Closing the great family business succession gap

In what has become no less than a family business endemic, some 50% of small to mid-sized business owners in North America report having no current plan for succession. This promises to perpetuate the unfortunate incidence of catastrophic value losses for many family businesses. And since family businesses have been responsible for 85% of all U.S. jobs created from 2000 onward, it could also be devastating for the entire U.S. economy. Business founders are implored to just let it go—to relinquish their clutch on the reins of power. They are also urged to professionalize and prepare the management ranks for the handoff. And they are warned of the risks and burdens that spouses may come to bear should calamity befall them. Yet, statistics show that these exhortations don’t seem to move the needle when it comes to prompting founders into right action. Notwithstanding their tenacious grip, some 88% of business owners—the most committed of whom are now studying Family Business at Hult—say they foresee their families carrying on the business five years and more downstream, as reported by the Family Business Institute. Some 88% of business owners say they foresee their families carrying on the business five years downstream. Falling into the reality gap In the chasm between these high expectations and the absence of a plan we trip and fall into the reality gap—the underlying cause for the prevailing succession gap. But the gaps don’t stop here.  The reality gap is a byproduct of the I’m-not-sure-what-to-do gap. Aren’t we all too familiar with that one? It’s the gap that suspends action. The one that leaves us stuck. And because matters of succession entangle the personal and emotional sides of family life with the operational and financial sides of the family business, yet another gap widens from deep within—the one at the core of all stuck-ness in the world. That is,  the I-don’t-want-to-talk-about-it gap. If a business founder is anxious about what life would be like after a transfer of power, or has doubts about the readiness (or appreciation) of the next generation, or is just plain vexed about the business in general but has somehow always managed to see it through by themselves, the compound chain of gaps can be disabling. And national statistics will continue to foreshadow the tale of those  unable or unwilling to act. If a business founder is anxious about what life would be like after a transfer of power,  the compound chain of gaps can be disabling. So when seasoned owners are urged to take immediate action, to name that successor, to put down the phone and back away from the big desk chair, and put a transition plan in motion, these demands appear before them like a mountain of emotional toil and risk. Suspended by the mountain, they become the 50%ers noted above—with business continuity threatened, and with family wealth exposed to a single stroke of bad luck. And the committed â€Å"next-gens,† like the Hult graduate students who are currently studying the art and science of Family Business, are the future leaders we risk never knowing. An indirect and gentler way to help business owners get unstuck Are present business founders and leaders to blame for their immobilization? After all, aren’t these the kind of people who start businesses, cope with uncertainty, and overcome obstacles? Or might we be wiser to put the onus on the same old solutions imposed upon them, and apply a different tack? Considering a less resistant path, we might ask:  What are business owners able to talk about with emotional ease?  Answer: The business. And:  What do business owners know how to do, in order to move the business forward?  Take planned, incremental, action. Finally: What do business owners readily seek when they need to take action?  Information. Altogether, this begs one big question for business advisers, like those of us at Newport Board Group who serve these owners:  Why not apply the insights that gap theory reveals and offer a path of least resistance that leverages all three? The unemotional, the actionable, and the informational. What follows are suggestions for how we might pave an un-stuck pathway to generating properly planned successions. Successions that prepare for unforeseen calamity, that keep the family moving conversationally in the direction of power-transfer readiness, that preserve hard-earned wealth, and that keep the business vital in continued service to the world. Our gap-closing algorithm: 1. Keep it out of the emotional cauldron Rather than prematurely name a successor, why not name a placeholder until a successor is ready? Who could the owner rely on to execute a set of pre-registered instructions for what to do with the business should the owner be separated from the action due to illness, death, or come-what-may?  Respected allies, business partners, long-standing board members are all viable options to consider for the interim executor. Would this not aid in fostering more patient and unemotional conversations with offspring or with wider members of the family as to who might be next, and what they may need to do to be ready? 2. Take small action in the direction of bigger action What would be the owner/leader’s instructions for the business should the worst occur? Sale or exit? Continue on? How would vendors, customers, and employees be informed and kept engaged? What is the 2-3 year vision for the business, based on current performance and the plans that are in place? Working with someone to produce this set of contingencies can make hills out of mountains, and be freeing and comforting for the leader of any family business. 3. Gather information about the business, and keep it coming What would someone with temporary executive custodianship need to know about the business to perform his or her assigned task? How could that knowledge be kept up-to-date until such time as a permanent successor is ready to be put in place? How might this objectively collected information also serve those who run the business today—and crisp up targets for tomorrow? Make information the enabler it can be for tomorrow’s business—today. In summary, the three keys to closing the great family business succession gap and for treating—less confrontationally—all the gaps that serve to block the path forward are: De-emotionalize the succession matter Take incremental action, not mountain-sized leaps Make information the enabler it can be for tomorrow’s business—today Business-focused, incremental, and informed actions  serve to free owners from being stuck and deal more gradually with succession, de-risking the hard-earned value of so many job-producing family businesses nationwide. And the path opens for Hult’s next-gen students to become this generation’s business leaders. Download a brochure  to find out how  Hult International Business School can help you to develop the leadership skills and entrepreneurial mindset needed to help your family business thrive for future generations. Hult offers a range of highly skills-focused and employability-driven business school programs including a range of MBA options and a comprehensive one year Masters in International Business. To find out more, take a look at our blog Should you choose a Master of International Business or MBA program? Download a brochure or get in touch today to find out how Hult can help you to learn about the business world, the future, and yourself. Hult Rotation offers you a chance to study in a truly global way. Our rotation program allows you to study and be immersed in some of the finest cities in the world. 