In this issue
Much has been written about the personality characteristics of entrepreneurs that make them resistant to succession planning. For example, studies show that many business founders come from backgrounds in which poverty, parental abandonment, or sudden death in the family have contributed to feelings of insecurity. The business, in this scenario, provides a sense of security and well-being that is threatened when the time comes to "let go."
A lot of competitive market forces conspired to bring Wang Laboratories, one of the world's largest computer companies, to the brink of financial disaster in 1989. A new book by journalist Charles C. Kenney, Riding the Runaway Horse, shows that top-heavy management failed to respond with vision to a rapidly changing marketplace. But Kenney's book, excerpted on the following pages, places much of the blame on the hubris of the man they called "the Doctor" and his insistence on naming his son, Fred Wang, president of the company.
One of the main reasons that older business owners are reluctant to give up control of their companies is that they don't want to ever have to ask their children for financial help.
If you are thinking of transferring control of your company to your children and have a similar concern, you might consider establishing an income continuation plan. To illustrate how such a plan works — and its advantages — let me tell you about a good client of mine, Mr. C, who is weighing this option.
More then half the clients referred to my company, which specializes in managing turn-arounds, are family businesses. Often we are called upon when the business is already ill, when it is having trouble paying its bills. Before we can help plan a long-term recovery, we have to prevent the patient from bleeding to death.