| (803) 791-1111 | CLIENT LOG IN
Family-owned businesses are the foundation of our economy. In fact, family businesses account for (1) 64 percent of the gross domestic product (GDP), create 78 percent of all new jobs and employ 60 percent of the US workforce. The success of multi-generational, family-owned businesses, however, is not without its complexities. The longevity of these companies faces unique challenges as the business seeks to successfully transition from one generation to the next; I know this from experience.
In the 1930’s, my great granddad sought to achieve a better life for him and his family amidst the difficult backdrop of the Great Depression. He pedaled his bicycle throughout Orangeburg, SC, selling affordable insurance. His vision and hard work have continued with my father, Blake Amick, and myself as we seek to provide the same level of honest advice, expert guidance and passion for helping others. As a family, we have helped many business owners navigate the very challenges that many multigenerational businesses face – including our own.
One of the greatest obstacles in creating an enduring family business is the integration of the up-andcoming generation. Inevitably, new ideas, thought processes and priorities are introduced that may not always align themselves with the older generation’s approach to the business. Therefore, the key to successful integration and succession is to recognize the convergence of these different personalities and perspectives and design a plan that specifically addresses them.
The following are crucial strategies for creating an environment within your organization that will ,promote years of ongoing success for your family’s business.
The importance of communication between family members can’t be emphasized enough. Open dialogue is a crucial step in merging the
contributions of the older and newer generations in a way that is beneficial for everyone, including the business. Many times, there is a misunderstanding regarding expectations, values and traditions that motivate decisions and opinions, which often lead to divergent paths. If these topics aren’t discussed and understood, family members can become misaligned in their approach to working together for the common goal. The younger generation needs to learn why things are done – the significance and meaning behind processes and decisions. Likewise, the older generation needs to be open to listening to new ideas and perspectives to show an interest and investment in the upcoming generation.
Very closely associated with the importance of communication is the need to make sure the business is built on clearly understood values. These values, and the mission of the business, will almost always reflect the family’s values: hard work, integrity, efficiency, etc. When your business is built on specific values, customers will choose you because of those values and future generations will know that decisions and priorities related to the business must reflect those standards.
Passing on the business to the next generation should be considered an earned opportunity, not a presumed right. Nepotism will ultimately lead to complications, as it does not focus on the proper transition of responsibilities based on knowledge, experience and commitment. Families who have a desire to keep the business within the family need to train and vet family members the same as anyone else. The healthiest, most successful businesses provide opportunities to the rising generation to work their way into management and beyond. Doing so helps family members better understand and appreciate the varying aspects of the business and builds trust amongst all team members. For example, within our family business, many individuals on our team have known me since I was a toddler. So, when I started working with my dad, it was extremely important for me to take on different responsibilities to prove both my commitment and experience to take on future leadership roles.
The transition of one’s business isn’t an overnight transaction. Instead, it’s a plan that must be created, understood and executed well in advance – sometimes several years in advance. However, even with a succession plan in place, it can be difficult for the founder to hand over the reins. There’s an excellent article (2) that was published by the Harvard Business Review that addresses many of the challenges that stem from this situation. Succession plans are best created with all relevant parties involved so that expectations are clearly communicated - on both sides. In addition, a qualified third party (intermediary) can be beneficial to ensure all messages are fully understood and to help with areas requiring additional consideration. Then, it is up to the founding, older generation to ,accept when to let go - which can be easier said than done. But the knowledge that a clear, comprehensive succession plan is in place can often make the transition more manageable.
As another excellent HBR article (3) summed in its conclusion, “Successfully passing the baton to the next generation is a goal for many family business leaders. It can also be a sound business move if the right steps are taken." Family businesses are the fabric of our society and economy; they are needed. Many family businesses can successfully pass their vision onto the next generation. This succession, however, requires great responsibility and attention to care for all involved.
If you are in the midst of this kind of transition or have questions related to family business succession, feel free to contact us (803) 791-1111 or info@longleafadv.com if you have questions about your specific situation.
References
(2) https://hbr.org/1971/03/conflicts-that-plague-family-businesses
(3) https://hbr.org/2020/05/the-key-to-successful-succession-planning-for-family-businesses
Thank you!
Please try again.
Investment Advisory Representatives offer advisory products and services through Longleaf Advisory Services, LLC, a Registered Investment Advisor.
171 Lott Court
West Columbia, SC 29169
All Rights Reserved | Longleaf Advisors
Investment Advisory Representatives offer advisory products and services through Longleaf Advisory Services, LLC, a Registered Investment Advisor.