Sunday, 30 September 2012 20:28

Succession shopping

Lisë Stewart founded Galliard Group to support family-owned businesses in the many decisions that can make or break the future of a company. One significant area of decision-making for family-owned businesses is succession planning.

When considering how to handle the future of the company, many family-owned businesses don’t realize the number of options that are available. From transitioning to the next generation in the family, to bringing in a leader from the outside or deciding to sell the business, the decisions are very personal and require careful thought and planning.

That is where Stewart, founder of Galliard Group, lends a helping hand. Galliard Group provides consulting, training and support materials for family-owned businesses. Conversations in the succession planning process can be difficult, as most experienced family-owned business members will report. The process is challenging on several different levels.

“Owners who are currently running the business often really enjoy what it is they are doing and don’t necessarily want to leave, but they feel like they need to make room for the next generation of ownership,” Stewart says. “Others really want to get out of the business because they’re tired and they’ve been doing this a long time, but they realize they’ve never groomed a successor and they don’t know what to do with the business.

“Sometimes they think that their children may want to take it over, but they’re concerned that their children don’t really have the skills, background, or maybe the passion to do a great job. How do you tell your children that? So it’s a very difficult situation.”

These businesses need to understand their options. The sooner the business members start the planning process, the better.

“We try to convince our business owners to develop their exit strategy right when they start the business,” Stewart says. “Think about what the future needs to be and what your plans are. A lot of people don’t realize that it could take five years or more to really develop and implement a successful succession plan.

“The other thing I think is important to note is that succession is not just about finding one person to take over and run your business. A succession plan is a plan to continue the long-term viability and success of the business. That often means that you need far more than one person to take over — you need a strong leadership team.”

More often than not, family-owned businesses will have to look outside the family to get the right kind of talent to help grow the company.

“We really encourage family-owned businesses to place people into jobs based on their talent and skill, not on their blood line,” Stewart says. “You have to look at the job and what needs to be done to this company to meet a strategic goal. Get people into jobs that have the talent or the ability to learn skills that are key to that job being effective. Base your organizational development on key competencies as opposed to relationships.”

Family businesses often struggle to weigh the needs of the business with the needs of the family. It is important to be honest in discussions about the future, especially for families that do not plan to pass leadership to the next generation.

“We have a saying at Galliard Group, which is, ‘Deal with the emotional issues before emotions become the issue,’” she says. “If you believe your son or daughter or the next generation of potential owners don’t really have the skills … have a really honest conversation around what sort of skills you need in order to bring this strategic plan to life and if you don’t have it, what are the options.”

Depending on the needs and desires of the business owner(s), there are several paths to take.

“One might be that you form an advisory board of people who have knowledge necessary to help grow the company and they can serve as mentors and coaches for the next generation,” Stewart says. “The second thing you can do is bring in an interim leader. They come in in a leadership role, but they are hired with the knowledge that they’ve got to be able to coach the next generation of ownership. There really are quite a lot of options that family owners can generate if they are not sure that the right leader is in the family.”

How to reach: Galliard Group, (320) 762-1371 or www.galliardgroup.com

Published in Akron/Canton

Victoria Schneider Temple knows quite a bit about adapting. The chairman and CEO of family-owned The Schneider Corp., was reading her grandmother’s minutes — and noticed how the engineering solutions company adapted to scrape through some economic downturns.

“Back in the early days, they sold fishing maps and chopped wood to keep the doors open,” she says. “Now we find other ways — technology and such — to adapt. Everything is changing so rapidly. … It basically all comes down to your ability to adapt and your willingness to accept change.”

Temple is proud to note that accepting change as a way to foster longevity is a strong point of the 50-year-old company that tallied $14.7 million in revenue last year.

Smart Business talked with Temple about how an ability to adapt is critical to company longevity.

