Succession Planning

Succession planning must address family and business transitional issues

During generational transitions, many family businesses are sold or experience declining business performance and family problems. Inadequate or nonexistent succession plans are generally the underlying reason. Even when succession plans are developed, they often fail to deal with the many quantitative and qualitative issues necessary to properly transition a family enterprise to the next generation.

Succession planning is a difficult subject for the current generation to face. Such discussions often trigger a range of deep emotions, among them fear, conscious acknowledgment of personal aging and death, loss of personal identity defined by involvement in the business and a desire to avoid family conflict. These factors contribute to the company leadership’s lack of will to address succession planning on a timely basis, despite prodding by the next generation.

Inevitably, a transition will take place, whether planned or unplanned. Transitions can be caused by death, disability, health challenges, family disputes and other life events. Unplanned transitions generally are marked by problems that often prove devastating to the business, family relationships and the family wealth.

A well-thought-out succession plan provides an essential advantage to those families seriously concerned about continuing family enterprise ownership and success into the next generation.

Problems with succession plans
Many succession plans only identify the next CEO and update the family’s estate plans. Critical and existential issues about ownership, governance, organizational development, financial and retirement planning, and business strategy often are not addressed. These issues impact the health and very survival of the business and should be addressed years before a generational transition is forced upon the company.

The lack of a comprehensive succession plan also creates problems for the business prior to a transition. For example, key managers and employees need to feel confident that the company will survive beyond the aging current generation’s ownership and leadership. Their careers and family security depend on it. Customers, both current and prospective, want to be comfortable that the business will continue to meet their needs in the future. Similarly, suppliers will be concerned about maintaining long-lasting vendor relationships. Companies that lack clear direction on succession suffer business downturns after the inevitable transition.

Nine-step succession planning road map
Succession plans must address both family and business transitional issues. When I was asked to resign from my Deloitte management consulting partnership to become the Gen 3 CEO of our family business, I wanted to be certain we had alignment and clarity among our third-generation ownership on how our business and our family members would function.

Based on my family’s Gen 2 to Gen 3 transition, several years of CEO experience and my subsequent family business consulting work, I developed a nine-step succession planning road map. This road map captures the complexity and breadth of issues that should be addressed in a family enterprise succession.

Family and ownership transition planning
Planning issues related to the family should be addressed first.

Step 1: Family planning and communications. The first step is to communicate to the family any decisions that have been reached or are being contemplated. It is important to explain the rationale behind the decisions so there is no misinterpretation or misunderstanding of intentions. This step also provides an opportunity to craft the plans to meet individual family members’ needs and concerns. For example, certain family members may prefer predictability of cash flow distributions while others may desire long-term capital appreciation.

Most family members understand that transitioning a family enterprise to the next generation triggers many issues. Certain topics are emotional by definition — who is picked to be the CEO, who is entitled to own stock, who may serve on the board (in control of the enterprise) and the equitability of the financial arrangements. These decisions impact family members’ roles and their sense of purpose and even self-worth.

The family should engage in clear communications in which family members are transparent about individual and group needs. This will enable plans to be tailored to meet the next generation’s financial objectives while also advancing the best interests of the family enterprise.

Step 2: Ownership planning and alignment. Once family matters are addressed, the next step is to create an aligned ownership group with compatible goals and approaches for running the family enterprise after a transition. The current generation tends to make inaccurate assumptions about the next generation’s goals, concerns and risk tolerance. This is partially a result of the next generation’s lack of candor with their parents for fear of appearing greedy or unappreciative. 

Members of the next generation must reach agreement independently on whether they desire to work in the business and/or retain ownership in the business and, if so, for how long. Establishing criteria for employment and board participation is important to ensure family member involvement is based upon individual qualifications and not birthright. Key ownership and employment matters should be codified in an owners’ operating agreement and a family employment policy.

Step 3: Retirement and estate planning. To ensure a healthy and sustainable transition, it’s essential for current-generation family members to develop a personal retirement and estate plan. The plan should identify both a “purpose” and the future financial needs of each family member transitioning out of the family business. 

The “purpose” may be recreational activities for some, while others may desire involvement in non-profits, part-time roles in the family business or membership on business or civic boards. The future financial needs of the current generation should be planned after taking into account the impact of inflation, healthcare and long-term care, travel plans, estate taxes and charitable giving goals.

Step 4: Governance planning. The next generation must establish effective governance for two related but separate entities: the family and the business. Both require objective and accountable governance, but each has different issues to oversee.

The two organizations are a family council and a board of directors. The family council represents the family and addresses family matters. The board of directors represents the owners of the family enterprise and addresses business issues. The board can be composed of all fiduciary members or a combination of fiduciary and advisory (i.e., non-voting) members. Every director should be qualified based upon specific business and ownership needs. Independent board members (i.e., non-family) are crucial to bring objectivity, management accountability and professionalism to the board room. 

Business transition planning
These steps in the road map relate specifically to the business. If you overlook them, you might be putting the entire enterprise at risk and threatening future wealth creation.

Step 5: Business strategic planning. The initial step is to carefully examine the outlook for your business to ensure the strategic plan meets the next generation’s goals. Many next-generation CEOs adopt the prior generation’s strategies, organization and general way of running the business. While doing so might appease the prior generation, this practice is a missed opportunity and potentially a gigantic mistake. Business environments change continually, and strategic planning requires fresh and objective thinking.

Step 6: Risk assessment and contingency planning. The board and senior management team must identify and prepare for both the probable risks and the potential risks that could wreak havoc on the family enterprise.

While most successful business leaders are good risk managers, they do not regularly apply these same critical skills to evaluate the risk that the company will encounter a “black swan” or once-in-a-generation event. As we all learned from the 2008 Great Recession, unexpected and low-probability risks do occur. Having plans in place to mitigate them can be essential for long-term business success (or even survival).

Step 7: Management organizational planning. Once a strategic plan is adopted, the next step is to create a management organization that can implement the plan and meet the family’s investment objectives. During management transitions, stylistic and culture changes often occur. In making any adjustments to the existing management team, be sure to consider fit with the family culture and other qualitative characteristics as well as technical and experiential capabilities.

Step 8: Family leadership development planning. Another step is to train and develop the management team for the future, including the next generational transition. It is also important to train family members who are not active in the business in responsible ownership and to develop future family directors.

Step 9: Stakeholder communications planning. The final step is to develop a communication plan to inform constituents about your transition and plans for the company going forward. A 100-day business plan with measurable milestones is an excellent way to focus the next generation’s management team on results. Constituents include family members working in the business, family owners not working in the business, key customers, suppliers, the management team, employees/team members and the external community.

