Perspectives from ISB

The odds of successfully transitioning a business from one generation to the next are extremely low. In fact, as each new generation ages to the point of needing a successor, it is even less likely that a transition to the next generation can be successfully accomplished.

If you know down deep that your next generation of family is not quite ready to take over the reins, you need to have a stopgap plan. For this, you may need to work with a key nonfamily employee or perhaps even another unrelated firm like yours.

Hopefully you have one or more longstanding employees who are significant to day to day operations. These key employees also wonder what would happen if you didn’t wake up for breakfast. Are they out of work? Is the business getting sold? Will they be working for a 25-year-old who knows nothing about the business?

These thoughts are common among longstanding loyal employees. Your best bet is to be completely up front with these folks. They need to know that your plan is to keep the business as family owned. But you also need to create a plan that keeps them engaged and motivated to assist with that noble objective.

Even if your children are mature and experienced with respect to your business – you still need a plan. That plan needs job descriptions and who is reporting to whom. It can be dysfunctional when there are three family owners tripping over themselves all trying to do the same thing.

This issue gets even muddier when one or more of your children may have nothing to do with day to day business, yet are an equal owner with those who run it day to day. For this, you may consider equalizing your children’s inheritance and exclude business ownership from those who don’t work in the business. If that doesn’t work, lay out clear guidelines now about who makes the decisions – including the important decisions about compensation, mergers, buying or selling.

Source: Napolitano, John, Aug 15, 2017,

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