Q. How can your outlook help a company get through financial challenges?

A. Even though we've had a contraction in our business, I have never seen it as negative. It's an opportunity for you to go back and ask questions about how you can do things better. I do think there are going to be companies that are not going to survive the trying economic times, there are some that will and then there are going to be companies that will survive, but they are going to have no clue why; they won't have adapted like they should have when the economy turned around.

Q. So the unfortunate ones may have not asked the right questions of themselves?

A. I think you have to be able to be honest with what works and what doesn't work. If you are a leader, you need to have periods of introspection about what works and what doesn't work personally and professionally. A leadership staff has to spend time introspecting and having hard conversations about what's working and what's not. I also think you have to have the courage to understand that if you have made a wrong decision, or you've made a bad choice, you just turn around and make a different choice. You can’t be afraid to make mistakes.

Q. How do you decide what does work and what doesn’t work?

A. You have to look at the finances of it. When you are putting any type of business together, whether you are investing in new technology or investing in a new person, you have to look at what you are trying to get out of that. You need to put together a business plan, you need to have milestones, you need to know if you are hitting those milestones.  If you are not hitting those milestones, you need to know why and you need to make decisions — is this worth the risk of going forward if you are not meeting your milestones? Or is it just something that you just have to decide, ‘Hey — I made a mistake, and we need to go in a different direction.’

I think a lot of it is really just about putting a plan together and sticking to the plan, and if you aren't going to stick to the plan, you have to have very clear reasons why you're not. A lot of that is just holding your leadership accountable.

Q. What goes into determining milestones?

A: In a challenging environment like this, you need to look at things quarterly. So if you are going to invest in something, like a specific piece of equipment or if you make a new hire to sell a new service, at what stage is your break-even point? At what point is it acceptable? And how fast can you become profitable in a specific area?

So when you keep longevity in the back of your mind, you know that there are hard decisions that have to be made along the way. What makes it worthwhile is knowing that the longevity of the company and the survival of the company for employees is the most important thing.

How to reach: The Schneider Corp., (317) 826-7100 or www.schneidercorp.com

Published in Indianapolis

Ron Calhoun was planning to discuss plans for his company’s 100th birthday back in 2006 when the discussion with the board of directors took on a more serious note. After the birthday plans were nailed down, it was time to talk about the future ownership of the wholesale distributor of residential building supplies and HVAC equipment.

The second generations of three families owned the company that was founded in 1907, but no third generation descendants had an active role in the business.

“We were looking to dilute the stock down to the third generation,” says Calhoun, president and COO of Palmer-Donavin Manufacturing Co.

That was not the best scenario for continuation of the company — it made it too likely that the company would dissolve.

Palmer-Donavin was doing well enough. Revenue for 2011 was $163 million, down a bit from a high of $174 million previously, and better than 2010’s $147 million. About 230 are employed company-wide.

Calhoun got to thinking and remarked on how much his predecessor, Bob Woodward Sr., put an employee focus on the company during his 60 years with the company.

“The culture of our company is very much an employee-oriented culture that he developed through his policies and compassion for the business and people,” he says.

“We talked about where a company goes. Do you go to a private equity firm? Do you go to a strategic buyer, and then what happens to the company, what happens to the management and the people?

“I think from our ownership and board perspective, they wanted to maintain the integrity of the company and the people, and felt an obligation to management and the people to see that the company could go forward.”

The proposal that was the best fit was an employee stock ownership plan. It would be a way to give back to the people who helped build the company. After talking to a number of people in the industry who had taken their companies in an ESOP direction, it was time to decide.

The leadership settled on the ESOP as a succession plan for Palmer-Donavin. The company was sold in 2007 to the ESOP and went from being 100 percent shareholder-owned to 100 percent ESOP-owned private company.

“It’s been interesting along the way, and because of our past, I think we transitioned into it very well, and we got everyone’s goals aligned,” Calhoun says. “We have been very successful since.”

But just because the papers had been signed doesn’t mean the work is over. Here’s how Calhoun faced the challenges ahead of him.

