Todd Smith
Principal
A scan of literature (and speakers!) in the family business succession universe would lead one to believe that the need for family harmony is required above all else to ensure generational transitions are executed with success. Our experience would tell us that this is an overly simplistic take on a complex set of questions around continuity. While harmony is important, the work of transition is a combination of “heart and brain”—a delicate balance between the emotional needs of family and the practical realities and very real demands of their business environment.
The work of transition is not about just keeping relationships within the family harmonious; it is systemic in its nature and requires a sightline across many factors. There will be times when sufficient cohesion will have to be enough when longevity is not top of mind but instead in the background, and when “good enough” or doing what is possible will have to do. Successful families are, at times, called on to do their best for what is needed now.
We use the concept of cohesion specifically here; it transcends harmony. Cohesion implies there is a shared glue, a set of implicit and explicit agreements around shared goals and taking a long-term view to navigate forward together and not lose the big goal of continuity. Harmony can be fluid, as there are many emotional and practical impacts on it that are ever-changing.
While the goal of family harmony is often at the top of the list when we first meet families working on succession, this goal often gives way to one that calls for striking the right balance between what is needed for the business and what is acceptable within the family. Business families who survive do not let the ebbs in harmony control their internal narrative—that somehow, they are failing as a group when harmony is not the key focus. After all, it is not a direct trade-off between harmony and business decisions, but rather considering both, doing what is needed today, and managing risks in both arenas as a result. Instead, these families rally around the concept of shared interests to deal with the reality in front of them. We often hear language that reflects this strength, often along the lines of “we may not always like each other, but we can still get in a room together and make business decisions.” This may sound rather pedestrian—well, of course, they can! After all, they own a business together. But for every family able to hold this distinction in place over time, there are many others who fall apart completely. The emotional trumps the rational, the brain succumbs to the heart—which can create paralysis when some forward movement is still possible.
Many challenges to harmony come in the form of unintended consequences. Take, for example, a sibling group of owners, all of whom work in a business together. Their father ran the business well into his later years; upon leaving the business, he put his youngest child in charge feeling they had the best set of skills to successfully move the business forward. This type of decision, even when correct, can create emotional angst in a variety of forms—feelings of being passed over, breaking traditional birth-order “rights,” gender roles in families, and so much more. A decision like this, under-attended, can break a family and its business.
But there are many times in the life of a business when a family must make an active decision with full knowledge that it will have consequences. These decisions can include challenges around choosing the best person from within the family to serve on the board of directors, how best to adapt to market changes, how the family deals with acute public relations challenges, and many more. But regardless of the challenge, successful families adapt to immediate needs based on current realities, while not outright losing the threads of alignment, continuity, and longevity during their transition journey. They do the work to set the expectations that they will not all always agree but they will survive.
This same logic applies to larger, more fundamental transitions that many family businesses face as well. Decisions to bring in a non-family CEO; to move the company headquarters or re-focus the work within their foundation; or even the decision to sell their operating company and hold their wealth together in a shared family wealth enterprise (e.g., family office). Families may simply need to push through during these major transitions at the risk of upsetting or alienating a portion of the shareholder group. The result may even be a redefinition of who the family is moving forward, but this does not indicate failure; it indicates that sufficient cohesion can, and will, pull families through tough challenges more successfully than harmony alone. Hopefully, it can provide a stable platform to allow the family to return to harmony—a key feature of their work together moving forward.