📠¸: @jasminmanzano . Hult Rotation offers you a chance to study in a truly global way. Our rotation program allows you to study and be immersed in some of the finest cities in the world. 📠¸: @jasminmanzano . Each year, Hult seeks to enroll a talented and ambitious incoming class from all over the world. We look for diverse students with a wide range of experiences, perspectives, and interests—students who will thrive in our unique educational atmosphere. Are you ready for a truly global experience? 📠¸: @iambrunadiniz . Each year, Hult seeks to enroll a talented and ambitious incoming class from all over the world. We look for diverse students with a wide range of experiences, perspectives, and interests—students who will thrive in our unique educational atmosphere. Are you ready for a truly global experience? 📠¸: @iambrunadiniz . We’re excited to start 2020 on a ranking high! Hult is proud to have been placed #28 in Poets Quants 2020 rankings for Best Undergraduate Business Schools in the US. Taking a huge leap of 32 places from our 2019 position, we’re also very happy to have secured top positions in key categories like: life-changing experience, practicality of the degree, and global immersion. . With five global campuses, a student body of over 130 nationalities, and a learn-by-doing approach—Hult offers a student experience like no other. . We’re excited to start 2020 on a ranking high! Hult is proud to have been placed #28 in Poets Quants 2020 rankings for Best Undergraduate Business Schools in the US. Taking a huge leap of 32 places from our 2019 position, we’re also very happy to have secured top positions in key categories like: life-changing experience, practicality of the degree, and global immersion. . With five global campuses, a student body of over 130 nationalities, and a learn-by-doing approach—Hult offers a student experience like no other. . â€Å"I’m from an engineering background and needed a whole new skill set for the industry I wanted to switch to. I learned a lot about myself and how I deal with being out of my comfort zone. I learned both soft and hard skills, from how to work in very diverse teams to key accounting metrics and strategy. I was surprised by how weak I was at certain tasks in English or how strong I actually was in other areas. Hult gave me opportunities to try new things and meet people from places I never thought I would have friends. . My internship experiences gave me the chance to broaden my view of different cultures and different companies. I had the opportunity to work and live with people whose values differed from people in my home country. I thought that this would be difficult, but it gave me the chance to reflect on my own values and assess if they were a result of my home country environment or if they were intrinsically mine. . Diederick ter Kulve (@diederick.terkulve) Netherlands Masters in International Business . â€Å"I’m from an engineering background and needed a whole new skill set for the industry I wanted to switch to. I learned a lot about myself and how I deal with being out of my comfort zone. I learned both soft and hard skills, from how to work in very diverse teams to key accounting metrics and strategy. I was surprised by how weak I was at certain tasks in English or how strong I actually was in other areas. Hult gave me opportunities to try new things and meet people from places I never thought I would have friends. . My internship experiences gave me the chance to broaden my view of different cultures and different companies. I had the opportunity to work and live with people whose values differed from people in my home country. I thought that this would be difficult, but it gave me the chance to reflect on my own values and assess if they were a result of my home country environment or if they were intrinsically mine. . Diederick ter Kulve (@diederick.terkulve) Netherlands Masters in International Business . Say a big hello to our Bachelor of Business Administration program cover star, Elisa Orus Plana âÅ" ¨ . â€Å"I’m excited for the future—especially that I cant predict whats going to happen. Maybe Ill end up in Mexico working for a trading company or maybe in Africa, developing my own business. Everything is possible, and the options are constantly changing. I love the idea that Im never going to be stuck doing the same job until the end of my life if I dont want it to be like this. . Hult really supports me and my ambitions and truly believes that we deserve to be considered as professionals as well as students. Here, I get to express not just my opinions but all elements of myself. From my creative side with the Fashion Society to my finance and business sides in Trading Club and the Management Consulting Club. We get a different type of learning here. Not just essential knowledge and theory, but practical skills and mindset. The school is always evolving. We’re encouraged to innovate and to always look for new ways of doing traditional things. We learn how to be more confident and become aware of how we can impact our environment. The school aims to help you become a better version of yourself and to stand out from the crowd.