Proper planning takes time
Spending the time and effort required for comprehensive succession planning is essential in multigenerational family enterprises.

A step-by-step approach to transition planning will minimize the interference of problematic family dynamics and will promote buy-in from prior, current and future generations of family members. Perhaps most important, it meets the common goal of passing a successful family enterprise legacy on to each future generation — a goal that is too seldom achieved.        

George A. Isaac ( is founder and president of GAI Capital Ltd., a family business consulting firm. He is the author of the newly published book Your Business, Your Family, Your Legacy: Building a Multigenerational Family Business That Lasts (Amplify Publishing/Mascot Books). 

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

Golub & Company works toward a magnificent transition

How do you explain the family real estate business to young children? The Golub family has used the board game Monopoly to help illustrate basic real estate concepts and strategy — and to introduce fun and friendly competition.

The family, which owns and operates Golub & Company, an international real estate development and investment firm based in Chicago, has not always been so strategic about preparing the next generation for the business. After a smooth but casual transition from the first generation to the second 20 years ago, the family now has active and significant participation from third-generation members and is laying the groundwork for an eventual transition to the third generation.

Gene Golub, now 88, and his original partner founded the firm in 1960, when they were both 30 years old. In a business that depends heavily on developing long-term, trusting relationships, they made their first connections with the help of a neighbor, an attorney who worked with developers.

Then they got their first loan with a handshake from a banker who liked both the partners and the property they had found on Lake Shore Drive.

“From then on, he was our banker,” Gene says. From there, they were able to successfully develop high-rise residential and office buildings.

In 1982, sensing that his family would be interested in continuing the business, Gene bought out his partner, and the firm became Golub & Company.

The company grew and became an international real estate presence. Golub and its affiliates have developed, owned, leased or managed more than 50 million square feet of commercial and residential mixed-use properties. Golub currently has about $4 billion of assets under management and is developing projects from West Palm Beach, Fla., to San Francisco — as well as in Central Europe.

Still, its roots are in Chicago. That’s where its corporate office, with about 50 employees, is located. (The company usually employs between 80 and 110 people worldwide, depending on which projects are active.) The firm has owned and managed properties in Chicago’s premier commercial district, the Magnificent Mile, throughout its history.

In 2007, Golub & Co. led the acquisition of Chicago’s John Hancock Building, and in 2016, Golub and partners acquired the Tribune Tower. The firm is working on a development plan that will enhance the existing building and add a mixed-use high-rise tower.

Eight family members work in the business. Gene is chairman and founder. Three members of the second generation run the company: Gene’s son-in-law Michael Newman, 63, principal, president & CEO; his son, Lee Golub, 57, principal and executive vice president; and his daughter Paula Harris, 63, principal and senior vice president.

Four third-generation members have joined the company in recent years: Harris’s daughter Samantha Patinkin, 33, human resources manager; Michael Newman’s son Alex Newman, 33, asset manager; Michael Newman’s daughter Laura Newman, 30, associate; and Joshua Patinkin, 34, Harris’s son-in-law and vice president of capital resources.

The three second-generation principals own the company, with none holding a majority of the ownership. (Ownership of the company’s assets is more complex, since it also involves partners for each project.)

The company’s governance remains fairly casual.

“For crucial decisions, Lee, Paula and I collaborate,” Michael says. “We’ve been doing this together for 30 years, so we don’t need a formal structure for that.”

They are aided by a board of directors that consists of four family members — Gene and the three second-generation members — as well as three independent directors: Lloyd Shefsky, a consultant and a retired professor at the Kellogg School of Management; John McClure, a former executive with the Northern Trust Co. who has worked with many multigenerational family businesses; and Robert Langer, a retired Ernst & Young partner who headed the real estate practice in the Chicago area. Third-generation members have recently started to attend and participate in the discussions.

A smooth succession
The transition from the first generation to the second happened organically.

Paula was the first family member to work at the business, as a part-time worker during high school.
“I started out checking serial numbers in refrigerators and measuring the amount of linear cracking in a development we had just purchased. Not a very glamorous job, by any stretch,” Paula says.

She joined the business full-time after graduating from college as a closing coordinator for condominium sales, then left for a few years after having her first child in 1985.

Around that time, her brother-in-law and brother joined the company. Michael came to Golub as a financial analyst after having worked as a CPA in a public accounting firm, as well as for a real estate finance company.

It took some time for Michael and Lee, who joined as a commercial leasing broker, to find their place among more experienced employees. “There was no planning or discussion around integrating family, business and all team members,” Michael says. As the working family members gained experience and started producing at a high level, they recruited new employees to join the team. The employees soon realized that having a forward-thinking new generation of family members interested in growing the business was good news for everyone, since it meant the business would continue. 

“In those years that we were working together, we just grew together and learned to work together,” Paula says. “A lot of it was unspoken. My father didn’t know this was going to be a family business — it just kind of happened. He was simply showing us what he knew.”

After gradually handing over day-to-day leadership of the company to the second generation, the family engaged Shefsky as their family counselor to guide them through the process of making the arrangement more formal.
Gene “wasn’t ready to step away completely, so we had to come up with an approach that gave him a purpose,” Shefsky says. “There’s a lot of love in the family, and a lot of respect also.”

The transition “worked pretty easily,” Shefsky says. “By the time it worked in a formal sense, the second generation was already running the company.”

“I realized that when you turn it over, you’ve got to turn it over,” Gene says. “I was very fortunate. My kids are great, they have a great work ethic, they’re smart, they’re moral, and they have done fabulously well with the business. It’s very rewarding to me to see that, especially now with the third generation coming in.”

The roles of the three second-generation members evolved from their interests and strengths. It felt natural for Michael to become president, for example.

“Michael, Lee and Paula have different personalities, but they get along great,” Gene says. “They’re smart enough to know that they’re stronger together than they are separately.”

“I watch over our culture,” Paula says, “leading our people into developing themselves and holding on to the motto of our company: We’re a family business that treats the business like a family.”

Preparing for the next transition
Although the second generation is not yet ready to hand over the reins, they are aware that the next transition poses a challenge. The business has grown so much that the third generation must be prepared to take over a much larger, more complex operation than the second generation inherited.

“We know the odds of a successful transition from the first generation to the second are a lot better than from the second to the third,” Paula says. “We really want to beat those odds.”

The family is also larger. “It’s different now than when there was just the first and second generation,” says Samantha. “Now there’s a whole generation of cousins, we have wives and husbands, there’s a lot of people.”
Although conversations about an actual transition are just beginning, the family has started laying the groundwork.

They have formalized some policies. Family members must get four years of work experience elsewhere before joining the business, for example.

