Sunday, August 9, 2020
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Generational Tug-of-War

The phase of transition from one generation to the next is often a period of time steeped in both pride and anxiety – for both the senior and junior generations. For the senior generation, and especially for the founding generation, it may be extremely difficult to let go of the reigns of the family business. This business was the product, after all, of their creativity and hard work, and it may be hard to imagine it in the care of anyone else, no matter how trusted the junior generation is. Furthermore, the senior generation may be left feeling like they have an empty nest, much like when grown children leave the home. They no longer have something to occupy their time or to nurture. The junior generation, on the other hand, often takes over the business with a sense of anxiety that they will not be able to fill the shoes of the previous generation.

In light of the difficulty of these transitions, both generations may sabotage the transition of ownership in a variety of ways. This can be caused by a multitude of behaviors and sets of beliefs:

Senior Generation

Advisors and Employees
Caught in the Middle

Junior Generation

Passive aggressive behavior or bullying

Refusing to agree to succession plan details

Refusing to define roles and responsibilities for – or to relinquish power to – the junior generation

Controlling the checkbook in order to control other aspects of the business

Insisting the junior generation do things exactly the same way, despite industry and market changes

Keeping an office on site in hopes of maintaining “unofficial” authority

Fear of “the end”

Viewing the junior generation still as “children”

Fear of loss of financial stability

Lack of certainty about where loyalties should lie – with those who formed the relationships or with those who are the future of the business?

Desire for approval from founding generation

Fear of standing up to senior generation

Fear of failure

The idea that they can wait out the problem

Lack of unity from fragmented ownership typical in succeeding generations

Overwrought sense that they must come in and make sweeping changes in order to form a unique identity

Resentment and displeasure with terms of succession plan, but refusal to speak up

Within each group, the above behaviors are further compounded by lack of objectivity regarding their own behavior. The result is bickering that can spread throughout the family and even the community, with the potential to damage and even destroy family relationships. The business itself can suffer or even fail because of the distractions the tension causes.

The best way to avoid these potentially devastating consequences is for the senior generation to begin relinquishing control and responsibilities to the junior generation well in advance of their retirement. They must put in place a solid succession plan with legal measures to ensure it is effected as agreed-upon. This plan, which should be incorporated into the overall family business strategic plan, should include details such as timelines, roles and responsibilities, buy-out provisions, compensation and the like. This plan should then be fully communicated to the entire organization so that all employees have an understanding of the changes that will take place. Furthermore, the family may wish to establish a board of independent advisors to help ensure that the transition, and the running of the business thereafter, runs smoothly. The family may also wish to formalize a process by which it meets to discuss family related matters to ensure intergenerational communication is facilitated.

Once the transition is complete, it is advisable for the senior generation to discover a new way to contribute, if it wishes to do so. This could include establishing or managing a family business charitable foundation, documenting the family and family business history, or becoming a spokesperson for the family business.

When the family can work together on creating a successful transition of power, the senior generation can exit gracefully and the junior generation can assume power more effectively. The family relationships can be strengthened, and the business benefits from a more strategic hand-off of management responsibilities. Employees can be comforted by a sense of stability and direction. In other words, by working together in a cooperative manner, you can guide your family and your business to a more successful future.

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