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."
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.
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."
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.
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