They have also started making sure all family members, including the third and fourth generations, have a clear sense of what the business is. This started with the Monopoly game at the annual family gathering but also includes hands-on exposure to the business.

At one family gathering, an engineer gave the family a tour of a building’s boiler room. During the time the company owned the Hancock Building in Chicago, the family got a tour of the observatory, the roof and the crown of lights.

“They have grown up knowing the business at a level they could relate to,” Paula says of the younger generations.
Because their parents were heavily involved in the business, the third generation grew up with it.

“I was here often enough to know that there’s a hidden mailbox behind this piece of artwork in the hallway,” Samantha says. “It used to be a real working mailbox, and you can drop a letter in it and it goes all the way down to the lobby.” Samantha and her cousin Alex both interned at the company.

Still, says Samantha, “I don’t think I ever thought about working here.” She changed her mind after working for another real estate firm after college. “If I’m going to do this for another company, I might as well do it for my family company.”

The family is working on creating a family council to help strengthen communication and bonds among all family members.

It will be “a way to formalize what we have been doing as a family for a long time, meeting all together in person at least once a year to spend time with each other and discuss business-related topics,” Alex says.

Another key to making the second-to-third-generation transition a success, Shefsky says, is to have the third generation find ways to expand the company, not just learn to run it as it is. The Golub family has already found ways to do this. “They have taken advantage of the skills that this G3 group has,” Shefsky says.

Josh came to Golub with a background in finance and raising capital, and since joining the company he has worked to expand the firm’s capital-raising abilities, particularly with private investors.

Laura has moved to Denver to help establish an office there in hopes of helping the company expand geographically.

“Geographic expansion is one thing we’ve been pushing as a third generation,” says Alex. “The family is only going to be bigger, so in order to be sustainable the company has to get bigger.”

The transition to Generation 3 is “definitely in the beginning stages,” says Alex. In fact, there may eventually be more than four third-generation members working for the business. “It’s important that we’re talking about it and thinking about it, because the time will come faster than we think,” Alex says. “The four of us who work here have very different strengths. It’s an ongoing conversation.”

Community roots, future focus
Real estate is a field that is closely tied to community, and Golub family members and employees are active and involved around Chicago. The Golub Family Foundation, founded in 2006 and led by family members both inside and outside the business, makes charitable contributions to health, education and cultural organizations.

The company provides employees with paid time off to volunteer, in small groups, at local non-profits. Over the years Golub employees have collected and boxed more than 32,000 pounds of food for a local food bank and have helped distribute 24,000 books to 4,000 children with a local non-profit.

The business also focuses on creating sustainable communities in other ways. The Golub Green Initiative is an approach to reducing the environmental impact of the company’s work. It includes a wide range of activities, such as installing energy-efficient lighting in the buildings it develops and encouraging its employees to serve on sustainability committees of industry groups.

The third generation is cognizant of its ties to the company’s history. Many employees have been with the company for decades.

“We have two women in our office who have been here for 37 years, and they remember my mom walking around pregnant with me,” says Samantha.

With the past in mind, the third generation is already helping push the company in new directions.
“I think every generation has its specialty,” says Samantha. “The first generation created the business and the second generation grew the business. We want to grow it even further.”   

Margaret Steen is a freelance writer based in Los Altos, Calif.

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

Family business members' insights on navigating succession process

Running a family business can be complicated. This is especially true when it comes to preparing for a smooth transition of ownership, leadership and governance to the next generation. What is the best way to start?

While much has been written and studied around succession and continuity planning, the way forward isn’t always clear or easy to manage, particularly since there is no one-size-fits-all solution.

As leaders of a recent a peer-to-peer workshop for family business owners and stakeholders, we explored the importance of creating and updating a succession plan.

Rather than basing our presentation on what the “experts” have to say about the topic, we wanted to generate a deeper of people’s experiences around succession or continuity. (We used the terms interchangeably.) In the process, we uncovered what the participating families saw as challenges, barriers, sound achievements and lingering questions.

We thought that the conversation and learning from this session — a fruitful and egalitarian endeavor — was valuable enough to share with a wider audience.

Reports from the trenches
We posed several questions for reflection, which generated a deeper discussion of the most pressing succession topics posed by participants — those who are facing these issues in real time.

1. What specific challenges are you currently facing in your succession planning?

2. How have you managed the notion of fairness and equality in order to distinguish between inheritance of personal assets and ownership or leadership of the company?

3. What conversations do you need to have?

a. Are buy-sell agreements in place and understood by everyone?

b. Have “graceful pruning” plans been discussed and put in place for those who might feel trapped into ownership, might pressure the business for money or might not support the new leader(s)?

c. Have you established policies for preparing the next generation of potential successors? What has worked best?

Several key topics emerged as participants shared what was “top of mind” for them regarding their succession planning. They shared questions they had about the planning process as well as advice, drawn from their experience, on what to avoid and what to do. These comments demonstrate what is most important to those who are engaged in (or just venturing into) succession planning.

Start early.
In terms of both continuity successes and challenges, conversations about succession with family members must be started early and in a proactive manner — before members of the next generation begin planning their own careers or educational focus.

Plan proactively for transition of shares.
Whether stock will be gifted or sold, it is best to create a cohesive plan for the redistribution of shares to the successor generation when the next-generation members are young. All family members should understand the plan.

Transparency and communication are essential.
Rather than keep succession plans under wraps until the will is read, it’s important to be transparent with family members. Issues such as the “hows” and “whens” of share distribution (including voting shares) to the next generation and what qualifications are required for those in management and ownership should be discussed openly.

Establish clear qualifications for the CEO’s post.
Whether the company will be led by a family member or by someone outside the family, being clear about the qualifications for the position, and how they might be developed, is key to a smoother transition. An explicit statement of the requirements also ensures that next-generation members know how they can best prepare themselves for the future.

Get an outside perspective.
Families in the midst of succession planning reported that an outside adviser can offer objective recommendations that can keep the process moving forward.

A family council can play an important role.
Families who had created even the most rudimentary family council — a forum for the broader family to discuss next-generation ownership and leadership — talked about how much it had helped them. They viewed their family council as a key to their success in a variety of areas, such as developing a family employment policy and clarifying training and development needs of the next generation.

Vision and values lay the groundwork for a sound continuity plan.
Reaching agreement on what the family wants (vision) and what is most important to them (values) is a challenge and can take time. Several participating families cited the ability to articulate the family vision and values, particularly with succession planning firmly in mind, as a good first step.

