What If The Best Leader In A Family Business Isn’t A Family Member?

When it’s a family business and people with the same last name are at the top of the organization, a leader targeting people to step into leadership now if necessary and in the future probably says, “OK, this is the most qualified member of the family to take over.”

Does it have to be that way, though?

What are the implications when you’re talking about a change to the family side of the family business – where the most qualified person to take over and lead the company is not a family member? Does that change anything at all?

Absolutely.

For one, as you go further into the generations, that question of next to lead becomes even more complex if you wish to keep “the crown” in the family.

Is it going to be passed to the current generation of leadership?

Let’s face it. The handoff can be relatively easy if we’re talking about going from the first to the second generation.

However, as you reach the third or even the fourth generation (defying the number of companies that make it this far), complications could genuinely arise.

How so? There may be a few different third-generation members or others in the fourth generation running around the company. Which one of them takes over? But there’s another likely scenario:

What happens if you want to retain ownership, but nobody in the family wants to run the business or is capable of running the business?

Now, there’s a challenging question to pose to your board, especially since it has significant implications for how the board will change. The board can comprise primarily family members, but the company’s operating leadership will no longer be family members.

As you move into these conversations (and potential disputes), remember the importance of planning for what you’re doing and the process for planning it.

Where do you even begin?

For Once, Don’t Think Big.

So often, we make succession seem so big and intimidating when what needs to happen is making it simple but as digestible as possible. We don’t need big answers today.

Instead, see succession as a journey to determine where we’re going and what we want to achieve.

We don’t have all the answers yet, but we don’t need them yet. We know this is a path to start going on together. You have the time to think about the leadership selection process.

Waiting is not an option. That’s what throws companies into chaos when the “leader hit by a bus” scenario we spoke about in our previous post comes to fruition – not literally a leader being hit by a bus, but rather an unexpected passing of the leader or the leader needing to leave the company much sooner than anyone ever expected.

Of course, you and members of your leadership team hope to be around for a long time. But it’s important to ask questions about “who’s up next” and how you will decide that.

Looking at this from the perspective of the family and non-family members, who needs to be involved when making critical decisions on the company’s future? Do they have to be exclusively family?

We’re not even talking about the actual leader to be named yet – just the people who need to be at the table to have input. Surely, there are people who have been a part of your business almost as long as the current leaders. Where do they fit in, if at all? Answering this question is vital. If they can be involved in making such critical decisions, what else would make sense for them?

We also have to consider our process - a process that will change over time but nonetheless a process for this evaluation and preparation of the next phase of leadership at your company. What is that? Do you currently have one at all for if and when something happens to a key leader of the company, rendering them incapable of weighing in on anything anymore?

You can’t go into this process haphazardly and try to accelerate anything about it.

The best thing you can do is commit to starting. Then, you can change the path as you encounter certain things along the way and say, “OK, here are some things we didn’t think about as we were planning what we would need in a potential successor.”

But at least start on the path. Every journey begins with the first step.

Among one of my often-discussed “Four Questions” that every leader must answer is the first question: What is long-term?

Followed by: What do I want to look like when I get there?

Think about these first two questions for a moment. What is long-term for your company? What will that look like?

Chances are, you’ll want to have a company that still has excellent leadership. And no matter who the next head of the company is, you’ll still want to have a family where this process has not driven massive spikes or explosives into cherished relationships.

Fair to say?

So, what do we do to accomplish this much? A series of discussions has to happen so you can deal with succession planning on your terms. It’s what every leader and emerging leader should want as a next step.

Remember, it’s not something where you have to have the answer today, but it’s a very organic process where anybody who needs to be involved can and should be involved.

Even bigger than succession planning, we’re talking about the company’s future as a whole, not just who stands at the top.

Family members or not in charge, who do we want to be as a company and who is the most qualified individual to lead us there?

Where do we also want to be as a family in the wake of this transition? How could the person we name change that for the better, same or worse?

In a family business, it’s easy to appreciate the desire to retain much of what you are. However, knowing the odds of a business’ longevity as it moves into the third and fourth generations – less than 10% - some evolution in certain areas may be in order.

Where are you along this timeline? Second generation? Fourth generation?

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Is the most qualified person to take over one with your last name? Or is the best person to guide your business through a complex transition and emerge stronger not a family member? Having the answers to such questions can help clarify your thinking around leadership transition.

Spitulnik Advisors can help you start down the journey and assemble the crucial pieces for success along this path. As a leadership coach intimately familiar with family businesses and transitional periods within them, we’re remarkably well-positioned to assist you in identifying solutions that benefit the company, your family and your team.

Contact us today at 312.593.3181 or email us at [email protected].