Why your family business needs a disruptive successor

By Jonathan Goldhill

Your plan to pass your business on to the next generation may be derailed if:

• You don't have a future leader with vision.
• You haven't made changes to your business model and have been impacted by the pandemic.
• You aren't thinking about your exit and making progress on a succession plan or sale. 
• You don't think strategically about innovations to your business model or processes.
• You don't have a millennial on your team, providing input on the future of the business.

There's a saying in business and life: You are either growing or dying. And I believe it's true. If you are not aggressively driving the future agenda, then the business may be slowing down. Or, if you are changing too slowly, you will be passed by the competition. According to an old fable, every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you're a lion or gazelle. When the sun comes up, you'd better be running.

We've all heard that few family businesses survive through the third or fourth generation. I know because my grandfather's business was a hugely successful apparel manufacturing company that didn't make it past the third generation. It could have survived, had there been enough interest from that generation, but only a couple of sons-in-law from the third generation seemed to have any interest in the business. Sadly, my father was one of those, but he passed away in 1960 at the age of 35. The family chose not to hire a non-family executive to run the company, so selling the business made good sense. The family sold the company for a fortune in 1966. Family members stayed on in executive roles for the next two decades, until the factory was permanently closed in 1986. Simply put, there wasn't an entrepreneurial successor with a vision to lead the company into the next century.   

If you want to keep your business in the family, what's needed is a successor with excellent leadership abilities and a vision for driving the business forward. If no one in your next generation meets that description, you could hire a non-family CEO, either for the long term or for a shorter period while a promising next-generation family member gains more experience. I believe the future leader in a family business looking to maintain relevancy must be a disruptive successor, if the business is to be scaled up. And since a larger company is usually a requirement to meet a growing family’s  financial requirements, the successor must be as driven and determined as a founding entrepreneur.

What is a disruptive successor?

A disruptive successor is a next-generation leader who sees that they must change the status quo to keep the business relevant and current. They are willing to challenge the preceding generation's way of running the business. They can deliver innovations that may adjust the business model, improve the product/service or update business processes – none of which is easy.

Succession often involves psychological challenges. The senior leader may be reluctant to let go, especially if they are the founder of the business. This may cause conflict with the future leader who plans to disrupt the status quo. Such dynamics can lead to a family fracture if not handled carefully. 

Creating a growth playbook helps to transcend the rivalry that plagues many family businesses. The playbook sets out steps that are needed to unlock the potential of a growing company. By centering everyone’s focus on these concrete action steps, the playbook shifts attention from the family dynamics to the business, reigniting the team’s passion.

The skills needed in a successor

A leader’s top responsibility is to create clarity about where the business is headed and why, and how each person can contribute. Therefore, a leader must have a vision for the business, communicate expectations clearly, organize the necessary resources to enable success, unlock team members’ potential by developing their own leadership skills and inspiring the team to work together.

When Justin White took over leadership of his family’s small landscaping business, he set out to scale the business. Substantial disruption to the family, as well as to ownership and management of the company, ensued.
K&D Landscaping was started by Justin’s father and mother (Kendel and Dawn), Shortly after his promotion, his mother left the company and divorced his father. Over the next few years, at least 75 new employees were hired, and radically altered recruiting methods were implemented to improve hiring effectiveness. Meanwhile, loyal, long-term employees were counseled and repositioned into other roles. As the management team mushroomed in size from a few to more than a dozen, a separate leadership team was split off from the others.

Justin was the oldest sibling in his family business. His bold and decisive style may have been born, but he learned many other leadership qualities, such as continually asking employees for feedback, being a strong financial steward, holding regular progress meetings with key employees and communicating his vision for the future of the business.

Why your business needs a millennial

As much as we current leaders have to teach our children, we must embrace the next generation and respect what they are teaching us. Millennials are the future of business in the United States. They represent the largest generation in the U.S. labor force, making up 35% of it, according to a 2018 Pew Research Center analysis.

A 2019 study by Guidant Financial and LendingClub found that millennials are driven, determined and seemingly more optimistic in their outlook regarding change, innovation and entrepreneurship. They are also earlier adopters and faster learners of software and technology applications, which we are increasingly using to manage our businesses. We need to recognize these promising qualities and support their leadership development.

As the current leader, you must believe in your successor's capability. You must assess whether the successor understands the business and its many nuances. You must evaluate if they truly desire the CEO's role, where they need further development and whether they can grow into the position.

Next, you must recognize that both of you might have significant "blind spots" that must be overcome to move forward together. One blind spot might be overestimating your own strategic capabilities. Ask yourself, "Do I incorporate big-picture thinking into my planning? Is my successor more of a big-picture thinker than I am, or vice versa?" Big-picture strategic thinking and decision making may have to be shared until you and your successor are comfortable in your post-transition roles.

Trust is probably one of the most significant roadblocks during a leadership transition. Everybody must trust the next-generation leader and align with the new style of leadership and management. The current leader must learn to "let go" and release authority, control and power to the successor.

It's a journey for everybody, and hopefully, it can be enjoyed by all.

Jonathan Goldhill is a scaling up business coach, strategist and author of the book Disruptive Successor: A Guide to Driving Growth in Your Family Business (Jon@TheGoldhillGroup.com).

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