Have a plan, a backup plan and a Plan C.
Much like the strategic planning that needs to be done around the business (including disaster plans, safety regulations and insurance), a succession plan should provide an alternative or two that can be implemented if the first plan fails. A family may have a clearly thought-out transition plan, but several situations could throw that plan into disarray: an untimely death, changes in the family, shifts in the economy, and more. Secondary and tertiary planning were cited as important parts of the planning process.

Prenuptial agreements are a fine idea.
While many business owners might not think of prenuptial agreements as necessary or helpful, the wisdom of these documents becomes clearer in the context of succession planning. Restricting ownership to direct descendants of the founder keeps the business in the family in the event of a divorce.

Fair does not mean equal!
Children and grandchildren are quite effective at training parents and grandparents that “fairness” means equal distribution of assets. But this principle does not apply when it comes to dividing ownership shares or offering management positions to family members. The long-term needs of the business must take precedence in these cases.

Independent board members can offer guidance.
Family companies that engage independent board members prior to a transition will be able to turn to these seasoned professionals for advice. Independent board members can provide objective advice not only on business matters, but also on developing strategic plans around succession.

Use objective assessments to set compensation.
As the family grows along with the business, good succession planning includes a clear process by which pay for family managers is determined. Although there is a cost associated with this, using an industry-based compensation study will help smooth any disagreements about fair market value for various roles in the business.

Create and adhere to a fair, predictable process.
A clear road map for the next generation regarding how they might best prepare to be effective and responsible owners, managers and/or board members is the foundation of a fair succession process. Developing it early will give them time to better understand the family firm and consider how they might best fit into the family’s vision for the business.

Develop future leaders for the business and the family.
Succession or continuity planning doesn’t just apply to the business. Establishing separate roles for leadership of the family and the company can provide further opportunities for family members. In addition to joining the family business, family members might play roles in the family council, family office or family foundation.

Sharing experiences
We have found that family business members love to learn from one another, and the peer-to-peer format of this session yielded a rich experience for all involved. The family business members who participated in the workshop shared stories of their successes and ­failures and raised pointed questions.
Their comments ­reinforced the notion that carefully developing a continuity plan, and updating it regularly, is one of the most effective ways families can manage the inherent challenges found at the intersection of family and business. We thank all the participants for sharing their insights.                      

Kent Rhodes, Ed.D., is a senior consultant and Joshua Nacht, Ph.D., is a consultant with The Family Business Consulting Group (


Who will inherit the family business? A strategy for succession planning


A poorly planned succession has the potential to derail a closely held family business. The lack of a well-drafted plan can cause financial hardship on both the business and the family. Letting the estate plan dictate how a business is passed on may cause issues, and there are numerous stories of prominent business empires that have been adversely affected by the lack of a well-designed succession plan.

There are several strategies that small business owners can take to ensure a smooth transition from one generation to the next. Careful planning is needed. Families should be aware of the important role that life insurance can play in smoothing the transition from one generation to the next.

Estate planning is not succession planning

The first thing to keep in mind is that estate planning and succession planning are not the same—they have very different goals. Generally the goal of an estate plan is to primarily provide for the surviving spouse and subsequently provide for children equally. The goal of a business succession plan, however, is to ensure the business passes to the heirs who are active in the business. One of the big challenges involves addressing the needs of children who are active in the business as well as those who are not. Should all the children be treated equally, or should they be treated equitably? Too often, the succession defaults to the owner's estate plan, which usually calls for the estate (including the business) to be divided equally among all children.

As an example of how complicated this can be, consider a business family with two sons, one who works in the family company and one who doesn't. The active son, John, has really built up the business, spending considerable time and effort to grow it. The dad, Mike, stepped aside many years ago, although Mike still owns 60% of the business because he is not yet ready to relinquish control. Of the balance, 30% is owned by John and 10% by his brother, Mark.

John feels that he should get the business, and he's been identified as the heir apparent. In fact, the estate plan says that the business passes to John and all other assets are divided 50:50. Mike's wife, Ann, is upset that Mark's inheritance isn't the same as his brother's. Ann wants everything equal across the board. Succession plans for family businesses can become fraught with all the emotional interplay that occurs in families. Family members must understand that there is a difference between "equal" and "equitable." Equal distribution does not take into account the contributions of the children who are active in the business and contribute to its success. An equitable distribution considers these factors.

There are several strategies that closely held family business owners can use to ensure a smooth transition.

1. Address the needs of both active and inactive children. Those who spend their careers contributing to the company's growth and success should be rewarded for their efforts.

2. Recognize the difference between equal and equitable distribution. Should all the children be treated equally, or should they be treated equitably? Business owners should consider the needs of all family members, including their own needs, when developing a distribution strategy. Not every family member has the same needs or wants. It may be best to leave the family business to the active children and other assets, such as investments and life insurance, to the inactive children.

3. Hold a family meeting. Family business succession planning can get bogged down by emotional complexities. The family should consider holding a family meeting, moderated by trusted professional advisers. A meeting enables family members to talk through the issues and the roles and responsibilities of all family members, both active and inactive.

4. Obtain a valuation of the business. The key to a viable succession plan is a formal valuation of the business. Basing any transfer, during lifetime or upon death, on a proper valuation helps to limit the chances that the IRS will contest the valuation, which would result in additional estate or gift taxes.

5. Commit to a succession plan. Without a well-designed business succession plan, inheritance of the business defaults to the owner's estate plan, which often distributes the estate (including the business) equally among all children. Owners must give careful consideration to how the business should transition to the next generation. When a written plan is created, it should be communicated to all family members.

Gifting stock

Once a succession plan is in place, it is important to recognize the efforts of the children who are active in the family business. For example, John, in the situation described earlier, should be rewarded for his efforts in growing the business. Mike should consider gifting additional stock to John, both to reward him and to shift the future appreciation and growth of the family business to John's estate as opposed to Mike's.

If Mike is thinking about gifting an additional 5% stake in the business to John, he should consider using valuation discounts to leverage this gift. For decades, senior-generation family members like Mike have made gifts or sales of minority and non-controlling interests in their family businesses to junior-generation family members. Through proper planning, these business owners have used the lack of marketability and lack of control valuation discounts—generally 20% to 30%—to reduce transfer taxes and increase the amount of wealth transferred over several generations. If he wants to implement this strategy, Mike should act now, as the availability of these discounts in the future is questionable.

The role of life insurance in succession planning

Owners of closely held family businesses should understand the multiple roles that life insurance can play. Since the triggering event in most business successions is death, life insurance can obviously serve as the main funding vehicle for a well-designed succession plan. It can also provide liquidity when it is needed most—not only to transition the business to the next generation, but also as a source of funding to pay federal and/or state estate taxes. Life insurance might be used to fund a buy-sell arrangement for the active children, or it can serve as a wealth-replacement vehicle for inactive children who will not receive an interest in the business. In the previous example, John could own a life insurance policy on his brother Mark's life to help pay Mark's family for the value of the business when he passes away. If John owns a permanent life insurance policy, he might have cash value that he can access for an installment purchase of the business in case Mark wants to be bought out sooner.