Make the ESOP fit

From the perspective of a company’s vendors and customers, the transition to an ESOP is virtually invisible. But from the board of directors and managerial areas, it is quite a bit different.

ESOPs are rarely used to rescue a company in financial trouble but are most often used to provide a market for the shares of departing owners of companies, to reward and motivate employees or to take advantage of loan incentives to acquire new assets in pretax dollars. ESOPs, in nearly every case, are a contribution to the employee, not an employee purchase.

In preparation for the transition, company owners usually will need to hire an attorney and an investment banker to appraise the company, set a value on its shares, put together a share allocation schedule and arrange financing if needed.

Once the Palmer-Donavin board of directors voted to go the ESOP route, one of the next steps was to hire a trustee who would represent the employee-owners when voting.

“She represents the ESOP employee owners,” Calhoun says. “She votes their stock and is completely independent of the board, so she provides a true independence in the association of the employee owners of the company.”

When selecting a trustee, it is a matter of hiring a pro. Through the process of interviewing, you should be able to find a professional trustee to meet your needs. Then take him or her through a meet-and-greet process.

“You should go around with your trustee and your chairman of the board to employee meetings to tell them about the changes that are coming — and that the decision was made to sell the company,” Calhoun says.

An administrative committee should be formed that is responsible for the management of the ESOP and the shares. They will work closely with the trustee and keep the trustee informed of business concerns. They work together as far as share redemptions and things of that nature and any reporting that is necessary.

Most important of all, the trustee votes for the shareholders and attends the annual meeting of the board of trustees. This is one of the major points employees will need to know.

“The trustee votes on matters on behalf of the employees; for instance, the trustee would vote for the election of directors representing the employees,” Calhoun says. “The trustee votes if there is a decision to sell a majority of the assets of the company or a major event.”

The Department of Labor and the Internal Revenue Service require an annual valuation of the shares and the trustee hires a third-party evaluation team to perform this duty.

The most common method to allocate the shares to employees is in proportion to their compensation, although different formulas may be used, such as years of service or a combination of the two.

Another question to be answered is when the employee becomes vested in his or her shares.

“What we did — that the trustee and our attorney said we should not do but we felt that going through this transition we should — is that we gave pre-ESOP vesting to all employees so the vesting period on the ESOP is six years,” Calhoun says. “They recommended that we take that and have every employee start over at the time we implemented the ESOP, and we just didn’t feel good about that, and we allowed them their previous time with company to vest. So if they were with us six or more years, their ESOP shares vested at 100 percent when they received them.”

The company leadership wanted to continue the tradition of being an employee-friendly organization.

“The culture of our company has been an employee-oriented one,” he says. “Bob Woodard had what we called an appreciation plan. If the company was profitable, all of a sudden all of the employees would get an extra week’s pay or a bonus would show up in their paycheck, and they didn’t know when it was coming. It was just kind of random.

“Now with the ESOP contribution, shares get distributed every year. It is really kind of based on the same thing — shared distribution is based on each individual’s income level but done on a regular basis.”

Educate the employees

One of the largest benefits of an ESOP is the ownership culture and the pride that the employees take in being employee-owners. While some employees will feel the honor right away or early in the transition process, others may be doubtful of the benefits and will need time and attention to work it all out.

“The challenge for the company is how you educate the employees to understand what the ESOP is,” Calhoun says. “It is a very difficult concept for everyone to grasp, so we spent a lot of time on it.”

One useful tool is a communications committee that will take on the assignment to tell employees on a regular basis what is happening with the company and the ESOP.

“We publish what we call The Owners’ Manual every quarter,” Calhoun says. “It talks about the different aspects of the business and different educational pieces that we put in there to help the employees understand better what’s going on with the company, what’s going on with their investment in the ESOP and the business strategy.”

The first message to be communicated is that the biggest advantage of an ESOP is that it will offer employees the chance to create the ownership culture of everyone in the organization.

