The Family Business: Surviving Succession
Handing the company to the next generation can be tricky. The cold perspective of a consultant can help
Succession in a family business doesn't have to create a crisis, but far too often it does. I know a father who fired his daughter and sold the company, only to have the daughter sue him. I know of several elderly founders who simply can't cede control to their kids. I have accumulated more than enough evidence to understand that mixing business and family can be lethal.
Yet here I am, working every day at Emerald Packaging with my brother, Jim, my sister, Maura, and my father, Jim Sr. And Mom, Rosaleen, sits on the board. This could be a recipe for disaster. So far, happily, it hasn't been, despite my father's threats to ''leave the business to the cat'' when things don't go his way. A history of solid relations has spared us the deep-seated antagonisms that often immolate family businesses. Our shared sense of humor, laced with irony and self-deprecation, gets us through tense meetings. And a well-drawn division of labor--I handle operations; my brother, sales; and my sister, customer service--taps our strengths and prevents squabbling.
THE BIG QUESTION. Still, when my father lobbed the big question last year of how we wanted to organize ourselves as he moves toward retirement, no one knew how to proceed. It's true: Succession is one of the toughest questions for a family business. In our case, we were shifting from first to second generation just as our major market was undergoing big changes. Most of our plastic packaging is sold to the produce industry. But over the years, our clients have switched from packaging whole vegetables to slicing and dicing them so they're ready to eat. That has led to demands for snappier packaging--and thus to demands for investment in new machinery. So we have had to ask ourselves how much to spend on new equipment--a printing press costs between $2.5 million and $4 million. And how would we organize ourselves?
We all had different answers. I favored a more aggressive path that would take us into new packaging, in areas such as snack food. I wanted a corporate structure in which power was shared, recognizing our roles as equal partners. My brother wanted us to focus more on our current markets, and given his seniority, wanted to set the agenda. My sister cared less which markets to pursue but was very concerned about her position. She didn't want to be overshadowed by her two brothers, and she wanted a bigger role in sales.
Needing guidance, we sought outside help early last year. Fortunately, because hundreds of thousands of family-owned businesses are going through similar trials, there's a ready pool of consultants. Our search ended with Judy Barber, a psychologist based in nearby Napa, Calif., and her partner, Peter Sammond, an accountant out of Minneapolis. We figured they would give us the insight we needed to confront the emotional questions around succession while also providing some business acumen as we planned for the future. So far, at four meetings at a Radisson Hotel conference room, we've put together a five-year plan, as well as hashed through issues about how we communicate. One outcome: I've learned to control my temper when people make mistakes.
One year later, we have come a long way. We have decided what capital outlays we can afford and started to focus on new markets. The process has helped the three of us define just how big the business should be. We have had our difficult moments, but we're all pretty excited about the future. We've agreed to run the business as partners, collaborating on major decisions. As my father reduces his stake, we will remain equal shareholders.
Of course, there's still plenty of conflict. My brother and I, for instance, still don't see eye-to-eye on exactly what kind of equipment to buy. But we know we can talk out our differences. And after all this work, I know none of us wants Koko the cat to get the business.
By Kevin Kelly
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