’t know enough … you can’t play this game yet.…” Some of these statements may have been true at one time in life. But they must be balanced with positive messages, Erikson noted, or else a sense of guilt will predominate. Business leadership requires confidence—and lots of initiative.

When the child begins school, the ability to learn new skills and tasks with industry emerges. The child works with others as part of a larger group, under the direction of a teacher or coach who may not be as nurturing as a parent. Other children become part of a competitive world. If my grades aren’t so great, and I drop the ball, I can develop a sense of inferiority, unless I have learned some clear ways to measure my own personal best effort and overcome the poor grade on the test, or the losing score.

The hard work of forging an identity challenges the teenager. This is the stage when my own uniqueness, perhaps in contrast to my parents’ expectations, emerges. What are my talents, my dreams, my goals—in school and beyond? What difference do I want to make in this world? In my family? Maybe in the family business? If an adolescent somehow can’t pull these pieces together, perhaps because of addictions, premature emancipation or other distractions, he or she can get lost in role confusion—I’m not sure who I am or where I’m going.

Young adults seek intimacy, or the opportunity to share who I have become with someone who can accept me as I am, in an intimate, committed relationship. If love is not possible, then isolation closes in, without the capacity to share deeply what is most important in life.

By the late 20s or early 30s (new neurological research indicates that the human brain is not fully developed until age 25), adults hope to have enough good things to offer to their own children, or to the next generation. Generativity—the capacity to share, to build, to mentor others —is the hallmark of adult life. The alternative, according to Erikson, is stagnation—getting stuck within myself, unable to grow or share or enjoy with the next generation whatever is life-giving.

The last stage of life, ages 60 to 80, moves beyond generativity to integrity—accepting the truth of my life as I have chosen to live it (the glaring mistakes as well as the audacious triumphs) without embellishment or denial. The alternative is despair, or the feeling that what I have done is worthless and that my life has no meaning. Family entrepreneurs who focus only on what they are letting go of, and not the legacy to be shared, may delay retirement and succession planning. It is much harder to exit a complex business than to start one.

A new set of skills

Succession planning for the senior generation, which according to some experts can take as long as ten years, requires extraordinary honesty—the admission that it is time to let go, that the new leaders I have mentored may do it even better than I ever could. Tough as it was to build a start-up from scratch, a whole different skill set and a new level of energy are required to take a $100 million business to the next level. Whatever remains imperfect will become the successor’s challenge. This is tough for many an entrepreneur.

Much has been written about requirements for succession, but Erikson’s pathway through life offers some powerful psychological criteria for any business leader: the capacity to trust and collaborate with others and yet to demonstrate personal independence or autonomy; to take initiative to go where no one else has gone while developing the right competencies and a productive sense of industry; to become comfortable with one’s own identity while enjoying the right kind of intimacy with family and business associates; to become generative by giving away to the next generation all the business know-how you have worked so hard to gain. If all this evolves within a business leader, integrity will fall into place.

Entrepreneurs who successfully make the transition from CEO to chairman emeritus never lost the balance between work and play. They recognize the unfinished business of life: the desire to sail across Lake Michigan, to write a blog about business tactics, to play the entire Robert Trent Jones golf trail, to mentor an inner-city kid, to develop a family foundation as a legacy, to grow knock-out roses, to have a second cup of coffee with the spouse who has been waiting 45 years for this.

The family circle looms larger than either the business circle or the ownership circle in the final chapter of life. Now is the time to relax—to let love, care and trust take us back to where we began. It’s time to look on with pride and joy as sons and daughters shape their own future, knowing that what I have done may not be perfect but has been good enough for the business, good enough for the family and, honestly, good enough for me.

Competent financial planners, accountants and attorneys can provide essential guidance on how to transmit a business appropriately, but only if they are asked. Boards of advisers and directors will help manage the transition and nominate competent successors. Family members can offer support and invitations to vacations too hard to refuse. But the CEO must lead this final process, too. The senior-generation member must address some essential questions: What is life-giving beyond the business? What is the meaning of my life?

