Plan for Transitions in the Family Business

Posted by: Rod Kurtz on November 1, 2005

Psychologists have observed that normal life transitions (i.e. birth of a baby, divorce, serious illness, loss of a loved one, etc.) often create personal and/or relationship crises. People who work in and own family businesses aren’t immune from these sorts of transitions. In fact, 85% of family business crises revolve around the issues of transition.

When we think of family businesses, we normally think of transition in two ways. The first is intergenerational transition, which refers to the passing of the torch from the senior generation to a junior one. It may involve a gradual handoff of day-to-day management responsibilities, and it may be further formalized by a gradual ownership handoff. The most common reason for crisis at the time of intergenerational transition is the reluctance on the part of the senior generation to truly let go of management and ownership responsibilities and entrust them to the junior family members or managers.

The second type of transition crisis is intragenerational transition. This can take the form of diverging views among siblings on the future direction of the business or disagreement over the need for structure, formalization, and professionalization of the enterprise.

This type of crisis is becoming more common and is perhaps more prevalent than intergenerational crisis because of the lack of a clearly defined hierarchy. For example, mothers and fathers have well-established moral authority that simply goes with being a parent. There’s no such clearly defined authority among siblings, who, after all, were treated as equals within the family.

Flash points of crisis are predictable and treatable when viewed in the context of intergenerational or intragenerational transition.

Wayne Rivers
President, The Family Business Institute
Raleigh, N.C.

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