EXIT PLANNING - By Ellen Frankenberg

In a family firm, letting go
is the toughest job of all

The eight stages of life identified by Erik Erikson offer insight
to retiring business leaders as they adjust to their new role.

Much of the buzz about succession planning has focused on the younger generation—assessing and developing their competencies, sending them to seminars and building individual growth plans. But who really understands what it’s like to walk in Dad’s shoes? The senior generation must determine when (and how) to retire, and what new passion will replace the business.

Many dads and moms don’t want to leave the business. Especially for the accomplished founding entrepreneur, letting go is uncharted territory. After all, there is always one more deal on the horizon, and the possibility that everything that has been accomplished is somehow lacking. Instead of celebrating all the good work that has been done, the founder focuses on the road not taken, the marriage not completely fulfilled, the friends who have passed on, the shrinking retirement account, the grandkids too busy to visit.

Developmental psychologist Erik Erikson identified eight stages through which a healthy individual should pass from infancy to adulthood. Making a successful transition to the next phase of one’s life requires a lifelong effort to build psychological health, according to Erikson. Sometimes later in life we must revisit earlier stages that we missed, in order to make the process complete.

A pathway through life

The process begins with the infant’s ability to trust his or her caregivers —a basic requirement for building any solid relationship. Is the world a predictable place? When I am hungry will I be fed, and when I need comfort, will I be picked up? The alternative is mistrust, or fear that no one will support me, which develops into a belief that caution and fear are the only ways to protect myself from the worst possible outcomes. Most of us with loving, consistent parents develop the capacity for trust during the first year or two of life and carry it through the rest of life’s stages.

Autonomy marks the toddler’s psychological development—discovering the world, getting up to fall down again, trying things I don’t yet know I can’t do. Learning to say “no” is a sign that I now know I am a separate individual, capable of standing my ground even against my parents, the most powerful people in my life. If autonomy is blocked, a child can become stunted by shame. Blame, not forgiveness, can surround me after transgressions such as spilling a bowl of cereal or dropping the family heirloom that Grandma prized. Autonomy or independence is critical for healthy lifelong development. Acquiring it early is essential for any future business leader who will have to navigate complicated family -relationships.

If autonomy is gained, the healthy child develops initiative during the third, fourth and fifth years of life. The circle of the family opens up so I can reach out and make friends with other people my own size. I learn to share toys, perhaps with a new baby sibling; to give and take, even with tears; to feed myself, especially the things I have decided that I like. I learn to play without any sense of time, to enjoy making things for their own sake. I choose to dance, while my brother plays with Legos by the hour.

But some children don’t have the chance to develop initiative. Instead, they hear negative messages that get buried in their neural pathways: “You’re not tall enough … you’re not old enough … you don’t know enough … you can’t play this game yet.…” Some of these statements may have been true at one time in life. But they must be balanced with positive messages, Erikson noted, or else a sense of guilt will predominate. Business leadership requires confidence—and lots of initiative.

When the child begins school, the ability to learn new skills and tasks with industry emerges. The child works with others as part of a larger group, under the direction of a teacher or coach who may not be as nurturing as a parent. Other children become part of a competitive world. If my grades aren’t so great, and I drop the ball, I can develop a sense of inferiority, unless I have learned some clear ways to measure my own personal best effort and overcome the poor grade on the test, or the losing score.

The hard work of forging an identity challenges the teenager. This is the stage when my own uniqueness, perhaps in contrast to my parents’ expectations, emerges. What are my talents, my dreams, my goals—in school and beyond? What difference do I want to make in this world? In my family? Maybe in the family business? If an adolescent somehow can’t pull these pieces together, perhaps because of addictions, premature emancipation or other distractions, he or she can get lost in role confusion—I’m not sure who I am or where I’m going.

Young adults seek intimacy, or the opportunity to share who I have become with someone who can accept me as I am, in an intimate, committed relationship. If love is not possible, then isolation closes in, without the capacity to share deeply what is most important in life.

By the late 20s or early 30s (new neurological research indicates that the human brain is not fully developed until age 25), adults hope to have enough good things to offer to their own children, or to the next generation. Generativity—the capacity to share, to build, to mentor others —is the hallmark of adult life. The alternative, according to Erikson, is stagnation—getting stuck within myself, unable to grow or share or enjoy with the next generation whatever is life-giving.

The last stage of life, ages 60 to 80, moves beyond generativity to integrity—accepting the truth of my life as I have chosen to live it (the glaring mistakes as well as the audacious triumphs) without embellishment or denial. The alternative is despair, or the feeling that what I have done is worthless and that my life has no meaning. Family entrepreneurs who focus only on what they are letting go of, and not the legacy to be shared, may delay retirement and succession planning. It is much harder to exit a complex business than to start one.

A new set of skills

Succession planning for the senior generation, which according to some experts can take as long as ten years, requires extraordinary honesty—the admission that it is time to let go, that the new leaders I have mentored may do it even better than I ever could. Tough as it was to build a start-up from scratch, a whole different skill set and a new level of energy are required to take a $100 million business to the next level. Whatever remains imperfect will become the successor’s challenge. This is tough for many an entrepreneur.

Much has been written about requirements for succession, but Erikson’s pathway through life offers some powerful psychological criteria for any business leader: the capacity to trust and collaborate with others and yet to demonstrate personal independence or autonomy; to take initiative to go where no one else has gone while developing the right competencies and a productive sense of industry; to become comfortable with one’s own identity while enjoying the right kind of intimacy with family and business associates; to become generative by giving away to the next generation all the business know-how you have worked so hard to gain. If all this evolves within a business leader, integrity will fall into place.

Entrepreneurs who successfully make the transition from CEO to chairman emeritus never lost the balance between work and play. They recognize the unfinished business of life: the desire to sail across Lake Michigan, to write a blog about business tactics, to play the entire Robert Trent Jones golf trail, to mentor an inner-city kid, to develop a family foundation as a legacy, to grow knock-out roses, to have a second cup of coffee with the spouse who has been waiting 45 years for this.

The family circle looms larger than either the business circle or the ownership circle in the final chapter of life. Now is the time to relax—to let love, care and trust take us back to where we began. It’s time to look on with pride and joy as sons and daughters shape their own future, knowing that what I have done may not be perfect but has been good enough for the business, good enough for the family and, honestly, good enough for me.

Competent financial planners, accountants and attorneys can provide essential guidance on how to transmit a business appropriately, but only if they are asked. Boards of advisers and directors will help manage the transition and nominate competent successors. Family members can offer support and invitations to vacations too hard to refuse. But the CEO must lead this final process, too. The senior-generation member must address some essential questions: What is life-giving beyond the business? What is the meaning of my life?

Ellen Frankenberg, Ph.D., is a family business psychologist who welcomes feedback on your experiences with transitions at ellen@frankenberggroup.com.

Erik Erikson’s Eight Ages

1. Infant (0-1): Trust vs. Mistrust

2. Toddler (2-3): Autonomy vs. Shame and Doubt

3. Preschool (3-4): Initiative vs. Guilt

4. School age (6-11): Industry vs. Inferiority

5. Adolescence (12-18): Ego Identity vs. Role Confusion

6. Young Adulthood (18-20s): Intimacy vs. Isolation

7. Adulthood (20s-50s): Generativity vs. Stagnation

8. Late Adulthood (60+): Integrity vs. Despair