What is the Most Difficult Part of the Succession Process?

Business Leader Post, September 26, 2012

Thomas D. Davidow, Ed.D.

The transfer of ownership is relatively easy. You consult your attorney or accountant or another professional who has the knowledge and experience in transferring stock in the most tax efficient manner while still taking into account the family’s wishes.

The management transition, which has to do with the leadership of the company, is where the rubber meets the road. The transfer of leadership is extremely demanding and complicated, akin to teaching your adolescent how to drive your brand new car. The adolescent learning how to drive with a parent as the teacher is full of anxiety and is terrified of making a mistake. At the same time, the teacher/parent is skeptical and concerned and is likely to comment only on “mistakes.” That only adds to the adolescent’s anxiety.

The successful transfer of management/leadership in a family business takes place over time and demands a lot of communication. Who can tolerate that level of anxiety over a number of years? The tension between the two generations is so high that communication about the topic breaks down very quickly. In the same way parents hire a driving instructor, it is a wise idea to bring in a third party to help you through it. Wasted energy and distractions from the business are the byproducts of the lack of a succession plan. The investment will easily pay for itself.