Ellen Frankenberg, Ph.D., is a family business psychologist who welcomes feedback on your experiences with transitions at ellen@frankenberggroup.com.

Erik Erikson’s Eight Ages

1. Infant (0-1): Trust vs. Mistrust

2. Toddler (2-3): Autonomy vs. Shame and Doubt

3. Preschool (3-4): Initiative vs. Guilt

4. School age (6-11): Industry vs. Inferiority

5. Adolescence (12-18): Ego Identity vs. Role Confusion

6. Young Adulthood (18-20s): Intimacy vs. Isolation

7. Adulthood (20s-50s): Generativity vs. Stagnation

8. Late Adulthood (60+): Integrity vs. Despair

The late Robert B. Wegman may well be emblematic of a shift that is taking place in family businesses across the country. When he passed away in April 2006, Weg-man, then chairman of Wegmans Food Markets Inc., was 87 years old. Until shortly before his death, a company announcement stated, he “kept a full schedule working in the office and enjoying his favorite pastime of visiting Wegmans stores.”

Only the year before, he had named his son, Danny Wegman, CEO and his granddaughter, Colleen Wegman, president of the 70-store chain based in Rochester, N.Y. Robert Wegman had worked in the company for more than 65 years and had been its leader for more than 55 years.

The prospect of Mom or Dad being in charge for more than half a century may not bring comfort to sons and daughters eager to take the reins of a family business. Nevertheless, the reality is that people are living longer, healthier lives, and members of the senior generation who are full of vitality in their 60s, 70s and 80s may be reluctant to relinquish their hold on the family firm. At the least, they may wish to retain a vital connection to it.

Over the last century, the average life span of Americans rose 30 years. An individual born in 1900 had a life expectancy of 47.3 years, but someone born in 2004 could look forward to 77.8 years, according to the National Center for Health Statistics.

While we’re not yet seeing statistics on aging and the family firm, family business advisers are beginning to notice more instances of three generations of family members working in the business.

“Even in families where there are only two generations, I’ve certainly seen people staying a lot longer,” says Paul Sessions, director of the Center for Family Business at the University of New Haven. “And not just because they don’t want to give up control, but because they’re still incredibly able and there’s a need to be -useful.”

Consider some names you might know:

• Sumner Redstone, 84, still chairs New York City-based entertainment conglomerate Viacom Inc., and speculation is that his daughter, Shari Redstone, will be 60 before she gets to run the show. (However, according to a July 20 Wall Street Journal report, Redstone “is no longer confident” that Shari, 53, should succeed him.)

• At 77, Edward C. Johnson III is still the very active chairman of family-controlled Fidelity Investments, the Boston mutual fund giant. Unclear is whether his daughter, Abigail P. Johnson, a company executive and its largest shareholder, will be his successor.

• John H. Johnson, the founder of Johnson Publishing Company, publisher of Ebony and Jet magazines, ran the Chicago enterprise for 60 years before naming his only child, Linda Johnson Rice, CEO in 2002. When he died three years later at 87, he was still the company’s publisher and chairman.

In some families, to be sure, restless successors all but shove the parent-CEO out the door. However, says Sessions, “In the families that are working well together, there’s a real concern in the younger generation for the seniors, and they don’t want to push [the seniors] out.”

When he’s working with next-generation family members who seem impatient to take charge, Sessions tries to help them “reframe things a bit,” he says. “Think in terms of not, ‘We’ve got to get him out of here so we can do what we want,’ but, ‘How can we get to do what we want and give him an opportunity to do what he wants? How can we find useful activity for all of us?’ Not make-work but real stuff.”

Planning the transition

Michael Powell, 67, always expects to have a role in his company—just not the role he has now as the owner and president of Powell’s Books in Portland, Ore. Powell’s, which is nationally known, has eight stores and a sizable Internet operation; it employs more than 500 people.