Another objective that life insurance can fulfill is equalization between children. For example, Mike, the dad, could purchase an insurance policy on his life (or on him and his spouse) and name Mark (or a trust for his benefit) as the sole beneficiary. John would inherit the business, and Mark would inherit an equivalent amount in life insurance to make the brothers' inheritances equal—just as Ann wants.

Succession planning is a big topic, and this brief overview has barely scratched the surface on many issues, but this should help explain the importance of putting a plan in place. Formulating a succession plan is critical to the continued success of a closely held business over several generations. If the legacy of the business is important to your family, take the time to develop a strategic succession plan.

Meg Muldoon is an assistant vice president of advanced sales with The Penn Mutual Life Insurance Company ( She also has related experience as an attorney in the financial services industry.

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

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March/April 2017 Openers

A PwC survey of 160 stakeholders in U.S. family businesses has concluded that too few family firms are developing formal succession plans, instituting governance structures or planning responses to industry-disrupting scenarios.

In its survey report, the accounting and consulting firm said many respondents appear to be neglecting medium-term strategic planning, which bridges the gap between day-to-day concerns and the family's long-term vision for the business.

Families that have established formal succession planning and strategy planning practices "tend to be better prepared for that middle period," notes Jonathan Flack, leader of PwC's U.S. Family Business Services practice.

Particularly in the founder and second generations, family business leaders are inclined to focus narrowly on immediate tactical decisions; as the saying goes, they spend too much time working in the business and not enough time working on the business.

"Families have always struggled with putting processes and formalized structures in place," Flack says.

For example, 87% of the survey respondents predicted that five years from now they would generate most of their revenues from the same products or services they offer today.

This is generally not a realistic strategy for business longevity, notes Alfred Peguero, PwC's U.S. family business survey leader. "How does that tie into the idea of growth and innovation, meeting clients' demands and needs, and [changing] consumer tastes?" Peguero asks rhetorically. He notes, for example, that companies in the food industry have had to respond to consumers' growing aversion to sugary snacks and preference for products that are free of genetically modified ingredients.

When asked what would drive their growth in the next five years, 83% of the U.S. respondents planned to increase business in their existing markets. Only 43% predicted that growth would come from acquisitions, while just 41% envisioned entry into new sectors, and a mere 26% foresaw their companies diversifying into new countries.

A parallel PwC survey of stakeholders in more than 2,800 family companies from 50 countries found a disconnect between a perceived need for innovation and the development of plans to actually achieve it. Nearly two-thirds (64%) of the global respondents cited the need to continually innovate as the biggest challenge they would face over the next five years, Yet 72% of the global study participants said their companies would have largely the same portfolio in five years, and 53% said diversification was "not important."

"The changing economy, and the way we do business in the world today, is going to put far more pressure on businesses going forward," Flack says. In an environment marked by rapidly changing technology and global competition, innovation is essential, he notes.

Leveraging capabilities

For the 2016 edition of its biennial U.S. survey, PwC conducted telephone and online interviews between May 9 and Aug. 19, 2016. Annual revenues of the companies represented ranged from less than $10 million (7% of respondents) to more than $1 billion (17% of respondents); nearly a third (31%) of the firms generated annual revenues between $100 million and $500 million.

Companies represented in the survey were about equally split between those in the first and second generation and those in the third generation and above (49% and 51%, respectively).

In the vast majority (91%) of the companies represented, the family both owned and managed the business. More than half (54%) the individuals who completed the survey were members of the family that owned the business.

Flack says the family firms that are best positioned for longevity are those that are able to diversify. "A lot of families have certain capabilities that are unique to their business, but they're also unique because they're a family business," he says. However, he notes, many family business leaders "haven't taken the time to step back and say, 'I know that my people are great, I know that my marketing is great, I know that my distribution is great. How else could those capabilities be used to grow?' " Many of the U.S.'s largest family companies, such as S.C. Johnson & Son and Mars Inc., have grown by diversifying beyond their original product line and expanding sales abroad, Flack notes.

As part of the strategic planning process, business leaders must address the possibility of digital disruption in their industry as well as their company's vulnerability to a cyber attack. PwC's findings indicate that family business owners would do well to put such scenario planning higher up on their priority list.

Only about a third (32%) of the U.S. survey participants said they think their business could be hampered by digital disruption in the short term to medium term, and only 45% said they have a strategy that is fit for the digital age.

Similarly, a third (34%) of the U.S. respondents predicted that cyber threats would be a challenge, and less than half said they are prepared to deal with a cyber attack.

"We know that family businesses are typically the slowest adopters of any technology," Flack says. The reason, he says, could be related to long employee tenure at family firms. Although employee loyalty is a positive attribute, low job turnover means fewer opportunities to bring in new hires with a broader set of digital and technological skills.

Flack predicts that next-generation members who are poised to join their family businesses over the next five to 10 years will help bridge the digital skills gap. "I think they will help at the board level, and I think they'll help at the management level," Flack says. "Because they grew up in the digital world and they grew up with technology, we think that they are extremely well equipped to help lead their families through that transition."

Plans for the future

Nearly three-fourths (74%) of respondents said they employ next-generation family members, up from 59% in 2014. But many survey participants did not envision their younger family members at the helm of the company in the future.

Only 41% of respondents to the 2016 survey said their next generation would run as well as own the company in the next five years, compared with 48% of respondents to the 2014 edition of the PwC survey and 52% of the survey population in 2012.

Just 11% of the 2016 survey participants planned to have the next generation own the business with non-family members running it, compared with 26% who envisioned this strategy in 2014. Nearly one-third (30%) of the 2016 respondents said they'd be seeking to sell to an outside party within the next several years, compared with 19% in 2014 and only 12% in 2012.

In previous iterations of PwC's U.S. family business survey, respondents "tended to be much more optimistic" about the prospect of keeping the business in the family, says Peguero. "In this survey, there's an uptick in [the percentage] that would consider selling the family business to a third party." Peguero calls this finding "a little concerning."

Would the results have been the same if the survey had been conducted after, rather than before, the presidential election? "I think the sentiment in business before the election was the expectation that growth would be flat," Flack says. Anecdotal evidence based on PwC advisers' conversations with clients combined with an increase in transactions since the election indicates that some U.S. family business leaders are expecting the economy to grow, Flack reports.

