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Letting Go helps family business owners and CEOs make the decision to begin succession planning. It provides new ways of thinking about giving up control of the family business and explores practical strategies for preparing, managing, and carrying out the decision to do so.
About the Author
Craig E. Aronoff is Co-founder, Principal Consultant, and Chairman of the Board of the Family Business Consulting Group, Inc., the founder of the Cox Family Enterprise Center and current Professor Emeritus at Kennesaw State University. He invented and implemented the membership-based, professional-service-provider sponsored Family Business Forum, which has served as a model of family business education for universities world-wide.
Read an Excerpt
Preparing Yourself to Relinquish Control of the Family Business
By Craig E. Aronoff
Palgrave MacmillanCopyright © 2011 Family Business Consulting Group
All rights reserved.
The Inner Process of Letting Go
When I was a young consultant and family business leaders asked me for advice on succession planning, I would be very clear on one particular point: "You need to set a date for your retirement, and you need to stick to it." It didn't take me long to realize that I wouldn't have many clients left if I insisted on that idea. While I still think it's good advice, I learned that it didn't fit with a tremendous number of family businesses. And because it didn't, I found that the notion essential to succession, that the incumbent leader will leave the business so that the next generation can take over, needed to be approached in a different way.
"Letting go," means relinquishing control and leadership of a family business, and it is one of the most emotionally difficult experiences of a CEO's life. Few family business owners readily embrace the idea of not being in the position of leadership anymore—with its attendant perks of feeling that one is doing something meaningful, powerful, with prestige in the community and respect from family members. But letting go will occur one way or another. Some business leaders "die with their boots on," staying in power until even their children have retired. Others, are laid low by circumstances—unexpected death, disability, bankruptcy, criminal prosecution and imprisonment, or divorce—not circumstances one would chose as the means of leadership transition. Others are forced out by their boards or their families, often under bitter circumstances. Still others follow a more elegant course, planning years ahead for an orderly transition and mapping out an active, meaningful life for the years after retirement from the family business.
Research shows that about 11 percent of incumbent family business leaders say they will never retire and about 23 percent say they will "semi-retire." That means that a third of all family business leaders aren't going anywhere—they expect to stay in the business.
While my bias is for letting go gracefully, I also believe with all my heart in your right, as a family business owner and CEO, to choose. You can hang on, or you can plan your exit. It's your business, and you should be able to do as you please with it.
Whatever path you choose, you must do it responsibly. And that's what this book is all about, helping you make the choice and then implementing it in a way that benefits the business and the family and that gives you satisfaction.
In many respects, this book is a "prequel" to Family Business Succession: The Final Test of Greatness. While the earlier book tells you how to plan and manage succession, this book is focused on making yourself ready to do succession planning. It's the preparation here that counts. Planning is relatively easy when the incumbent leader is prepared and virtually impossible when he or she is not.
I see "preparation" as an internal process, one that equips you mentally, emotionally, and perhaps even spiritually for the task ahead—much like a great athlete prepares for a crucial game or race. We'll look at the process from a number of perspectives, but the key is to begin to understand the extent to which you and your business are separate entities. In my experience, the greatest difficulties occur when there is a total lack of separation between the individual and the business. Very often, a leader has made an enormous investment in the business in terms of emotion, time, money, thought, and energy, and his or her identity has become rooted in the enterprise. This is true not only of first-generation leaders who started and built the business but also of second- and third-generation CEOs, who see themselves as stewards responsible for a vital legacy. It is valuable, early on, to understand that you and your organization are separate from each other.
Family business leaders tend not to see retirement as part of a normal career cycle. They are unlike those entrepreneurs who develop an exit strategy as soon as they've started a business. For those who won't let go, life without the business is not something they want to think about. And yet, the single most important factor in the successful transition of a family business to the next generation is the attitude of the person who is sitting in the CEO's chair. If you are that person, that transition depends on you.
This book has been written for you, the incumbent leader. One of its chief goals is to help you become more comfortable with whatever decisions you make about letting go. Just as important, it should enhance your ability to open up dialogues that need to take place with others (and with yourself) about the issues of letting go. It will also help you acquire greater skill in managing the transition process, whether you decide to retire or to stay on as CEO.
Others can benefit from this book as well—your spouse, your sons and daughters, your board of directors, and key non-family members. All are involved in encouraging the generational transition. By better understanding the issues and concerns you face, they can be more supportive in helping you make your way through the inner process of letting go. With increased knowledge, they may gain the courage it takes to engage in the dialogues that are necessary to effective planning.
Succession and retirement are a part of letting go, but effective letting go begins long before these events take place. While you won't find a step-by-step "to do" list in this book, you will gain some new ways of thinking about letting go. You will also encounter some practical ideas and strategies for carrying out the decisions you make. And perhaps most exciting, you can expect to discover some new insights about yourself.CHAPTER 2
You Don't "Have" to Retire (but Is Hanging On Worth the Price?)