About five years ago, Michael and his wife, Alice, a psychotherapist and clinical social worker, turned to the Austin Family Business Program at Oregon State University for help in succession planning. Their only child, Emily, was working in another state and it was not yet certain that she would join the family business. She did, however, in 2004, and the Powells were ready for her with a career development plan. The Austin center has also worked with some of the company’s senior managers and even Emily’s boyfriend to help ensure Emily’s success.

Last year, Michael announced that Powell’s Books would stay in the family and that Emily would own and operate the company after a four- to six-year transition period. When Emily takes over, Michael, who says he’s healthy except for knees that are “a little creaky,” will be in his early 70s.

When you’ve run a business for 28 years, as he has, Michael says, you don’t think of a retirement age. “I don’t have any reason to think that 65 is any more magic than 67 or whatever,” he says. “It became more of an issue of when Emily would be ready.”

Only 28, Emily is getting ready as fast but as deliberately as she can. At present, she is the company’s director of used books and is taking advantage of the opportunity to learn from her father and other senior managers. In addition, she is working on an executive MBA in a joint program offered by the University of California, Berkeley, and Columbia University in New York.

Right now, she says, her father’s role is the same as it has always been—“the leader and the visionary.” She sees the next three years as one of “partnering together so that I get the most out of the experience of working with him and learning from him.... It’s really a mentorship as well as, for me personally, just a great opportunity to work with my father, who I’m very close to and who I care a lot about.”

Neither she nor her father knows what role he’ll assume in the future. He might serve as chairman of a yet-to-be-created board or just do some of the more mundane jobs he enjoys, such as pricing and processing books. But one of the main things, he says, will be to “try and stay out of Emily’s way.”

Besides, he’s got a lot to do. He serves on a number of community and business boards and is chairman of Portland Streetcar Inc., a non-profit agency that manages the city’s streetcar development, construction and operation.

Even though he announced his plans to step down several years in advance, Michael says he isn’t having any regrets about the prospect. “I have always thought that the important thing was the success of the company, its stability, and its survivability,” he says, “and it occurred to me that the best thing for the company—not for me personally —is to have fresh eyes and fresh hands on the reins.”

Longevity’s advantages and challenges

You have no doubt noticed that most of the successors or prospective successors mentioned in this article are women. That’s because two major trends are converging —longer, healthier life spans and the emergence of women as business leaders. In family businesses, the greater longevity of the senior generation works to the advantage of daughters who want to raise their children to a certain point before joining the family business or taking on a significant leadership role. Once their child rearing is done, they still have ample time to make a meaningful contribution to the business, and someone in the senior generation is still available to teach them the ropes.

Curtis L. Carlson, founder of the Carlson Companies, named his daughter, Marilyn Carlson Nelson, CEO of the Minnesota-based travel empire on its 60th anniversary in 1998, the year before he died at age 84. “If I would have retired at age 65, we wouldn’t have gotten to where we are today,” he once told Family Business Review, a professional journal.

In the same article, Nelson, who joined the company after raising a family, said one benefit of her father maintaining his leadership position for so long had been “to give my sister and me a chance to develop a more mature relationship.… I think my sister and I are now much more capable of providing the leadership and stewardship for the Carlson family and our family enterprise.” Nelson’s sister, Barbara Carlson Gage, heads the family’s foundation.

Healthy longevity can offer many benefits to a family firm, including the wisdom and experience of the senior generation. And having several generations in one business can help a family stay connected and can provide the enterprise with a variety of useful perspectives. “It’s really fun to have three generations working together on a daily basis,” Colleen Wegman told a newspaper reporter not long before her grandfather died. While her father and grandfather shared the same values, they approached things differently, she said, adding, “I think diversity of thought is so important for our success.”

But there are downsides and challenges as well. As her father grew older, Marilyn Carlson Nelson told FBR, “he became less willing to take some of the risks that had helped him build and grow the company.”

A major challenge that longevity poses is financial, according to Bonnie Brown Hartley, president of Transition Dynamics Inc., a family business consulting firm in Venice, Fla. The oldest baby boomers are now entering their 60s and, Hartley points out, they stand a good chance of becoming centenarians. The question boomers need to be asking, she says, is, “Will we be financially safe until we’re 100?”

