Advisors can help successful entrepreneurs with the hard choice of leaving the top spot
Key Takeaways:- The decision to step down and retire is one of the hardest a family business entrepreneur ever makes.
- When the time comes, entrepreneurs don't have to retire and leave their companies. Instead, they must change their job description.
- Rather than undermining the new leader's authority with their continued presence, founders should become the architects of their company's new ownership, management and leadership systems.
- Stepping down is not quitting - it's leading from a new perspective.
I start this article with the tale of Jim, an entrepreneur who started his family business, and Robert, the nonfamily member Jim hired when he decided to step down. Jim had a son who was not quite ready to take over the business, so he asked Robert to run the company and train his son.
All the right intentionsJim was rightfully proud of his company. He had nurtured it from a garage start-up to an enterprise making $40 million annually. To ensure a smooth transition, Jim met monthly with Robert, his new president, to review the company's performance. At one such meeting Jim noticed Robert's last item on the agenda: "Jim's Schedule." When they got to it, Robert said, "Jim, if I'm going to be successful around here, you can't be here as much."
Jim felt his face turn ashen. In shock, he thought, 'What will I do? The company is my life.' Then he thought about his hobby farm and his boat on Lake Michigan and decided, 'I'll be fine. I have plenty to do.'
A few months went by. Jim was having another monthly meeting with Robert, and the last agenda item again was "Jim's Schedule." When they got to it, Jim said, "Well, Robert, at least I'm doing a better job of not being around as much." Robert shook his head slowly from side to side.
Jim realized it was true. Although Jim wanted to turn his attention to his hobby farm and boat, he couldn't do it. His continued presence in the company undermined Robert's leadership. Jim could not, in his mind, "quit" the company.
The decision to step down and retire is one of the hardest a family business entrepreneur ever makes. But entrepreneurs don't have to retire and leave their companies. Instead, they must change their job description. Jim should become the architect and designer of new ownership, management, and leadership systems. He should be the lead family member to organize and build consensus on family values and family philanthropy. He doesn't have to quit; he must lead from a new perspective. (For more specifics on this philosophy, see my article The Last Challenge of Entrepreneurship, parts
one and
two.)
As rewarding and manageable as this approach seems, it appears to be easier said than done. In my 30 years of consulting with family-owned businesses, I have seen many entrepreneurs who failed at the "letting go" process - the last challenge of entrepreneurship.
There are likely as many reasons for failure as there are reasons for entrepreneurs struggling to pass businesses on. But in my experience, the breakdown tends to come from a failure in communication. I'll share examples below.
Real-world examplesDon't forget a key player in the business succession plan: the spouse. A company once hired me to do its succession planning. The company's accounting firm had taken the lead on the technical side. The accountants created a tax-driven plan that would save an enormous amount of taxes. It allowed Allan, the entrepreneur, to retire immediately and to winter in Arizona.
I was invited to the briefing in which the accounting firm presented the succession plan to Allan. Although a bit surprised by it, Allan quickly warmed to the idea of spending his winters in Arizona. Allan's wife, Helen, was not at the briefing.
Next, the accounting firm presented the logic, the tax savings and the value of the agreed-upon plan to a wider group, including Helen. Helen's response was definitive. She slapped her hand on the table three times as she yelled, "I'm too young for my husband to retire!" That ended the discussion. Allan did not retire for another five years.
Here is a second example on the same theme. As part of my succession planning process, my client, Roger, shared with his family his dream for life after leaving the company: He looked forward to playing golf in Florida for four months every winter. Roger Jr., Roger's highly capable son, was ready to take over the company. He supported his dad's dream.
Roger's wife's responded, "That is fine. I will be happy to come down and visit a couple of times. But our grandchildren, our friends and our church are all in Minnesota. You can go to Florida, but I'm staying here." The succession plan stalemated because Roger and his wife had not talked things through.
I believe that every couple involved in a family business has already made an implicit contract in their relationship concerning that business. It may be unspoken and implied as they take on roles to meet the needs of the business. By the time the couple is in their sixties and certainly their seventies, however, they need to be more explicit about their expectations. They need to be specific about what they expect for the future and not merely assume that their partner knows what they expect.
ConclusionBoth spouses need to share their individual "new" dream and include the coming generation as part of that dream. They must work together to support the transition, determine their new job descriptions and communicate their intentions.
This makes sense when you realize that entrepreneurs by definition are driven by their dreams. When they move on from being the family business driver, they are most successful by developing a new dream relative to work, family, relationships, money/wealth, leisure time, health, community service and spirituality. I call this process Life Career Planning.
Part two of this series reviews the Life Career Planning process and its benefits.
