Warning: Here is what every family needs to know about succession

Succession is one of the most painful topics in family businesses around the world. Especially when it comes to founders passing on the torch, but even in subsequent generations.

You never quite know if you get it right as the matriarch or patriarch of your family business empire when you have to hand over the reins. This is why many do not.

They have stepped down on paper, but when it comes to the actual reality of handling the business, they still have their hands all over.

They may call themselves “chairman,” or “non-executive director,” or whatever, but titles can be deceiving.

Most do not fully let go because they are too afraid the next in line will mess things up.

What you are left with then is a mess because you suddenly have two people at the top, one who officially heads the company and another one who unofficially does.

Truth is: After advising so many families around the world and after reshaping their businesses, it has become clear to me that succession is still one of the hardest topics for them.

This topic is usually very emotional for them, and they have a lot of blind spots.

You live in an ivory tower

If you are at the top, the matriarch or patriarch of your family business empire, chances are you do not see reality clearly. You think you do, but you really do not.

People tell you what you want to hear, and even though you think you have a good view of reality and what your business is really like, in reality, you will tend to see more of what you wish to be true than reality itself.

This is very common even if you are a Fortune 500 CEO, but even more so if it is your own business.

The reason for this is that—if you are at the top—you usually live in an ivory tower and succumb to the privileging hypothesis and reality distortion field.

You bend reality to make it look like what you wish to be true.

In success, this often means that owners do not want to see if their children are not fit to lead, or lack motivation, or are spoiled, etc.

In my list of clients there have been many examples of that.

One owner of an Asian conglomerate wanted his son to succeed him as the president of a major business in his conglomerate and just did not want to see the reality that the son was utterly lacking any real motivation or skill.

Sadly, he insisted on letting his son stay in the role, even without any competence, and my team and I had to develop another solution, which is what we call the “cushion of competence”: excellent people around him to make up for his many deficiencies.

You ignore the inevitable

Most family businesses rely too heavily on one or two key individuals. If that sounds like your business, you need to fix that.

Everybody needs a deep bench. Nobody has a lease on life but most act as if they do. This is why the death of a patriarch or matriarch is often ignored as a subject. It is the taboo that is not going to be touched.

I remember very odd meetings I had in a boardroom of a family whose head was approaching 94 years of age. He already had a hard time understanding most of what I was saying and clearly needed to get his succession fixed—years ago!

He was still involved in most matters of the very large conglomerate and refused to get out of operations and the day-to-day.

I turned this client down because no one in the family was willing to approach the subject of succession with the father.

How can you have an open conversation about succession if no one wants to talk about it? Very strange.

The results? When the “day after dad” comes, this empire is going to crumble. And I will not take that call.

Another bad example is the one of an Asian family whose businesses were making close to a billion in revenue.

After an initial meeting, it became clear to me and my team that the one who had approached us, namely the son, had only done so because his dad had pressured him.

But in reality, the son was not willing to move this forward in any way. Here, the situation was different, however. The son was leading the business already but the father wanted to already put succession plans in place for his son, in case the unexpected happens.

The son did not want to talk about his own potential death. Now I understand that these conversations are uncomfortable for everybody. But the alternative is to let the business go up in flames.

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You don’t have a fire drill

This is exactly what happened to a Swiss family who was the birthplace of major global brands.

When they called me, it was already too late. The patriarch, only in his 50s, had died unexpectedly and now it was havoc. Nobody else in the family had been trained to take over.

They were all receiving paychecks and had been told to keep quiet and their mouths shut. A bad decision.

The sooner you start grooming the deep bench, the better. The principle is: The more they know, the more they grow. This means that the more they are familiar with all different aspects of the business, including what is happening in different divisions and business units, the better a leader they will become.

Start early. Have a clear succession preparation plan. And execute. And this involves exposing the next in line to all the different parts of the business.

Remember: Design precedes execution.

Most families plan too little and spend too much time being busy. You need a clear plan for the “day after” and also a fire drill if this happens out of the blue.

Great executives are made, not born. You start early, you still have enough time to build awesome next-in-line successors.

Your kids don’t have the work ethic

Often, kids are brought up to be too comfortable, even lazy. This is not inevitable and simply a matter of education, ethics and values. This can be taught.

Two of our clients, both Asian multibillionaire families, did this really well. Grooming their kids from an early age, the different children had to survive in various different departments of the business. The same work hours as the other employees. No privileges. Just hard work.

The result? Insane work ethics, even if each of the several children is now worth over a billion dollars.

Five to Thrive – What to do

1. Plan early. Be short-term paranoid and long-term optimistic about your own death if you are the family head.
2. Document all your knowledge and insights and learnings and processes in a knowledge bank.
3. Groom successors early and have a deep bench for the key positions.
4. Get support from experts who have done this before and know what they are doing because chances are that you don’t.
5. Get outsiders to appraise, evaluate and—if needed—coach your next in line because if they are your blood, chances are you will not see reality clearly.

We all love our children. It doesn’t mean they are fit to lead.

Remember: Great executives are made, not born. If you start early, there is still time and no one needs to go into panic mode.