A communication tool that Calhoun found helpful was to set up a company intranet site to encourage questions from employees about the ESOP. These are posted on the site with a response, usually from the human resources department or someone else in the organization that has more expertise in an area.

“I think there were a lot of people who were very nervous about it, that were skeptical. But I think hopefully those concerns have been satisfied over time,” Calhoun says.

“It’s a learning process. As far as each year when we have to go through like the redemption of stocks for people leaving, those types of things get a little cumbersome and you want to make sure that you do that through the right process. It’s very regulated.”

When employees leave the company, they receive their stock, which the company has to buy back from them at its fair market value.

Efforts to spread the word about the ESOP should be frequent and creative.

“You can do different things such as lunch with the CFO, to small individual meetings, to having an ESOP committee, which is made up of employees from all the different areas and sections of the business,” Calhoun says. “They meet at least on a quarterly basis. They are charged with doing some things to bring an awareness, and ownership awareness among the employees. They have come up with some different types of games and things that can be used at company picnics or all-employee meetings that help communicate the message.”

Increase your company value

For a company going through a recession, having an ESOP adds a whole new dimension and a new tool to operate the business.

“Our business went down from a high of $174 million before the downturn to $147 million, and during that time we had 320 employees; we are down today to 233,” Calhoun says. “Many of those changes were just through attrition, but we did have everyone look at their departments and evaluate what are the tasks that we need to do, and what can we do to improve ourselves and where we have redundancies to try to cut out that duplication.

“I think through managing through that type of a downturn in our business — everybody focused extremely well in that and agreed to take on more than their share to keep the ship going forward. It was a pretty seamless transition through that, and we were able to maintain our profitability through those times.”

In the long term, ESOPs provide a convenient way to which bonuses can be tied. A rewards-for-profit plan focused on return on assets encourages employees to meet goals and rewards them when the goal is achieved.

“A rewards-for-profit plan replaces the typical profit-sharing plan,” Calhoun says. “Initially, employees had been able to see the company value grow because of debt repayments. Now it’s just like when you own a house, you build up equity by paying off the mortgage. Well, our mortgage is paid off, so we now have to increase the value of the house. We’ve got to see how we can grow our top line revenue and our bottom line profits in a sustainable way that will increase our value.”

How it works is an ROA or a profit objective is set by the board, based on abilities. It runs on a continuous 12-month basis and is paid quarterly to the employees.

“Then based on a formula, whether you are at 100 percent of the goal or 125 percent of the goal, the employee gets one week’s pay. If you are at 90 percent, it’s 90 percent of one week’s pay. If you are at 150 percent, it’s 150 percent of one week’s pay. It’s been very effective.”

How to reach: Palmer-Donavin Manufacturing Co., (614) 486-9657 or www.palmerdonavin.com

Ron Calhoun

president and COO

Palmer-Donavin Manufacturing Co.

The Calhoun file

Born: West Lafayette, Ohio, just east of Coshocton

Education: Ohio University. I got a bachelor’s degree in business administration from the College of Business.

What was your first job?

For my very first job out of college, I was a bartender at Maumee River Yacht Club. I was able to network that into a sales representative position for the National Gypsum Co., selling drywall in the Columbus market.

What was the most important business advice you ever received?

My mentor and former company president Bob Woodward kept saying it’s the people who make the company and the company is nothing without the people. I think that’s so true. Also, without integrity and honesty, you have nothing. You have to have integrity and character in everything you do.

Who do you admire in business?

Outside of Bob Woodward, I think one person I admire most is probably John McConnell of Worthington Industries. Actually, my father retired from Worthington Industries. He had always been an hourly factory worker all his life and went through working on union organizations and went through strikes and closing of facilities. He got a job later in life with Worthington and retired there. He always respected Mr. McConnell. The policies and programs the company had for all their employees created quite a loyalty among the employees and allowed my father to retire. He is 85 today and is and doing well — I think it’s the culture that is built within an organization. I recently was fortunate enough to talk to one of the board members and get some insight as to how they did some things.

