Joining the family business is a little different than going to a typical job interview. You may have been told from a young age that this is your destiny. Or you may have been told the opposite: that you will have to start small and prove yourself. Either way, there is an idea that because the business is “family” that you may be a part of it at some point. But do you want to?
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Succession planning is a process that every organization needs to be thinking about and working on throughout the lifecycle of the business. However, succession planning in a family-owned business has some unique challenges and considerations. More often than not, more than one family member is working in, invested in, or associated with the business. When your business associates are the same people you celebrate special occasions and holidays with, you need to be even more intentional about not damaging relationships in the process.
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Every family has unique dynamics and each member carves out a role that just seems to fit his/her strengths. Among the many roles, there is usually the role of “person in charge,” the role of “peacekeeper,” the role of “challenger,” and the role of “planner/organizer.” And in some cases, multiple people want the same role; which can cause conflict in the family business. To add to that, the role in the family may not match the position they hold within the company.
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The family business is as American as apple pie and the Fourth of July parade. Companies such as Ford, Marriott and Wal-Mart are only a handful of family-owned, corporate giants that come to mind. And although there are more than 100 million family businesses in the United States, only about 30% of family businesses survive to the 2nd generation, and 12% to the third.
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Parents are parents forever. That’s a given. As parents, we want to give our children every opportunity to be successful. Why not? We have nurtured them, guided them, and taught them; all in hopes that one day they will grow up, be successful and contribute to society. And we have to protect them. We don’t want any harm to come of them. No hurt feelings, no life setbacks. In that endeavor, as an owner of a family business, we have resources available to us to create opportunities for our children to become successful. And this is an opportunity they may not have in other companies. We’re very good at utilizing all of our resources! So we end up hiring family members.
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I was recently asked this question by the owner of a family business with four sons working in the firm: “How do I choose which one will run the business?”
Wow! There are so many ways to answer this question. Family business succession can be complicated. My first response was to ask, “Who wants to?” To which the owner did not know the answer. So that is a good place to start; however, there is more running the family business than just who wants to.
When deciding who should be the next-generation CEO and who should play supporting roles, let’s take a look at a few of the tough decisions at play here.
The owner may be asking several questions: Who can run the business? Who wants to? Do we have the talent? Do we expect that they will want to?
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As you may know, Revela is a family business. Our founder, Wayne Nielsen, started this business (among other companies) so that it would be around for his grandchildren’s grandchildren. We’re a smaller family business, but we do business across the United States. Family businesses come in all sizes. We work with a few in different industries: banking, manufacturing and distributing, transportation, and other business services.
Family business owners often contemplate who will take over the business when they retire. Revela is now owned by Wayne’s daughter, Andrea Fredrickson. Actually, many owners consider their family members as first options. Leadership teams may consist of spouses, siblings, children, cousins, etc. All the same people that sit around the table at Thanksgiving dinner. But as a non-family member in a family business, sometimes you have to wonder… Where do I fit in?
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This is a question that most business founders must face at some point in their lives. Family business planning is the process of selecting and preparing the right person to lead the family firm into the future. The average life of a family-owned business is about 24 years, usually ending when the owner/founder retires or passes away. It is reported that approximately 30 percent of family-owned businesses survive the succession from the first generation to the second and only ten percent to the third generation. By 2019, the number of family-owned businesses that will transfer from the first generation to the second will be the largest the world has ever seen.
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