Multiple generations in a family firm can also present communication difficulties. For example, Hartley says, the younger generations dislike meetings and would prefer to use e-mail or text messaging. Members of Generations X and Y work hard but, unlike their parents and grandparents, Hartley suggests, they’re not going to be as eager to work 80-hour weeks. They want more balance.

Despite the differences, Paul Sessions is optimistic. “A lot of it is about the willingness to communicate,” he says. Where there’s willingness and generosity of spirit, family members “find ways to connect.”

Longer, healthier lives are wonderful, but they do raise new questions for families in business. When do we retire if not at 65? What do I do if my parents don’t retire? How do we fund all those extra years and manage our health? It’s uncharted territory, and today’s generations must start crafting the maps for those yet to come.

While Robert Wegman had to answer some of these questions for himself, he never had to deal with the issue of extended longevity of the generation before him. Quite the opposite. His father, Walter, and uncle, Jack, were the founding partners of Wegmans. Robert was only 18 when his father passed away and just 31 when his uncle died. He would probably agree that a longer, healthier life span is a good thing.

Sharon Nelton has been writing about family business issues for more than 20 years. She is a former board member of the Family Firm Institute.

For further reading The Dynamics of Aging Families: A Handbook for Both Aging Parents and Adult Children, by John W. Gibson and Bonnie Brown Hartley. Offers information and tools to help different generations understand one another and interact effectively. Available from www.cambiopress.com. To see an excerpt, visit www.transitiondynamicsinc.com.

Facing up to extended lives Tips for older family members:

1. If you plan to hang on to leadership, make it clear to your children so they can make choices for their own lives.

2. Enlist several trusted individuals who will tell you when it’s time for you to let go of control. Don’t put the business at risk by staying on when it needs fresh leadership.

3. Find a meaningful way to stay connected to the business without running it. Be a mentor or an ambassador to the community, or engage in work you enjoy.

4. Retire to something, not from something. Some former CEOs run for political office, become engaged in philanthropy or teach.

5. Plan well ahead how you are going to fund a longer life—and let your family know your plans.

Tips for younger family members:

1. Consider the advantages of having members of the senior generation stay in the business longer—the value of their experience and their relationships with customers, for example.

2. Hire a consultant or enroll in a family business program to help you and the senior family members deal with issues of aging and planning for an eventual transition.

3. Help aging but healthy family members find meaningful ways to stay connected with the family business, if that is their desire.

4. Be honest with yourself and with a senior family member who won’t relinquish the reins. If you find it unacceptable to wait another ten years before taking over, perhaps it’s time for you to move on.

5. Begin to plan now for your own extended life.

Ping Golf has revolutionized not just an industry but also a sport played by nearly 29 million Americans. The innovative product designs of company founder Karsten Solheim made a difficult game easier—and a lot more fun—for golfers at all levels. His sons, especially CEO John Solheim, now 61, honed a business model that set standards for the industry. Today, the third generation is getting ready to assume the mantle of leadership. They are inheriting a $300 million operation with 1,000 employees, about 850 of whom work at the main campus in Phoenix, Ariz.

It all started with Karsten Solheim’s obsession with the game, which he didn’t take up until age 42 while still an engineer at General Electric. He began experimenting with clubs and patented his first product —a putter that on contact with a ball made the distinctive sound that gave the company its name—in 1959. Production took place in the garage and was literally a family affair. John Solheim was 13 at the time. “When we started, I drilled the holes in the putters where the shaft went,” John recalls. “My brother Allan was putting the grips on. It was fun.”

That first putter’s heel and toe weighting helped the player keep it on line. It evolved into the Anser model, which featured several other advancements. “If you look at nearly every putter on the market today, they’re all descended from the Ping Anser,” says John Buczek, head golf professional at the fabled Winged Foot Golf Club in Mamaroneck, N.Y., and PGA National Merchandiser of the Year for 2006. “It’s amazing what they’ve done in the golfing world since Karsten developed the original Ping putter in his garage,” Buczek says. “They’ve been leaders in putters, in irons and even in golf bags.”

