Founders of businesses are often characterized by a powerful belief in their ability and vision for their business—an almost invulnerability and purposeful drive that includes extraordinary perseverance. The melding of a person and their business that enables founding can become problematic when it becomes time to consider the business’ future beyond the founder.
A remarkable aspect of successful family business continuity is a founder’s ability to embed strong core values and a clear vision that inspires others and challenges their independent development to become leaders and managers—this is especially critical to work through as succession—planned or unplanned—approaches.
Developing a succession plan can be anxiety-producing for a founder and the business as it surfaces worries about the organization’s viability and the founder’s continuing vitality. Board members and the organization’s leadership must dedicate time to think carefully about succession planning—as a carefully crafted plan that “punts” the emotional and psychological for both founder and follower(s)—now that we know so much more than we did 25 years ago when this piece was originally written, can only make outcomes worse.
It is still true that many family businesses fail to continue into a second generation—and fewer family businesses make it as independent entities to a third. While the process of continuity is complicated and risky, there are many companies in their second, third, fourth, and later generations that are creating value for their shareholders, great products for their customers, and work satisfaction for their employees.
To successfully transition from a founder to the next generation, the continuity process requires a:
- Plan for business leadership succession that starts early and adapts honestly.
- Strategy to preserve the core values that attract talent and offer the business a distinctive, productive culture.
- Development of sufficient cohesion among the ownership group to collectively determine an ownership strategy—this can get harder across generations unless owners have a continuing reason to be invested—financially and otherwise.
- Strengthened shareholder governance processes and structures along with leadership skills.
- Attention to organization development—people development and structure adaptation that fosters productive engagement.
Successful founders can present a paradoxical dilemma for the businesses they founded. The founder can perpetuate his or her success by positioning their business for growth and sustainability, explicitly emphasizing transition and continuity to support the next generation of leadership, neither taking all the credit nor none of the credit for what has been created so far. The strongest indicator of an organization’s future success lies in how it plans today to follow initiatives, purpose, and distinctive value with eyes wide open, honoring a founder’s work while bringing critical thinking to what change to embrace.
We share three cases of founder succession and how businesses can think more strategically about their future here. Give the piece a read and let us know what you think at info@cfar.com.