â€Å" . Elisa Orus Plana French Bachelor of Business Administration Class of 2021 Say a big hello to our Bachelor of Business Administration program cover star, Elisa Orus Plana âÅ" ¨ . â€Å"I’m excited for the future—especially that I cant predict whats going to happen. Maybe Ill end up in Mexico working for a trading company or maybe in Africa, developing my own business. Everything is possible, and the options are constantly changing. I love the idea that Im never going to be stuck doing the same job until the end of my life if I dont want it to be like this. . Hult really supports me and my ambitions and truly believes that we deserve to be considered as professionals as well as students. Here, I get to express not just my opinions but all elements of myself. From my creative side with the Fashion Society to my finance and business sides in Trading Club and the Management Consulting Club. We get a different type of learning here. Not just essential knowledge and theory, but practical skills and mindset. The school is always evolving. We’re encouraged to innovate and to always look for new ways of doing traditional things. We learn how to be more confident and become aware of how we can impact our environment. The school aims to help you become a better version of yourself and to stand out from the crowd.â€Å" . Elisa Orus Plana French Bachelor of Business Administration Class of 2021"> During the final days of 2019, you probably reflected on what you’ve accomplished this year—and even this decade—and what you’d like to achieve in 2020. Let us know in the comments below. During the final days of 2019, you probably reflected on what you’ve accomplished this year—and even this decade—and what you’d like to achieve in 2020. Let us know in the comments below. â€Å"The first time we did group work on the program, I went head-to-head with a colleague. It taught me a lot about how I see people, how people see me, and how conflict can be resolved in a kind and productive way. The best feedback you get, when delivered constructively, is the most critical because it really feeds into how you lead. I’ve completely reversed my leadership style—the result is so much richer and more powerful when you lead from behind and lead with strength. . Studying in tandem with working, whilst challenging, gave me the perfect platform to directly apply learning concepts into my business environment, the competitive landscape, and the real-estate industry as a whole. When I started the program, I was very happy in my corporate role. But my courage and aspirations grew to the point that I took on a whole new direction. Having my career coach, Joanna, as a sounding board allowed me to really be strategic and get to know myself. She coached me thro ugh all the interviews, the research, and the questions. It went in parallel with what I was doing academically and after six months everything just clicked. . I went into the EMBA knowing I had nothing to lose and I’ve come out with everything. Great strength, global friends, amazing learning, mentors from professors, a job I love, and the knowledge that I can set my mind to achieve anything and with the right support and resources I’ll get there.† . Kashani Wijetunga British, New Zealand Sri Lankan Associate Director Senior Strategy Consultant CBRE EMBA Class of 2019 . â€Å"The first time we did group work on the program, I went head-to-head with a colleague. It taught me a lot about how I see people, how people see me, and how conflict can be resolved in a kind and productive way. The best feedback you get, when delivered constructively, is the most critical because it really feeds into how you lead. I’ve completely reversed my leadership style—the result is so much richer and more powerful when you lead from behind and lead with strength. . Studying in tandem with working, whilst challenging, gave me the perfect platform to directly apply learning concepts into my business environment, the competitive landscape, and the real-estate industry as a whole. When I started the program, I was very happy in my corporate role. But my courage and aspirations grew to the point that I took on a whole new direction. Having my career coach, Joanna, as a sounding board allowed me to really be strategic and get to know myself. She coached me thro ugh all the interviews, the research, and the questions. It went in parallel with what I was doing academically and after six months everything just clicked. . I went into the EMBA knowing I had nothing to lose and I’ve come out with everything. Great strength, global friends, amazing learning, mentors from professors, a job I love, and the knowledge that I can set my mind to achieve anything and with the right support and resources I’ll get there.† . Kashani Wijetunga British, New Zealand Sri Lankan Associate Director Senior Strategy Consultant CBRE EMBA Class of 2019 . â€Å"It was now or never. I knew that I’d have likely stayed in my neighborhood for years to come if I didn’t take this opportunity. I’d not lived or studied outside of the U.S. before. So I left my job as a global strategist at an advertising agency and moved halfway around the world. I’ve come back a more culturally aware, well-versed person. I’ve realized that everything is a learning experience and an opportunity for growth. Ill definitely carry this mindset with me into the future. Technology and social media allow us to be different people in several places at once. Im excited to see how I can establish myself in whatever city Ill be lucky enough to call home and still maintain deep connections with people all over the world. I’m inspired by my classmates every day. Hearing some of their life stories and how getting this degree fits into their greater mission has been very humbling. My biggest challenge has been finding the ‘right’ path for me. There have been rooms Ive felt like I shouldnt be in, but now Im proud to feel as though I truly belong, wherever I am.† . Dwayne Logan, Jnr. American MBA Class of 2019 . â€Å"It was now or never. I knew that I’d have likely stayed in my neighborhood for years to come if I didn’t take this opportunity. I’d not lived or studied outside of the U.S. before. So I left my job as a global strategist at an advertising agency and moved halfway around the world. I’ve come back a more culturally aware, well-versed person. I’ve realized that everything is a learning experience and an opportunity for growth. Ill definitely carry this mindset with me into the future. Technology and social media allow us to be different people in several places at once. Im excited to see how I can establish myself in whatever city Ill be lucky enough to call home and still maintain deep connections with people all over the world. I’m inspired by my classmates every day. Hearing some of their life stories and how getting this degree fits into their greater mission has been very humbling. My biggest challenge has been finding the ‘right’ path for me. There have been rooms Ive felt like I shouldnt be in, but now Im proud to feel as though I truly belong, wherever I am.† . Dwayne Logan, Jnr. American MBA Class of 2019 . Happy New Year, Hultians! . Happy New Year, Hultians! .