Successful family businesses have within them both the ability to live and the ability to die. According to global research, almost 90% of family businesses will not make it to the third generation. In Nigeria, it is hard to find a thriving three-generation family business. This means that your seemingly successful and thriving business today may be dead by January 2109.
Exactly three generations from now. The reason for this massive death of family businesses is the lack of a timely, well-planned and well-documented succession plan. According to the survey by PricewaterhouseCoopers 2014, only 16 percent of family businesses have a documented succession plan. Having no succession plan in place is a plan in itself and this plan is inevitably death. If your Business has no succession plan, it is already dying. It is up to you to stop death from happening to your business now.
If you were Methuselah, the oldest person on record in human history who died at the age of 969, you would live longer than three generations. That saving your business from the three generations’ death sentence will not be a problem. But unlike Methuselah, you and the whole of humanity as we know it today has a significantly shorter life span. Research shows that the average life expectancy for men is 68 years and 4 months and for women is 72 years and 8 months. This means that your time here will soon be over. When it eventually does, how would your business thrive without you? Would your wealth be spared like the wealth of John D. Rockefeller or would it be murdered like the wealth of Cornelius Vanderbilt?
Preserving family businesses across many generations is no small feat. It takes time, attention and certain skills to preserve family businesses. These skills are different from the skills that sustain businesses within one generation. While building a successful family business requires effort, determination and the resilience of the business leader. Preserving the same business across multiple generations requires the collaboration of siblings and cousins. It also requires the alignment of two generations. That is the outgoing older generation and the incoming younger generation.
This makes wealth preservation the most difficult job in the world. Wealth preservation is difficult because it involves the collaboration of a larger number of people. It requires the decentralization of power and the unifying of purpose. As family businesses move from the sibling’s generation (second generation) to the cousin’s generation (third Generation), difference in opinions ensue, decision making becomes harder and leadership becomes complicated. For a family to work together on a long-term basis certain skills are required. Without these skills, the lifespan of a business is already determined.
So what can Business leaders do to reverse the hands of death and position their businesses for long-term success?
The answer is simple and it is two faceted.
First, family business leaders must treat succession as a top priority. That is they must create the future they hope to see today. If business leaders who sacrificed time and resources to build their businesses will not plan for succession, successors won’t plan either. Succession requires time and business leaders who want to preserve their businesses must start planning now. Sometimes business leaders delay succession for personal reasons. Other times they delay succession for reasons that are linked to successors. Personal reasons involve the fear of vulnerability and the change required for succession to be successful. Living in denial of one’s mortality and having the wrong perspective of time and leadership. Every new goal demands vulnerability and change to achieve it and business leaders must be ready to make these changes. Business leaders must also accept the fragility of life and adjust their perspective of time and leadership.
Leadership is only successful when a leader has a successor. If business leaders have a positive view of time, accept their mortality and see value in continuity of their businesses. They will plan for succession long before their time is up. Successor’s related reasons for delaying succession include the absence of an interested bloodline successor, a lack of confidence in the ability of a successor and a lack of alignment between successors and business leaders. To solve successor related problems.
Business leaders must get help to understand why successors lack interest and what they may do. Business leaders must also articulate the criteria for the successor that will take over from them. They must understand how they judge competence and how they come to trust the ability of a successor. Successors, on the other hand, must know exactly how they can earn the trust of the business leader. They must also build internal confidence and fulfill their career goals.
Second, business leaders must manage their need for control with their need to build lasting legacies. The longer a business leader remains in position in a family business, the lesser the chances of success for a successor. Remaining in a leadership position for far too long set the wrong example for the next generation. It also keeps the business stuck in the present generation rather than prepare it for future generations. If business leaders must succeed in keeping their businesses relevant in the future, they must redesign their businesses. Redesigning family businesses involve understanding today how to make a business relevant to future consumers.
Business leaders can leverage on their relationship with successors to understand the likely needs of future consumers. They must align with successors to align with the next generation customers. To align and prepare for succession, business leaders and successors must gradually shift base through a series of organized role adjustment. Business leaders must move from sole operators or monarchs having preeminent powers over their businesses to overseer-delegator, from where they finally must transition to consultant or mentor who is disengaged from the business. At the same time, successors must progress from having no role in the business to being a helper to a manager, (under the monitoring of the overseer-delegator) and finally, leader/chief decision-maker (when the owner is disengaged from the business. Successors must also be weaned from the founder’s direct micro-managing. Thus, in a carefully planned succession, both business leaders and successors simultaneously advance through these stages to maintain a healthy relationship, build trust and enhance confidence.
If family businesses must survive the three-generation death sentence, it must tackle and not dodge the issue of succession. Business leaders must set clear examples, lay solid foundations and align with the consumers of the future. They must also relinquish control at the right time in favor of building lasting legacies. This is the only way for business leaders to become multigenerational wealth heroes. And ensure the financial security of their families for many generations.
Updated Bio-Kindly Update my bio please.
Grace Agada is a Generational Wealth Advisor, Legacy Expert, and Author of the popular Solid Wealth Book. She is a Celebrity advisor to an exclusive list of top executives and entrepreneurial clients running Businesses from $1-million to $1 billion in size. Grace helps Successful Business Owners build lasting Business legacies. Preserve the financial security of their families. Align with the next generation and help the next generation build confidence and earn the respect to lead family businesses to new heights.