What is your definition of business success?

Business success is creating a vision that people can trust and fulfilling that vision where everyone prospers.

Published in Columbus

As a family business owner, you may dream of one day handing your company over to the next generation. But have you considered the role that your management team will play in the transition?

“There can be no successful transition if the success of the business is not maintained,” says Ricci M. Victorio, CSP, managing partner at Mosaic Family Business Center. “A key element is making sure that you have secured the talent that has made your business thrive. It’s not just the family that is vital to an organization’s success. You have to retain your key managers, the talented people who really make your business work.”

Smart Business spoke with Victorio about how to involve your management team in the transition of leadership.

What role should the management team play in a successful transition?

Your management team needs to be able to run your business if you are no longer there, for whatever reason, while the next generation is maturing and learning about the business. You have to consider the gap that exists between the current owners and the next generation.

The first step in the process of passing the business along is to lock in a vision of what you see for the business’s future, then communicate that to the executive managers so that everyone who makes that business successful can be enrolled in the vision. The managers then see that, yes, ownership is thinking about their future and that there is a place for them. This is a significant step toward retaining the key managers that are such an important asset to your business’s success. You don’t want them departing at your retirement, leaving the next generation starting from scratch.

What challenges does senior management face when a leader departs?

Many owners are hierarchical in the way they manage, in which case senior managers learn to respond to the owner telling them what to do. But then what happens when the owner is no longer there? Managers won’t feel comfortable turning to the 30-year-old son, who’s never been in charge of the business, to now make those decisions.

You have to create a learning curve and find ways to develop the management team so that the company won’t be crippled when the owner is to longer there to make those key decisions, and the next generation is not completely ready to take the reigns. With the proper planning, key managers will know their expanded roles and who should be making the decisions once the owner departs, letting everyone feel reassured that the company can keep going.

How can a coach help facilitate the process?

A coach can spend time with the management team while the owner is still there, and alongside the next generation that is being groomed, to teach them to work together as a leadership team. This process also gives everyone the opportunity to clarify the core values of the organization and get comfortable in the kinds of decisions they’ll need to make based on those values.

In many companies, managers have a close working relationship with the owner, but may not have that relationship with one another. A coach can help unbind them so tightly from the owner and get them to start working together as a collaborative team.

The coach also works with the owner and managers to develop a charter. Here, the owner can define the vision of the succession plan, the agenda for regular team meetings and the objectives of what everyone is going to hold each other accountable for during the process. Part of this process involves identifying areas that managers will be taking over, but where they may be struggling. Some examples include communication, problem-solving, mentoring, how to deal with controlling personalities, conflict resolution and how to better conduct employee review sessions to create a dialogue between the manager and direct reports.

By addressing these issues before management takes on new roles and responsibilities, a coach can make a difference in the quality of the business environment, morale and, ultimately, bottom line profitability.

What are the dangers of failing to plan for a transition?

A drop in productivity is inevitable if you haven’t planned for that transition. If the person at the helm isn’t prepared for his or her new role, employees will become confused about who is really in charge. When people aren’t sure about whom to talk to about the important decisions, soon, someone with a higher pay grade will take over to tell them what to do. But employees won’t necessarily trust that person.

In this kind of confusion and unclear leadership structure, it’s inevitable that conflict will ensue and key people will leave the company. To avoid that, you have to identify and prepare new leadership, and get everyone used to the transition before it happens.

By empowering your leadership team as a group, you’re not putting all of your hopes on one person, because that could create resentment throughout the rest of the group, as well as stress for that one person. Instead, you’re enlisting a collaborative team that can check on each other and hold each other accountable. That way, if one person gets sick or leaves the company, the business will not fall apart. And generally, you won’t have to worry as much about people leaving when you enroll them at this level of leadership.

