Although an uncomfortable subject, it is reasonably predictable that some of us will outlive our brain. Advances in medical science have increased the likelihood of beating cancer and the likelihood that more of us will experience some degree of incompetence prior to death. Incompetence will be preceded by a transition with good days and bad days until at some point there will be confirmation that we are not able to manage our affairs. In a classic retirement environment this is no big deal. However in the family business realm where founders and subsequent successors commonly stay engaged well into their late 70’s and early 80’s because they are either addicted to the culture or they are an integral component of the success formula. In light of the difficulty self assessing competency and the emotions associated with telling a love one that they are losing their marbles, Marginal Competency represents a significant challenge to both the business mission and family harmony.

We have previously discussed a possible course of action in the event you discover that you are up to your arm pits in this unfortunate dilemma.  Let’s now consider how you could preemptively address this potential issue and avoid the business gaffs and family fireworks.

The first step is awareness. If the leader of your business is over 65 years old, you are vulnerable. If the leader of your business is 55 years old and you have not discussed an exit strategy and more specifically a successor leader you are vulnerable. 

The second step is communication. You or a trusted adviser in a group environment should bring up the subject of succession in the event of death or disability. This is generally an easy way to get the ball rolling but if not, continue to focus first on initiating succession discussions on the more black and white subject of death. As the discussion moves forward ask the question in the presence of the lucid and responsible leader (father, uncle, sibling) “what are we to do if you become Marginally Incompetent?”  No doubt discussion will ensue as to the definition which is all together healthy. Hopefully you will get a substantive answer, but more than likely you will initially be ignored or stonewalled with a “you don’t need to worry about that.” In such case, don’t get offended.

The third step is collaboration; solicit support from other same generation family colleagues and those who could be negatively impacted with the Marginal Competency Dilemma. Remember, success on sensitive subjects comes from strength in numbers. Keep in mind that the goal is to create awareness and over time take substantive action. Under the heading of action, suggest that the group request the business attorney give ideas about the legal structures that can be used to protect your family and business from the Marginal Competency Dilemma.  

The fourth and final step to reconciling the Marginal Competency Dilemma, is persistence over time. Relentlessly keep the sensitive subject part of the succession agenda. If you don’t develop a substantive plan, at least you will not be caught by surprise.

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