Yet concerns about the economy likely were not the only factor behind survey participants' plans for an ownership transition outside the family. Of the 2016 respondents who planned an ownership change within five years, 52% said the new owners would be family members, down sharply from the 74% who had these plans in 2014. In 2012, the percentage was even greater (76%). Notably, the figure was higher (55%) even in 2010—when the nation was still reeling from the "Great Recession"—than it was in 2016.

The current study found that family business leaders were thinking about succession, although they had not formalized their plans. More than two-thirds (68%) said they had a succession plan in place for at least some senior roles. However, only 23% described their succession plan as "robust, documented and communicated," down from 27% in 2014.

"We continue to see [that many] families have not put some more formalized succession planning and formalized strategy planning in place," says Flack.

Nearly 40% of those who completed the survey said professionalizing their business will continue to pose a challenge, whereas only about 20% answered in this way in 2014.

One cause for optimism in the survey findings was family commitment to the business strategy. Almost 70% of those who took the survey said the family and business strategies were completely aligned.

Older firms have more structure

A new feature of PwC's family business survey was a breakdown of results by generational cohort. Responses from survey participants whose companies were in the founder or second generation were compared with findings from those whose companies were in the third generation or older.

For example, leaders of older family firms were more inclined to keep the business in the family. Only 8% of survey participants from third-generation or older companies planning to sell said they would seek outside buyers, compared with half the respondents in the founder or second generation.

Older companies were more likely to grant shares to family members not employed in the business (60% of those in the third generation and older, compared with 42% of the founder and second-generation companies).

The mature firms were better prepared to diversify. Of the older companies that were sustaining double-digit growth, 40% planned to expand to new countries, compared with only 19% of those in the first or second generation. Nearly half the older fast-growth companies planned to expand into new industry sectors in five years, vs. 39% of the rapidly growing younger businesses.

The older companies were more likely to have board members in a position to help them address today's challenges. More than half the respondents from companies in the third generation or older said their boards fully comprehend the threat of digital disruption, whereas only one-third of those in first- or second-generation companies said their boards understand the problem.

Another area requiring a forward-thinking approach is succession. More than one-third of the first- and second-generation firms lack a succession plan, whereas 75% of companies in the third generation and older have some kind of plan. And while about two-thirds (65%) of survey participants from older companies said they think their next generation is being properly evaluated, only 51% of those from companies in the founder or second generation felt that way.

Flack says he and his colleagues will use the survey data to demonstrate to their clients in first- and second-generation companies the practices that more mature family firms have instituted.

"We know that Generation 1 and Generation 2 family businesses don't have a lot of structure," Flack says. "What we try to highlight to them as they transition on to the next generation is that structure is needed: structure in the succession planning, structure in the governance, structure in the strategy. The survey really helps to highlight this point. The data shows what third-, fourth-, and later-generation businesses are doing that the first and second generations are not."

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

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Planning ahead

In its recently released global survey of family business owners, accounting and consulting firm PwC found that too few of them are establishing structures that can help them meet the challenges of the future. (For a report on the U.S. edition of the PwC study, see the "Openers" section of this issue.)

As the family company passes to the second generation and then to the third and beyond, the business environment will change—and so will the composition of the family. Your management team, with guidance from your board, must consider how new technologies might affect your industry, where in the world your competition will come from and what your future customers will demand.

In addition, your family leaders must anticipate what your family will look like a generation or two from now, what those family members' concerns will be, and how good governance can keep them united in support of the enterprise (even as the enterprise changes to meet the demands of a changing world).

This edition of Family Business presents the stories of two families who recognized the need for advance planning and, after considering what issues might arise in the future, were proactive in making changes to prevent problems that were foreseeable.

The Lyles family, whose holdings include construction, real estate and agricultural businesses in California, started to focus on strengthening family communication and connection about 10 years before the third generation would pass the baton to the fourth.

The Graeter family—the Cincinnati-based makers of Graeter's ice cream, which is sold in neighborhood stores and in more than 6,000 grocery stores nationwide—realized that they needed to confront questions about the ownership structure in order to ensure a harmonious partnership among the three fourth-generation members. Today, the fourth generation is thinking about how governance might evolve as they bring the fifth generation along. They already have formalized their business operations.

In PwC's analysis of its family business survey, the firm concluded that long-term success depends on family firms' ability to adapt. The most adaptable have leaders who take time from daily operations to envision the future, from both a business and a family standpoint.

Of course, unless you're clairvoyant, you won't be able to predict every circumstance your family business will confront. But some situations can be anticipated (to name a few: the family will grow larger with each generation, stock will be transferred from one generation to the next, some family members will move out of town, not everyone in the family will join the business). The more plans you make to address these challenges, the better equipped you will be to continue as an enterprising family.

"Good succession planning," the PwC survey authors wrote in their report, "involves a series of intentional, well-coordinated, strategic efforts, sustained over time."

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

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Turning a family business into a family legacy

In 1955, Herald Smith lost his management job with a trucking company and decided to strike out on his own.

His son John M. Smith was 6 years old at the time. "That was scary, particularly as a young child," John says. "But when my father started to work again, things immediately went back to normal. My dad got started with no money and no credit, and he made a success of it the first year. I had no feel for the kind of risks he was taking."

Trucking was heavily regulated at the time. Herald Smith purchased the franchise to haul steel from Chicago to Cedar Rapids—hence the company's original name: Cedar Rapids Steel Transportation Inc.

He realized that Iowa farmers were transporting agricultural products to Chicago but the trucks were coming back empty, and he figured out how to fill the trucks on the return trips with iron and steel products from Chicago. "He was able to figure out a legal way to have a rate that was lower than the competition, and he promised the owners of the trucks that when they got to Cedar Rapids, he would pay them off right away," John says.

The risks paid off. CRST International Inc., headquartered in Cedar Rapids, Iowa, has grown significantly in recent years, partly through acquisitions. Today the company generates $1.3 billion in annual revenue, up from $680 million in 2009. John Smith, 67, is the company chairman. Herald Smith died in 2015 at age 91.

The company is owned by John Smith; his wife, Dyan; and their three children, Ian Smith, Cortney Howgate and Christine Smith. No single person is the majority owner or has voting control. The ownership structure involves one holding company that owns the family's main trucking and logistics companies, and a second holding company above it that owns the supporting transportation businesses and the family office. In addition, the family owns a separate real estate development company.

As both the family enterprise and the family have grown, the Smiths have faced choices about the family's involvement with the company. Today, the family is learning how to be active owners without having a family member running the daily operations.

