LETTING GO: PREPARING TO RELINQUISH CONTROL OF THE FAMILY BUSINESS
Updated: Apr 28, 2021
THE CEO'S PERSONAL CHALLENGE: PREPARING FOR A NEW LIFE
"Letting go," means relinquishing control and leadership of a family business, and it is one of the most emotionally difficult experiences of a CEO's life. Few family business owners readily embrace the idea of not being in the position of leadership anymore - with its attendant perks of feeling that one is doing something meaningful, powerful, with prestige in the community and respect from family members. But letting go will occur one way or another.
Some business leaders "die with their boots on," staying in power until even their children have retired. Others, are laid low by circumstance - unexpected death, disability, bankruptcy, criminal prosecution and imprisonment or divorce, not circumstance one would choose as the means for leadership transition. Others are forced out by their boards or their families, often under bitter circumstance. Still others follow a more elegant course, planning years ahead for an orderly transition and mapping out an active, meaningful life for the years after retirement from the family business.
While it’s our bias for letting go gracefully, we also believe it is the family business owner and CEO's right to choose. Whatever the chosen path, it must be done responsibly. Preparation for letting go is an internal process, one that equips the CEO mentally, emotionally, and perhaps even spiritually for the task ahead. The greatest difficulties occur when there is a total lack of separation between the individual and the business. Very often, a leader has made an enormous investment in the business in terms of emotion, time, money, thought, and energy, and his or her identity has become rooted in the business.
This is true not only of first-generation leaders who started the business, but also of second- and third-generation CEOs who see themselves as stewards responsible for a vital legacy. It is valuable, and your organisation are separate from each other. Family business leaders tend not to see retirement as part of a normal career cycle. They are unlike those entrepreneurs who develop an exit strategy as soon as they have started a business. For those who won't let go, life without the business is not something they want to think about.
WHY AREN'T YOU LETTING GO?
The reality is that most CEOs of family businesses need to ask themselves just why it is they intend to hang on. What keeps them from letting go? A business owner may state some reasons on a conscious level and be very sincere about them. Underneath the surface, however, there may be other reasons that he or she has been unable or unwilling to articulate, or that may even be unrecognized.
"I am having such a great time!"
Business leaders who make this declaration really mean that they don’t know what they would do with themselves if they retire. They have not figured out ways to have fun or finding meaning in life outside the business. And while they may indeed be enjoying themselves, it is likely that they are obstructing an orderly transition of the business to the next generation.
"I can't afford to retire."
In the case of certain small businesses, this may actually be true. The business owner needs to continue to work in order to live. But many times, this statement does not reflect reality. Despite having built more than adequate wealth, they still feel financially insecure, or perhaps, the business owner considers the business's financial security more important than his own and will not take resources from the business to afford a comfortable retirement.
"This business would be nothing without me!"
From the perspective of the organisation, if there is no successor, there is something wrong. That may not be an issue for the business owner who has essentially built and developed a company in response to his own desires, needs or beliefs about what needs to be done. His view may be "This is my business and whatever is left for my family to deal with.". In our view, the owner who does not tend to the needs of the organisation is not creating a business.
"What will I be without the business?"
While a business owner may have convinced himself that the business will be nothing without him, he may also worry more quietly that he will be nothing without the business. He fears losing power, prestige in the community, the friends and connections that the business affords him and even the respect of the family.
"I have no successor."
This can be a legitimate reason for staying on when a successor is suddenly not available as a result of death or ability, or because he changed his mind. This reason can buy time for the incumbent CEO to do what needs to be done to find the management needed to carry on the business. Unfortunately, this is often an excuse by CEOs whose motive is not to find new leadership but to hang on.
"I want to stay in control of the kids."
This is not a reason a CEO is likely to admit. Entrepreneurs characteristically have a propensity toward control. It helps them do what they do as business creators and builders. But when they try to control their adult children by maintaining control of the business, particularly if it is for his or her own ends and desires, it becomes a serious problem. Some owners disguise this dark desire by saying they are worried their children won't get along without the parent still at the helm.
"I will die if I retire."
This statement is a favourite of older incumbents. They tell you about all the people they know who have retired and died within six months. What they don't tell you is the people they know who have retired and are still alive and well and happy. This comment suggests that the CEO feels he is engaged in an activity that is life-sustaining and that preserves his identity.
"I need to look out for my loyal non-family executives."
Family business CEOs commonly have fears about what will happen to their long-time, non-family managers once succession takes place. "These people have taken care of us and we need to take care of them," many leaders say. Business owners and the non-family executives often share a significant amount of mutual loyalty. In many cases, they have grown older together.
"This business is my life!"
The hidden meaning here, perhaps inexpressible for the CEO, is that leaving the business means going home to marriage that can't survive with both spouses in the house. A number of CEOs throw themselves into their work because they lack other satisfactions in life - including from their spouse and family. They become passionately devoted to their business and it becomes their "mistress." In some cases, it can result in such a traumatic shock to the marital system that the CEOs marriage does not survive. CEOs who recognize this as their own situation may keep working because they don't want to face the probability of divorce. This sadness and loneliness can be reality to some. The fortunate CEOs recognize such potential difficulties early in life and seeks help from a marriage and family therapist.
DO YOU REALLY OWN A FAMILY BUSINESS?
As the CEO, you must ask yourself whether or not you are really committed to succession and to preserving the business for future generations. If you have what you proudly describe as a family business, then you must be concerned about letting go and you must be concerned about the business surviving beyond you. To be consistent with the declaration that you have a family business, to be honest about it and in order to fulfill your responsibilities as a family business leader, you must accept the "final test of greatness" and recognize that handing the business off to your successor is your key challenge.
In other words, a family business is truly a family business only when it is successfully passed from one generation to another. Such a transition is usually the most satisfactory when the CEO plans for it and steps back from the business when the next generation is ready to take over. The wisest CEOs embrace the necessity for letting go and the responsibility and preparation that it requires. They find joy knowing that they have built businesses that not only will outlast themselves but also have been preserved for the next generation of their families.
For them, that is immortality - leaving a legacy for future generations!
Family Legacies www.family-legacies.com is a multidisciplinary family business consulting company. Our consultants are leaders in their respective fields including; Family Business Consulting, Strategic Planning, Financial Planning, Wealth & Risk Management, Corporate Finance, Business Transitions & Exit Planning - Buy, Improve, Grow & Sell Businesses, Commercial & Family Law, Executive Coaching, Leadership Development & Facilitation, providing our clients with a professional and integrated multi-disciplinary service.