The first major tournament win for the company came in 1969, when George Archer used an Anser Putter to win the Masters. Every time a tour player wins an event using a Ping putter, a gold one is inscribed and given to the player and a duplicate is placed in the company vault to commemorate the occasion; more than 2,300 of them are there today. Angel Cabrera, the 2007 U.S. Open winner, uses Ping clubs, as does the world’s leading female player, Lorena Ochoa, and Daniel Chopra, the winner of 2008’s first PGA Tour event, the Mercedes Championship. The company sponsors the Solheim Cup, the premier international event for women pro golfers.

Karsten’s way

As with any family business, Ping’s path hasn’t always been smooth. Karsten, who suffered from Parkinson’s disease and died at age 88 in 2000, was a brilliant engineer, but his management style evokes mixed reviews from family members and longtime employees. “Karsten’s Way,” the name of a street on the company campus, also describes the man’s strong grip on the corporation’s direction. “Growing up, I was told there was the right way, the wrong way and Karsten’s way,” says John’s youngest son, David, 28, who works in corporate communications. “Whenever you start up your own company, you can tell people the way you want things done. It’s been a while since he was here, but that idea has not left the place.”

“Part of the Karsten way is doing things right because it’s the right thing to do, not necessarily the right business thing to do,” says Stacey Solheim Pawels, Karsten’s granddaughter and John’s niece, who is vice president and corporate secretary.

Karsten’s way brooked no opposition, whether from within the company, the family or the powers-that-be in the golf world. In 1961, he created another revolutionary product, the cavity-back iron. The initial primitive version became the Ping Eye2, a forgiving, game-enhancing club that, along with an innovative custom-fitting system, gave Ping a commanding 40% of the market for irons in the 1980s.

The clubs also caused immense trouble for the company and the family. In 1988, the United States Golf Association ruled that the clubs didn’t conform to the rules of the game. The next year, the PGA Tour announced it would ban the clubs, too. A long legal battle ensued.

That battle was a source of friction between John and his father. “The USGA thing really strained our relationship,” John says. “I wanted to get it over with because it was draining him so much.” Karsten also refused to introduce any new irons until the suit was settled. In 1990, the USGA settled by approving the old clubs while Ping agreed to design changes for new ones. The PGA Tour suit wasn’t resolved until four years later, with acceptance of the design. While Ping litigated, the rest of the industry moved forward technologically, beating Ping to market with lucrative metal and titanium woods.

The relationship between Karsten and John had always been somewhat problematic. Even when he was making clubs as a teenager, John writhed under his father’s management. One early issue was money: “There was a shopping center that came into the area and I went there and applied for a job. It was only after that that I got paid [for working in the family business],” he recalls. “I got $2.50 a putter, but if I needed help to get the job done, I had to pay the employees out of my own pocket. I had some of my high school friends helping.”

The real internal battles came when it was time for Karsten to step aside. “My dad didn’t want to let go,” John says. “He would never talk about not being there. That made the planning pretty difficult.”

It was even more difficult when Karsten became ill. “When the Parkinson’s started to get to him, I realized I needed to step in,” John explains. “I discussed it with him, but he didn’t want to [step aside]. Finally, before a board meeting, I told him I wanted to nominate him for chairman, which we’d never had before, and he would nominate me for president. He had a few words in private with my mother, and that’s the way it happened.” John later learned that his father had made the decision to turn over voting control of the company stock to him some time earlier but kept it secret as he held on till the bitter end. His two older brothers were co-executive vice presidents until they retired.

Generational shifts

When John took over in 1995, the change supercharged the company. He expanded the product line into metal woods, set up a rapid-delivery system to hold on to the company’s position in the custom-fitting market and hired Ping’s first advertising agency. He also divested several other operations that weren’t directly related to the company’s roots as a club maker.

Not long after, his own sons moved into management positions in the company. “At our age, the third generation has a lot more influence than the second generation did at the same age,” David observes. “That’s a credit to the second generation for allowing us to get our hands dirty.”