"This is my business," insists Arnold, the 75-year-old founder and CEO of a family-owned manufacturing company. "I love running it, why should I quit?"
If you're one of those family business leaders who say they're never going to retire, that's okay. You've got lots of company. Like other CEOs, you've devoted your career and the best part of your life to building and sustaining your enterprise—and you've done it for the sake of your family. Running a family-owned company is such an intense experience and so consuming that the business may seem like a beloved child to you. It may have become such an obsession to you that leaving it may seem akin to dying.
But even if you think you've made a firm decision never to retire, maybe it's a decision worth re-examining from time to time. Just as we said you have the right to do what you want with your business, you also have the right to change your mind about not retiring. Along with those rights comes the obligation of communicating with family members and others involved, letting them know where you are in your thinking and giving them an opportunity to discuss it with you. Constant communication over time is essential to the letting-go process, whatever direction it takes.
Arnold, the CEO mentioned above has a son and a daughter working in the business. They are both in their 40s, and each is capable of running the company, but they have finally come to accept the fact that Dad won't let go. While Arnold has tremendous passion for the business, his children have learned to distance themselves psychologically while fulfilling their job responsibilities in the firm. After all, why should they invest themselves so fiercely in the business without being able to affect its direction? They do their jobs competently, but more and more, they have come to regard the business as a financial asset rather than a family legacy. They see it as Dad's toy, and when he can no longer play with it, who knows what will become of it? Arnold's children no longer have a strong emotional stake in keeping it in the family. When Dad is gone, they will probably sell.
Sometimes hanging on is a necessity. There may be no one in the family available to take over, or the anointed successor dies prematurely or becomes incapacitated. An incumbent CEO who can stay on or step back in from retirement for a short period can offer stability to a family firm under unfortunate circumstances. But such situations do suggest that the incumbent has not faced the need to groom a non-family successor on a timely basis, or that depth of management has not been sufficiently developed so that someone is available to step in if the first choice of successor cannot do so.
The hazards of hanging on far outweigh letting go. Here are three major ones:
Your adult children become frustrated and bored. They feel that they have energies and ideas that are being wasted because they can't be applied. Because they need a challenge, the most competent offspring may leave the business that you say you so much want them to inherit. The least competent will stay because they have no other option.
Your children become angry and may even become alienated from you. Still under your thumb, they feel they're not treated as adults and that they're still being told what to do by their parents.
Your business begins to suffer. Deprived of the full range of knowledge and skills that your children may have to offer, strategies stagnate and performance erodes. The younger generation, after all, is more in touch with changing trends, developing markets, and shifts in technologies than the older generation is.
WE CAN'T ALL BE RALPH AND BRIAN
Occasionally, business leaders are so energetic and capable that they can make incredible contributions to the family company until well into their 80s or beyond. Ralph Roberts, the cofounder of Comcast Corp., is such a leader. At 82, he played a huge supportive role to his son, Brian, in Comcast's 2002 acquisition of AT&T Broadband, which made Comcast the biggest cable company in the world. Brian, at 43, became chief executive officer, and his father is chairman of the executive committee of the board of directors.
This father and son have a remarkable partnership, in large part because they have exceptional admiration and respect for each other and because Ralph has been able to let go. Brian was named president of Comcast in 1990, when he was 30. Eight years later, Ralph transferred most of the voting stock to Brian.
The Philadelphia Inquirer called the Robertses a "storybook father-and-son business team." One observer said their partnership was "one of the most unusual relationships I've seen. I think they are equal in their respect for each other." Following the acquisition of AT&T's cable division, Brian said, "Ralph is still my most trusted confidante, adviser, mentor and partner."
But most of us aren't like Brian and Ralph Roberts. Not many of us have Ralph's willingness to hand over control, and very few of us beyond our 60s have his stamina and brainpower. And few of us are like Brian, a brilliant son born relatively late in his father's life, one who reveres his legendary parent but who is also strong enough and smart enough to work with him as an equal.
WHY AREN'T YOU LETTING GO?
The reality is that most CEOs of family businesses need to ask themselves just why it is they intend to hang on. What keeps them from letting go? A business owner may state some reasons on a conscious level and be very sincere about them. Underneath the surface, however, there may be other reasons that he or she has been unable or unwilling to articulate, or that may even be unrecognized.
Below are reasons that business owners give for not letting go, as well as reasons that family business consultants perceive. Examining them and considering which apply to you should be helpful in considering the extent to which you can separate your identity from the business and see each as a different entity.
"I'm having such a great time!" Business leaders who make this declaration really mean that they don't know what they would do with themselves if they retire. They haven't figured out ways of having fun or finding meaning in life outside the business. And while they may indeed be enjoying themselves, it is likely that they are obstructing an orderly transition of the business to the next generation.