Turning points

The first pivotal moment for the family and company came in the late 1990s, when John wanted to buy out his three siblings. After several months, during which the siblings seemed to be hesitating, he discovered that they were concerned about their father's reaction if they were to sell. "This is my dad's baby," they reasoned, according to their brother.

Once their father gave his blessing to the plan, "the actual negotiations of the sale were so quick, it was astonishing," John says.

"Now my family is in the same situation," he says. They are working out what roles the next generation will play in the company.

John and Dyan Smith have seen their own assumptions and feelings about their children's participation in the company evolve. They started out with the picture of their own lives in mind: John Smith worked for CRST during summers when he was in high school and college, and his education was geared toward working for the family business. He majored in economics as an undergraduate at Cornell College in Mount Vernon, Iowa. He later got an MBA at Cornell University in Ithaca, N.Y., with a concentration in finance. He returned to the company after graduate school.

Dyan, now 66, met John in high school.

"My exposure to the company started the first time I met his parents," Dyan says. "We had dinner at his home, and everything revolved around the company: the problems, the opportunities. My father worked for the government, so we did not have discussions about the family business around our dinner table. It was very new and quite interesting to me."

Those experiences colored their initial thoughts about their children's roles.

"We started out with the full expectation that they would all work in the business," after initially gaining experience elsewhere, Dyan says. "We took that expectation and lived with it for a while. Then we decided we did not want to force any of our children into the business, so we backed off totally."

Finally they realized they needed a middle ground: The kids should be involved in the decision about the company's future. Would they work full-time for the company and run it someday? Would they continue as owners? Or did they feel little emotional connection to the company and prefer that their parents sell it?

"We had a full-year discussion about how they felt and where they wanted to go," Dyan says.

Family conversations

The Smiths had already turned the running of the company over to a non-family member, David Rusch, who today is president and CEO of CRST International Inc. Rusch is a CPA by training; his background includes seven years as an FBI agent. He worked for North American Van Lines from 1980 through 1990. The CEO of that company retired and joined CRST's board, then recommended Rusch as a good fit for CRST.

"The talk was about growth and entrepreneurship, things that I wanted to hear," Rusch says. He joined the company in 1991 and assumed his current posts in 2010.

The Smiths' three children were at different stages of their lives and all felt a connection to the company, though they were not certain they wanted to run it, or even work there.

Ian Smith, 33, who is currently a senior financial analyst and board member at CRST, held summer jobs at the company during high school and college, working in areas including customer service, driver recruiting and freight brokerage.

"When I entered college, I pretty much wanted to come back to the family business," Ian says. "But in college I kind of wavered. I majored in economics but also developed an interest in the performing arts."

For several years after college, Ian performed fire dance and modern dance. During that time he concentrated on performing; a few entrepreneurial ventures helped him to pay bills. He wasn't certain he wanted to return to the family business, but after about six years, he decided he would. He went to Cornell University for an MBA, then joined CRST as a senior financial analyst.

For Cortney Howgate, 32, CRST "is like the fourth child in our family."

"My parents talked business at the dinner table," she says. "We visited my grandparents' house every Sunday, where my grandpa wanted detailed updates about the company."

The company also provided Cortney, who today works on special projects for CRST on a part-time basis from her home in London, with valuable early work experience.

Her first job for CRST was in its billing department when she was 16. She later worked in departments including customer service and accounting. "One summer, I was a dispatcher, where I had a mini fleet of 20 trucks to take care of and direct all summer," she says. "That was the most difficult job—I have always had a very soft voice, so I needed to learn to assert myself quickly, since my job was getting truck drivers to listen to me."

Cortney's current position may not lead back to a full-time CRST job. "I never had a solid plan to move back, and once life starts moving it's hard to stop," she says.

Christine Smith, 24, an intern at the American Legislative Exchange Council (ALEC) in Arlington, Va., is just starting her career. She hasn't ruled out returning to the company.

"In high school, I became more aware of how special the company is and the uniqueness of a family business," Christine says. "I would get questions from my friends and became more aware of the company, its history and its legacy."

Ian had grown up with the assumption that if he returned to the company, it would be to see if he could run it, as his grandfather and father had done. But a family business seminar "opened all of our eyes to what the options were," he says. "There is a lot more to having a family business than running it."

Ian now evaluates potential acquisitions for the company—CRST recently acquired a business that transports blood plasma, for example—and works on financial reports.

After many discussions, the family reached a conclusion in 2010: They wanted to keep the business in the family, with the children as active owners and at least one on the board of directors. They created a family council and a constitution to assist with family communication.

They had several reasons for this choice, Christine says. "It's been in the family for more than 50 years. My grandfather started it and put his entire life into building the company. My dad loves it. We all thought, this is such a cool opportunity to keep the family together for generations to come."

This evolution is "classic family business," says Daniel Van Der Vliet, the John and Dyan Smith Executive Director of Family Business at Cornell University's Smith Family Business Initiative. As family businesses grow, Van Der Vliet says, it takes a more specialized skill set to run them. It's not as easy to step into the CEO role fresh out of graduate school.

At the same time, families grow larger with the passing of each generation, and family members' career interests may lie elsewhere, Van Der Vliet says. "Especially in a traditional industry like trucking, it might not be as sexy for the next generation," he says.

"My parents were wonderful," says Christine. "They didn't put any type of pressure on us. Their ability to let us go out and explore on our own has really led us back to saying, 'We've experienced these things out there, and now we're coming back. This is a great opportunity, and we do want to keep the business.' "

"I think the Smiths have been very deliberate" about the company's future and future leadership, Van Der Vliet says.

Family and community roots

John and Dyan Smith have been active in philanthropy, both locally and outside their community.

"They walk the talk in terms of how they treat their employees, how they treat their family and how they treat their community," Van Der Vliet says.

The Smiths funded the Smith Family Business Initiative at Cornell University, which Van Der Vliet has been hired to run. The program is currently searching for a full-time faculty member to teach courses and conduct research on family business as well.

"Family businesses are the backbone of the economy," Dyan says. She says she and her husband chose to fund the initiative at Cornell because "both my husband and my son got great educations there." John credits his Cornell education with helping him steer the company through deregulation in the 1980s, when a lot of other companies went out of business.

"The vision is to create a world-class program in family business," Van Der Vliet says. "This type of gift really helps put Cornell at the front of the pack fairly quickly."

When Cedar Rapids was hit by devastating floods in 2008, the Smiths helped fund a program called Block by Block to rebuild homes and another fund to help small businesses recover. Rusch says people in the community have told him how much they appreciate the Smiths' help with the flood recovery effort and all the other contributions they have made to eastern Iowa over the years.

