Estate Planning

Long live the king – Can a family business survive past the founder?

adapted from Beyond Survival by Léon A. Danco

In the majority of family‑owned businesses an organization chart does not exist. The owner‑manager often depends upon second‑class advisors, a non‑functioning and/or rubber stamp board of directors, and an archaic accounting system.

Long live the king

One of the basic problems of the family‑owned business is that too often the shareholders, directors, and employees are all one person: the founder. Sometime between the age of 30 and 40, newly fired from his last job and confident that he could do it better by himself, this self-appointed CEO scrapes together enough cash to start his own business.

Since he can’t find anyone else more qualified, and because he holds or owes all the marbles, he appoints himself President. He starts with nothing and grows slowly, hopefully getting bigger and better. He is the first annual king of a dynasty. He has no time to talk to other kings because he’s working 18 hours a day.

His kids don’t remember what he looks like, the dog bites him when he comes in the door, and his wife knows him mostly as an empty chair at the dinner table. When he finally does find time to talk with other monarchs he tells himself privately, “My kingdom is different.”

The men who run these businesses with guts and nerves are for the most part lonely, scared, tired, harassed and running out of time.

At age 50 a person has, on average, only 300 months more to live. The first 200 of these months will be devoted to their business.

For those 200 months, the owner often has no written plans, no organization chart, no calendar, no shared vision of the future, and no idea of what they will eventually do with their business…or the last 100 months

Yet, unless the President of the family‑owned business trains their successor(s) on a regular, formal basis, they risk not only the loss of their dream but they contribute to a withering away of the North American dream.

One million owner‑managed businesses in Canada generate one half of the Gross National Product. They are the constant reminder that in this land of opportunity, a person can still dream big and be their own boss. We have become a nation of family‑owned businesses, surviving for the most part, however, for only one generation.

In the last 100 months, the founder must begin transferring his energy from reaping the harvest to replanting for tomorrow. Somewhere down the line are the children and successors, but Dad is still really running the show. The successor is often told, in effect, “shut up, watch, and you’ll learn.” That’s not a curriculum; it’s a recipe for chaos. If they grin and bear it, they may inherit.

Bright young men and women find that shoveling sand, filing invoices or loading trucks are hardly useful pre‑requisites for becoming President of the company and poor use of their B.Comm. or MBA’s or perceived “experience.”

The founder must cease to be the company’s oldest and hardest working employee. Instead, he must take on the role of the teacher (CTO – Chief Training Officer) with the successor as their brightest student.

The curriculum must take into account the real nature of the business, with regular progression steps that incorporate standards of interim accomplishment. The student can’t go from General Manager in charge of the company picnic directly to Executive Vice President.

Owner‑managers must learn to allow their heirs to make mistakes. The mistake at the learner‑level may cost $10,000 ‑ or even $100,000 ‑ but this is nothing compared to the whoppers they can make when they control the whole company. In the long run, a $100,000 mistake might be the cheapest blooper a company ever made, because, if learned, the lesson may avert a disaster later on.

Leave a reply

Your email address will not be published. Required fields are marked*