Over the course of the last decade in working with family-owned companies, I cannot tell you how many times I have heard horror stories of family successors driving their family’s business into the ground. Often times, it is our clients’ fear of this happening in their own businesses that motivates them to hire us in the hopes that we can help prevent this tragedy. In spite of situations that I  have been involved in where, after some time, I begin to share the business owner’s concerns, I maintain hope that I can be helpful in creating solutions to avoid this disastrous downfall.

Faulty assumptions are a major reason for unsuccessful successors.  An entitlement mentality from the “heir to the throne,” is often the kryptonite to the ongoing success for a family business.  This is especially true in businesses that are being operated by non-family managers or producers.

A few subtleties of those with an entitlement attitude include a lack of experience-based knowledge of what the non-family managers do on a daily basis, a lack of understanding of what it takes to drive profitability to the bottom line, and a lack of respect for the people who are making it happen.  The lack of these important elements prevents the successor from gaining credibility and respect from those who have the experience. 

When a sense of entitlement and its underlying assumptions are allowed to fester unabated, the people who are making it happen in the business (that is, those who are generating revenue) are often not recognized by the successor as being integral to the future success of the business. In most of these instances, there is an assumption that the loyalty these people have shown toward the senior owner will be transferred to the next generation without question. However, unfortunately this is generally not the case.  I was reminded of this recently when the President of Operations of a client’s company remarked, “Eight seconds after the boss is gone…I’m gone. There is no way I’m working for his kid.”

Successor candidates sometimes need to swallow their pride, humble themselves, and recognize that the family’s business has been built upon the shoulders and backs of non-family managers and employees. When they display misguided arrogance in an attempt to gain respect and to make up for their lack of the things mentioned above, they undermine their own objectives and further alienate those they are dependent upon. This leaves them with slim chances of maintaining a profitable business when dad is gone. 

How would you evaluate your successor candidate’s attitude toward your key people?

While my past two postings have may have cast a negative light on family successors, my next blog, “$3 Million to the Bottom Line is All I Expect,” takes a look at the other side of the story and examines the unfair expectations that can sometimes be put upon successors.

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