Rusch says he found the Smiths' connection to the community "exciting after all those years in conglomerates and government."

As for the next generation, the family has an ownership and leadership structure in place, but there are still decisions to be made about the future.

The family started having regular family meetings about five years ago, working at first with an outside facilitator. They now have them three times a year, with Cortney serving as the facilitator. The agenda includes philanthropy as well as business.

"It's really important to keep communication alive in between our meetings, and that is my biggest goal and challenge," Cortney says.

There are discussions about diversifying the family's portfolio of businesses, Ian says. He adds that he's very interested in this strategy. "I do think our trucking company will remain a trucking company," Ian says, "but I think we might do some things outside of it."

Margaret Steen is a freelance writer based in Los Altos, Calif.

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

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Understanding Millennials' traits will help you prepare for succession

Whether "family business" connotes small mom-and-pop stores or industry giants like Samsung and Wal-Mart, family-run enterprises have a reputation for innovation and long-term planning. A study published in the Harvard Business Review found that family businesses globally had higher long-term financial performance than non-family businesses. Part of the key to their success lies in the family business model itself: By running their enterprises with future generations in mind, families emphasize resilience and foresight. However, long-term success requires that the business be passed down to the right hands at the right time. As many family business owners know, succession can be a thorny issue.

With Baby Boomers (born 1946-1964) retiring at a rate of 10,000 a day, according to the Pew Research Center, many in family businesses are asking: How, and under whose leadership, do we want our company to continue? Although most business owners prefer to keep leadership within the family, many wonder whether Millennials (born 1982-1992) will want to run the family enterprise. If so, will their business vision be drastically different from that of previous generation? And if it is, will that be a bad thing or a good thing?

A 2015 study of family businesses by PwC noted that 18% of the respondents were considering transitioning ownership in the next five years (primarily to the next generation). Of the leaders surveyed, 40% said it would be difficult to fully let go of their power and status when the next generation takes over. Many Baby Boomers and Generation Xers (born 1961-1981) fear the next generation lacks the dedication or interest to lead the business. While there is great variation within each generation, people are defined by the events and technologies that they are exposed to in their early years. Understanding intergenerational perspectives and expectations is crucial to a smooth power transition from one generation to the next.

Millennials: A portrait

Millennials (also known as Generation Y) are the first workforce of "digital natives." Employees in this age group have a reputation for being "always connected" and innovative. Millennials are said to have unrealistic expectations about the workplace and a propensity to job-hop rather than settle for a career they find unfulfilling. Dubbed the "selfish generation" by some, Millennials value creativity and a flexible work environment over stability. Often, this makes them appear irresponsible or unrealistic to their elders. They are often at odds with their Gen X counterparts, who tend to believe the Millennials need to "pay their dues."

Many Millennials view technology as enabling them to work smarter, not harder. With their digital connectivity, Millennials are used to looking up information for themselves, making them less likely to accept traditional "this is how we've always done it" explanations. Digital platforms have made communication not only faster, but also more transparent and less hierarchical. Many in Gen Y expect to receive thoroughly researched information quickly -- and they expect it to come from a variety of sources in the workplace, not just those at the top.

What to expect

Unlike their parents, Millennials do not view work as the primary focus of their lives, at least not for now. Millennials may have more opportunities than their predecessors, and many want to explore those possibilities.

PwC's survey found that it's common for family members to seek jobs outside the family firm. In some cases, the young people want to obtain outside experience before committing to the family business. Many family enterprises today, however, require several years of work outside the family firm before a family member is eligible to join.

Whereas older generations often shaped their lives around work, today's young people value free time and a work-life integration that meets their needs. They might prefer shorter-term jobs.

Although many Millennials look forward to leading the family company, they may envision it as a five- to ten-year endeavor rather than a lifetime commitment. For senior-generation family business leaders, the trend toward short-term job stints can cause anxiety. Millennials are still relatively young at this point (ages 18-33), making their long-term priorities difficult to predict. So how can family businesses prepare when it comes to Millennials and succession?

Tips for a smooth Millennial succession

Here are some tips for business owners who are considering transferring control to a Millennial family member:

• Understand their perspective. Millennials want to know how their current job will drive them toward their long-term goals, which may or may not involve the family business. Assisting Millennials in developing stimulating action plans to help them advance to their next leadership role can be both engaging and rewarding. They not only will have a clear vision of their role for contributing to the company short-term, but also may move toward a deeper appreciation of the business.

• Be transparent about the succession process. Instead of avoiding the elephant in the room, talk about succession early on. This lowers tensions and may spark greater interest in the business as a career. Transparency will open the door to dialogue about future visions and management styles. It will create opportunities for current leaders to mentor and train their successors.

• Be receptive to innovative ideas. Millennials know that the world has changed, and businesses need to change with it. Opening up to the rising generation's innovative ideas can build trust and create new opportunities for family businesses. Discussing new ideas before the transition occurs can give current leadership a chance to merge incoming ideas with existing business values.

• Take the time to train and mentor your future successors. Some in the older generation tend to overestimate how well they have run the business, while also underestimating their children's competency. Boomer anxiety over their children can be related to "helicopter parenting," or swooping in to rescue, guide and, at times, overprotect their children. A delicate balance must be found between mentoring the next generation and creating a dependence on guidance from elders; it's wise to let family members make and learn from their own mistakes. A training program should be developed that will boost their confidence and capability when it's their turn to lead. Employees in a family business are more likely to accept their Millennial bosses if they have been visibly and reliably learning the business rather than suddenly jumping in to take the helm overnight.

• Parcel out your CEO responsibilities as you prepare to leave the business. As your retirement date nears, slowly begin assigning your duties to your successor. Clearly distinguish which of you should handle specific responsibilities until a point at which they have taken over all the duties and you are ready to hand over the reins. Employees must be kept aware of the successor's new duties, especially as the situation affects them. This contributes to a smoother transition of power.

• Do not become a "ghost"; actually leave the company when you retire. As mentioned earlier, most Boomers find relinquishing control extremely difficult. Often, they don't know what to do with their time. Family dynamics may cause children to be reluctant to assert their own power. Having the old boss on the job can detract from the authority of the new leader and confuse employees. New leaders need time to develop their own management style and vision for the business, gaining respect without standing in the shadows of their predecessors.

The generation gap is challenging for all family business members, but taking time to reflect on the generational characteristics of each stakeholder will make succession easier. Hopefully for both generations, succession will come with gratitude.

Pamela Wasley is CEO of Cerius Executives (, a placement firm for temporary, full-time and contract executives. She serves on several private company boards and is a frequent speaker on the topics of talent management, millennials and contingent workforces.

Copyright 2015 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

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