Who doesn’t want to be acknowledged and empowered and really feel that they are making a difference at work? That is really what this process is about.

Ricci M. Victorio, CSP, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952.

Published in Northern California

Alot of business owners avoid the topic of business succession planning. They’re happy doing what they’re doing and life is good.

But what if something happens? What if the owner has a significant health event or dies? What if the family takes over when that was not the owner’s intention at all?

There can be a lot of strife and unnecessary financial loss without a plan in place. The owner knows the business better than anyone and should be the one who decides how to maximize its value after he or she is gone.

Many owners reason that they don’t have the time to develop a plan. However, it can be done in manageable steps.

“You can at least get started on defining your goals and then, through regularly scheduled meetings, craft the plan over the course of several years if need be,” says Chuck Kegler, director, Kegler, Brown, Hill & Ritter.

Smart Business asked Kegler for guidance on how owners can best navigate this process.

What is the starting point for business succession planning?

First you must come to the point of acceptance that you’re not going to be around forever, and that developing a plan is in your family’s best interests. Then you need to define your goals. There is no cookie cutter way to develop a plan. Goals, families and finances are all different, so therefore, each plan is different.

Also, there may be conflict among the goals — everyone wants to have their cake and eat it too, but that’s not always going to be the case. Owners can get very overwhelmed with the goal identification process. Anything their adviser can do to simplify the process — such as breaking down the goals into several categories — and keep the owner focused will help move the process along.

What happens after the goals have been identified?

The next step is to have a business valuation conducted by a third-party firm. How much is the business actually worth? Most owners don’t really know. Interview two or three investment bankers (brokers) and ask how they would go about selling your business. What do they think it’s worth? Brokers and investment bankers will often provide valuation estimates for no charge in hopes of being engaged to sell the business. Once you have a sense of a range of values you can work on the exit model — will you sell to an independent party, to family members or employees, or transfer the company to the next generation? How will your decision impact all of your other goals?

What are some of the most common roadblocks the owner will face during this process, and how does he or she overcome them?

The roadblocks will depend on the road taken. Even if you think it’s relatively straightforward (e.g., I’m transferring the business to my son), there are still many decisions to be made. Will this decision create conflict among the other siblings? How much money will they get, even those who don’t work in the business? Will any of this be gifted? Will your son pay you? How will your health care needs be provided for? What if you become disabled? Based on your goals and future needs, how much money will you actually need? Do you still want capital to invest in other opportunities in the future? Do you need some degree of certainty in terms of a guaranteed future income stream, such as an annuity? How would that decision impact your children at the time of your death? The answers to these questions may require you to refine your goals.

Owners who want to sell have other issues to consider. Unless an owner has health problems, is overly stressed, or just wants to get rid of the business, it may be decided that he or she ‘can’t afford’ to sell. Perhaps the proceeds from the sale will not enable the owner to maintain the lifestyle to which he or she is accustomed. On the other hand, if the most important goal is, ‘I need more time for my personal life,’ the owner might come to the conclusion that, ‘yes, this will be a different life than I am used to, but I can do this.’

What are some key considerations for structuring a plan that minimizes exposure to taxation?

There are two primary taxes to think about. First, if you’re selling, how do you minimize the income tax side? The goal is to pay one level of tax at the capital gains tax rate. Next, there are the gift and estate taxes. The $5 million ($10 million for married couples) exemption has been extended through 2011 and 2012, so many owners think the financial pressure involved with making estate planning decisions is off. However, that’s temporary — we don’t know what’s going to happen Jan. 1, 2013. Even the least informed members of Congress understand that we have a significant deficit and that an easy way to reduce some of that deficit is to go back to the $1 million/55 percent exemption. If this happens, it will once again change the estate planning ball game.

Chuck KEgler is a director, as well as chair of the business and tax and estate planning areas, at Kegler, Brown, Hill & Ritter. Reach him at (614) 462-5446 or ckegler@keglerbrown.com.

