CHOOSING A SUCCESSOR By David Claerbaut

A succession caste system
fosters business dysfunction

In choosing a successor, you must be careful to avoid playing out family dramas on the stage of the business.

Family life, even under the best of conditions, is difficult. Business, even under the best conditions, is difficult. Combine the two and life can become extremely stressful. In fact, business problems do not simply add challenges to family relationships. They intensify family problems, often bringing out latent ill feeling within the family unit. In mathematical terms, business challenges have a multiplier effect on family conflicts. Stated another way, business challenges A and B and family problems A and B don’t just add up to four problems; they interact with each other, creating closer to 16 dilemmas.

For example, if brother #2 always resented the perceived favoritism of his father toward brother #1, the formula for resentment over distribution of power (or perceived power) within the business is set. Now the issue of favoritism is no longer subjective. It involves money, authority and prestige. Even worse, other family members may take sides, so the brothers’ conflict begins to devour the entire family. It is no longer brother vs. brother amid a quiet resentment of the father. Now it is mother vs. father and his perceived lack of fairness, and sister vs. one of the brothers, and perhaps brother-in-law vs. the entire family and its dysfunctional state.

What is at the core of these blowouts? Family members play out their familial conflicts on the stage of the business. Sibling rivalries, marital conflicts, and nuclear vs. extended family rifts often become open wounds in the pressure-packed cauldron of business.

In one large printing company, for example, Terry, the president and older brother, started lording it over Marlin, the younger sales manager, pretty much by the time they crawled on their first teeter-totter. And he hasn’t stopped since. The fallout is obvious. Terry and Marlin have gotten locked up in a lose-lose posture on issue after issue. In addition, the salespeople do not respect Marlin, because Terry consistently overrules him. Marlin, of course, finds it difficult to support the overall company direction, because he sees Terry as a one-man gang. And so it goes.

The problem with primogeniture

Whenever we hire non-family people for key positions in our companies, we look for the best performers. We assess the skill demands of a given position and try to fill it with someone possessing those talents. With family, however, often it seems the determining attributes are gender and birth order. Male family members still “man” the critical power roles. Female relatives are often assumed eventually to marry and have children and thus are passed over for long-term, critical business roles, which are considered incompatible with motherhood.

The oldest male often is appointed to lead the business, without regard to whether he is the most qualified person for the position. Think about the potential negative consequences of that. First, the family may not be passing the reins to the most competent heir. Hence, on a coldly objective basis, this may be a major business blunder. Possibly compounding the problem, this style of succession can be devastating to a younger sibling’s enthusiasm for the business.

This succession caste system can result in a dysfunctional family business structure. Here’s an example.

Joe, the older son in a longstanding family communications company, was regularly agitating his father, Dan, to work with the company lawyer on a succession plan. What was most important to Joe was holding the title of president. But Joe’s younger brother, Kris, didn’t think this was a good idea. It wasn’t a matter of ego; Kris didn’t feel Joe was capable of making sound, rational business decisions. He feared for the long-term survival of the company if conservative Joe remained in charge. Moreover, many in the company felt Kris was the better horse to bet on.

Kris, wondering about his and the company’s long-term future, did what he could to stall the succession process and wondered whether he should even stay in the industry. It was an arduous task for me to help them work through their issues.

Working toward a solution

What can be done in such situations? Let me first cop out a bit by saying that no two companies are the same, so a simple one-size-fits-all formula does not exist. Nevertheless, there are some things that can help.

First, all family members should see themselves as trustees of the business, charged with the task of doing what is best for the company, not for any individual member.

It is often very helpful to assemble an advisory board, consisting of people acceptable to all (or at least most) family members. In critical areas the owner-president can call on these advisers for assistance in making key determinations. The value of such a group is obvious. Its members can offer far more objective input on a critical decision than a parent can. What’s more, the business leader can sidestep a good deal of the heat if the verdict was determined (or at least vetted) by an outside group.

An objective perspective can go a long way toward resolving conflict. Too often a parent will make a succession or leadership decision largely on the basis of how a family member (or members) may feel about the decision, not on the basis of what is best for the business. Often the parent’s inclination to go with the “feel” criterion is driven in part by the fear of being resented for the decision.

The current business leader must assess carefully the talents of the children (as well as qualified non-family employees) in determining who will be doing what in any succession structure. The appointment need not be permanent. The new leader could have a three-year term, leaving the door open to a change if necessary. Leadership could even be rotated among some or all of the children.

There is a flip side to this. While decisions must be based on what is best for the business, no family member should be ostracized should he or she decide to leave the company. The company will be healthier if the door swings both ways.

Finally and above all, there should be regular management meetings, during which all family managers act as responsible trustees of the business. If necessary, have an outsider lead the meeting, but whatever you do, make it an exercise in what’s-best-for-the-company thinking. There is no substitute for consistent practice to move people away from the wrong stage of self-interest and family strife toward sound business decisions that contribute to the health of the family.

David Claerbaut, Ph.D., is a sales and management consultant and the author of 15 books (www.claerbautconsulting.com).