Taking nothing for granted: Advice for generation next

Business succession consultants rarely work with families unless the senior generation controlling the business commits to a transition. “I spend a lot of time working with the younger generation trying to effectuate change, and it’s hard,” said Larry Hause, principal of Hause Family Transitions. While the senior generation will always control the pace of succession, Hause said there are ways for the rising generation to get their elders primed:

Demonstrate gratitude. Show appreciation for the opportunity to be involved in the business. Demonstrate a passion for learning about the business. And make a commitment to show up and do what you can do. “That can be really hard when you don’t know what the payoff is going to be,” Hause said. “Bankers like to hedge their bets, but there may be no assurances along the way.” 

Educate yourself. What systems are you going to need to have in place when the current leader is no longer there? Exploring such systems might jumpstart the conversation. For example: “You have one person at the top,” Hause said. “That person is likely the CEO, board chair and owner. They speak for all three of those groups.” If the adult child wants to replace the parent, they likely aren’t thinking about all three of those roles. 

“Maybe a parent thinks a confident child can be CEO but they want ownership split among all of their children,” Hause said. “Can the son or daughter also speak on the ownership side? Dad might not think about that, but mom is. Mom sees factions developing and is starting to get concerned.” A system that accounts for owners and management will need to be defined.

Know what you want. Members of the rising generation don’t often think about ownership or the board. But in many family businesses, the child who succeeds the founder will end up working for their siblings. If siblings don’t work in the bank, what say will they have? For the person newly in charge, questions of fairness arise. “If you work as president, you are getting paid to be president,” Hause reminded. “But how will you get compensated for your capital? How are other owners paid? There’s a lot of learning that needs to happen.”

Seek accountability. Hause advises the rising generation to tell their parents they want someone to hold them accountable. “Tell your parents you don’t know everything,” he said. “What that communicates is humility, which goes over big with the senior generation.

“If you can set up an accountability system, you are also saying you want dad or mom to be accountable, too, accountable to the future,” Hause said. “It can be hard for a parent to hold their offspring accountable. Maybe they can be accountable to outside directors?

“I tell the children of business owners that if they want to move something, they should approach it as if they were a consultant,” Hause said. “Teach yourselves about how family businesses go from generation to generation. Read about it. Educate yourself. Then interview your dad and mom about what they want, before you even start putting your oar in the water to talk about what you want.” It can be a key conversation starter.