"I can't afford to retire." In the case of certain small businesses, this may actually be true. The business owner needs to continue to work in order to live. But many times, this statement does not reflect reality. Despite having built more than adequate wealth, they still feel financially insecure, or perhaps, the business owner considers the business's financial security more important than his own and will not take resources from the business to afford a comfortable retirement. More about this later.
"This business would be nothing without me." From the perspective of the organization, if there's no successor, there's something wrong. That may not be an issue for the business owner who has essentially built and developed a company in response to his own desires, needs, or beliefs about what needs to be done. His view may be: "This is my business, and whatever's left is for my family to deal with." But, in my view, the owner who does not tend to the needs of the organization is not creating a business. He or she is just self-employed with a lot of helpers. I've worked with such circumstances where the "helpers" ran into the hundreds. With such individuals, there is no sense that "I am creating something to last beyond myself." And when they say, "Without me, this is nothing," they are, sadly, absolutely right.
"What will I be without the business?" While a business owner may have convinced himself that the business will be nothing without him, he may also worry more quietly that he will be nothing without the business. He fears losing power, losing prestige in the community, losing the friends and connections that the business affords him, and even losing the respect of his family.
"I have no successor." As suggested above, this can be a legitimate reason for staying on when a successor is suddenly not available as a result of death or disability (or because he changed his mind). This reason can buy time for the incumbent CEO to do what needs to be done to find the management needed to carry on the business. Unfortunately, this is too often an excuse by CEOs whose motive is not to find new leadership but to hang on.
"I want to stay in control of the kids." This is not a reason that a CEO is likely to admit. Entrepreneurs characteristically have a propensity toward control. It helps them do what they do as business creators and builders. But when they try to control their adult children by maintaining control of the business, particularly if it is for his or her own ends and desires, it becomes a serious problem. Some owners disguise this dark desire by saying they're worried their children won't get along without the parent still at the helm.
"I'll die if I retire!" This statement is a favorite of older incumbents. They'll tell you about all the people they know who have retired and died within six months. What they don't tell you is the people they know who have retired and are still alive and well and happy. This comment suggests that the CEO feels he is engaged in an activity that is life-sustaining and that preserves his identity.
"I need to look out for my loyal non-family executives." Family business CEOs commonly have fears about what will happen to their longtime, non-family managers once succession takes place. "These people have taken care of us, and we need to take care of them," many leaders say.
Business owners and the non-family executives often share a significant amount of mutual loyalty. In many cases, they have grown old together. The incumbent leader may worry that if she retires and names a son or daughter as the successor, good non-family executives may get upset at being skipped over. They might leave out of frustration or because they don't want to work for "the kid." Or the founder may be concerned that although the non-family managers worked well with her, they might not work well with the next generation.
Still another concern, in cases where the incumbent leader and his management team have grown old together, is that they all will retire at the same time, making it difficult for the next leader to maintain the business. Instead of planning for such an eventuality, the leader hangs on.
"This business is my life!" The hidden meaning here, perhaps inexpressible for the CEO, is that leaving the business means going home to a marriage that can't survive with both spouses in the house. A number of CEOs throw themselves into their work because they lack other satisfactions in life—including from their spouse and family. They become passionately devoted to their business, and it becomes their "mistress." Retirement will have serious consequences on other parts of a CEO's life. In some cases, it can result in such a traumatic shock to the marital system that the CEOs marriage does not survive. CEOs who recognize this as their own situation may keep on working because they don't want to face the probability of a divorce. This sadness and loneliness can be reality to some. The fortunate CEO recognizes such potential difficulties early in life and seeks help from a marriage and family therapist. Such problems are beyond the scope of this book, but if the prospect of your marriage collapsing is preventing you from implementing a succession in your business, you may want to consider seeing a counselor.
Another complicating factor is that entrepreneurs tend to be fundamentally insecure. On the plus side, their insecurity makes them vigilant. It keeps them working hard and makes them take their responsibilities very seriously. It gives them the drive to succeed. On the other hand, however, it renders them perpetually worried about the status of their organization and what might happen tomorrow. It feeds their anxieties, and the anxieties, in turn, provide fodder for not letting go when letting go is the best way to go.
WHAT'S HOLDING YOU BACK?
Many CEOs really do want to hand the business over to the next generation but just don't know how to go about it. If you are one of them, please see Family Business Succession: The Final Test of Greatness. The first book in the Family Business Leadership Series is a step-by-step guide to planning and managing succession.
Excerpted from Letting Go by Craig E. Aronoff. Copyright © 2011 Family Business Consulting Group. Excerpted by permission of Palgrave Macmillan.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of ContentsIntroduction: The Inner Process of Letting Go
You Don't 'Have' to Retire (But Is Hanging On Worth the Price?)
Whose Decision Is It Anyway?
Taking People Hostage
Make It Easy on Yourself
The Supporting Cast
Exit Laughing: Creating a Meaningful Life in Retirement
The Post-CEO Role
What if Your Choose to Hang On?
Notes and Bibliography