Published in Columbus

Bringing children into a family business, if not done correctly, can cause undue stress upon the family and negatively impact the business.

“Parents may wonder if their child will have what it takes to be their successor, worry about creating a sense of entitlement or be concerned that company managers may resent having to train a family member who might take their job in the future,” says Ricci M. Victorio, CSP, managing partner at Mosaic Family Business Center.

“Any time you mix family and business, you are going to be challenged,” Victorio says. “Family is all about unconditional love and acceptance. Business is all about results and productivity. The challenge is to define your expectations for your children at work so you can protect your relationships at home.”

Smart Business spoke with Victorio about how to successfully bring your children into your business without risking family harmony or business success.

When should a child ideally enter the family business?

We usually recommend family members work outside the business at least two to five years in an industry-related field, other than for part-time or summer jobs. If he or she has gained experience and had success on his or her own elsewhere, making the transition from scholastic to professional life will help avoid the stigma of also being the ‘boss’s kid.’ Doing so will give children a chance to prove themselves professionally and allow them to contribute new insights to the company, and they will have earned the right to be there with the other employees.

What are the first steps for bringing a child into a family business?

A succession professional with experience facilitating and integrating family members into family-owned companies can help structure this process. The consulting adviser will want to first interview the parents to get a clear understanding of their respective objectives and perceived obstacles. Next, one-on-one interviews with family members and key managers should be conducted to discuss their goals, expectations, education and work-related experiences. Even high school students can benefit in knowing what they need to do to be prepared, what skill sets and education they need and what requirements they will be expected to fulfill if they want to be considered qualified for a future leadership role in the family business.

The management team will provide perspective on the family goals of bringing young members into the company, the current strengths and opportunities within the team and how the family currently interacts in the business, and provide insight for developing interested and qualified family members.

As part of the interview process, we have found that profiling personality styles is very useful to gain an understanding of the potential strengths and challenges within the family and business team dynamic.

How important is it to find the right position for a child entering the family’s business?

Whether it is your child or someone you hired off the street, you want to do everything you can to ensure a good fit between the new employee’s personality and skills and the demands and characteristics of the job. Parents typically make one of two mistakes. First, they think their child should be just like them and can’t understand why they’re not, creating frustration on both sides. Or, they sometimes demand too much of their children, all too often causing them to quit, fail or give up.

Failing to match individuals with the right entry position and not providing a helpful training program to give them the skills they need usually undermines success and will strain family and business relationships.

How do you get the buy-in of managers?

Your management team is the leadership bridge to the next generation. Let them know they are critical to building the success of the business, with or without you. Match the right manager to mentor each family member to provide optimum opportunities to have positive experiences together. And never manage your own child if there is any way to avoid it.

How can families balance working together without damaging family relationships?

Draw up an agreement of expectations detailing how you want everyone to work together. Create mentor teams with executive managers and a development plan for how each family member is going to progress and learn the business. Unmet expectations will poison a golden opportunity, so it is vital to communicate what is expected of all involved. Having an experienced facilitator to help with this is essential.

Why do we need an outside adviser to facilitate?

Your succession adviser can raise issues you can’t and help you to have the honest discussions that very few families have the skills and experience to do on their own. A good facilitator will be able to get everyone together to communicate their expectations and help untangle the issues that inevitably tie families up into knots. An outside adviser offers objectivity and fairness to all parties, and will help avoid the predictable traps and pitfalls of family conversations.

What if you don’t think your child would be a good fit for the business?

Keep in mind that family and business are two separate entities. Not every child is suited to work in their family’s business and a bad experience can stress family relationships beyond repair. Most parents are very concerned about doing the right thing by their kids as well as needing to protect the success of the family enterprise. Ultimately, you may have to decide whether or not the adage is true that, ‘there is no business gain worth a family loss.’

Ricci M. Victorio, CSP, is managing partner at Mosaic Family Business Center. Reach her at (415) 788- 1952.

Published in Northern California