Andy, 31, is director of customer relations. Domestic and international customer service, credit and club fitting and repair all fall under his aegis. Like his brothers (and his father, for that matter), he’s never worked anywhere else. He says he learned what it means to be a Solheim early in his career. “One time, I had just finished my master’s degree and had helped do a video for a national sales meeting,” Andy recalls. “I was just going to show up, watch the video, then go back to the office, so I was wearing shorts and a casual shirt. My father gave me ‘the look.’ Fifteen minutes later, I had a suit on.”

John’s oldest son, known as John K., is 33 years old and the one who inherited his grandfather’s engineering talent. He holds an MBA as well as a degree in mechanical engineering. As vice president of engineering, he says, he has tried to expand the design function beyond the one-man-one-idea operation it was under Karsten. He’s hired several design engineers with backgrounds in the sport and has concentrated on speeding the time to market for new products. One of the company’s biggest changes came with the purchase—at John K.’s urging—of a supercomputer, which shortened the wait time for design analysis from 15 hours to 15 minutes.

“The Cray Supercomputer was one of those times when my dad and I were on the same page,” John K. says. There were plenty of other times when they weren’t, including several disagreements over product design. In fact, their relationship bears some resemblance to the one between Karsten and John, according to John K.: “We may have to name another road ‘John’s Way.’ He has his own way of doing things.”

That may not bode well for the looming management transition from the second generation to the third, although John says he’s working to ensure a smooth handover of operations. “My dad was well into his 80s when he finally turned it over, and I don’t intend for that to happen,” John says. “I’m not in any hurry to leave, but, at the same time, we have to have the best person for the job. The family members have to compete with everybody else.” The family is working with consultants to help them address succession issues.

John K. is often considered the heir apparent. Yet, he says, “Talking to my dad, I don’t get a lot of that. He hasn’t anointed me. Both of my father’s brothers retired at 65, but I’m not sure what the plan is for him.” Andy says he’d like the CEO job, too. “I don’t know what my dad’s plans are,” Andy says. “I look at the third generation, and most of us are pretty young.”

Leslie Dashew, a family business adviser in Scottsdale, says it makes sense for a business leader to take a cautious approach to succession decisions. “When families are [carefully] thinking through this process, it provides a great deal of security to employees,” she says. “If you want to run the business well, you run it like a business. You find the best talent. That may or may not be a family member.”

Doug Hawken, 58, Ping’s non-family president and COO, says he’s not privy to the succession planning but feels good about the prospects. “We have a good balance of family members and non-family members at leadership levels,” he says. Hawken might be considered a prospect to succeed John, but the two men aren’t that far apart in age. Hawken says he wants only one thing: “Whoever takes on that leadership role at this company has to have the same passion as Karsten had and John has. You don’t just assign somebody that passion—they either have it or they don’t.”

John turned the company around, streamlined it and worked through many of the rough spots, but there is still plenty of work to be done, the family acknowledges. Golf in the U.S. isn’t a growing sport, according to John and many industry sources, but the international market is just waiting to be tapped. As John K. points out, “In Japan, we don’t even have 1% of the marketplace. And that’s the second largest golf market in the world!”

In recent years, Ping opened new assembly facilities in both Japan and Europe as part of its strategy to take its rapid delivery system to the international market.

There is also some low-hanging fruit domestically, according to John K. “We’ve been a little slow to adjust to the market’s move from green-grass [golf course pro shop] outlets to retail stores,” he says. “They’ve really taken over the hard goods side of the business. We have great relationships with the golf course owners and operators, but, at the end of the day, the consumer isn’t buying product there.”

Doug Hawken, who watched the generational transition from the vantage point of a non-family insider, has a positive outlook for the future. “Since John has taken control, we’ve returned to a good position within the marketplace,” Hawken says. “We’ve had four years of growth now, but he’s willing to listen to the fact that we need to get our group together to go forward.” FB

Dave Donelson writes and lives in West Harrison, N.Y.