Letting Go

In every family business the senior generation must, at some point, let go of control. Letting go can occur as part of a succession plan that provides for an orderly transition of control to the next generation, at a sale of the business or at the death of the senior generation. One would think that letting go as part of a succession plan, which is a lot like retirement, would not be a problem. Assuming financial security, wouldn't anyone jump at the opportunity of not having to work 60-70 hour per week? In fact one of the hardest things for a family business owner to do is to pass the baton to someone else to run the business. This is true even when the recipient is a son or daughter.

I believe much of the reluctance arises from the fact that many family business owners are entrepreneurs. Entrepreneurs love their business and their work. My father, a classic entrepreneur, used to say that work is play and play is work; retirement for him would have been like a life sentence to hard labor. Also an entrepreneur's sense of self is usually closely tied to the business and in many cases their connection to the larger community is through the business. Asking an entrepreneur to turn over the leadership of the business is asking them to give up a part of themselves.

In order to feel confident in letting go the senior generation must have trust in the competence of their successor. However there are many entrepreneurs who believe that no one can fill their shoes, and this is not without justification. Entrepreneurs who start with nothing and build a successful business overcome huge obstacles and have demonstrated they have the skill, knowledge and creativity it takes to grow a business. Their children, who have enjoyed the benefits of this success, typically do not have the opportunity to prove themselves in the same way. Entrepreneurs also have difficulty giving their successors the opportunity to grow into their successor role; they like to be involved in all major decisions. This makes it difficult for their successors to develop and demonstrate their competence to run the business.

Convincing an entrepreneur that letting go is a necessary element of a succession plan is difficult because entrepreneurs do not like planning. Planning implies committing to a fixed course of action. But one of an entrepreneur's greatest strengths is the ability to react instantly to changes in the market or their business. Entrepreneurs like to follow their instincts rather than a plan. Entrepreneurs are independent thinkers with huge reservoirs of optimism. They discount stories of family discord and business failures caused by the lack of a succession plan. Just as they have created a business out of nothing they will solve the succession dilemma their own way, which usually means staying in control.

As you can see if the family business owner has an "entrepreneurial personality", getting him or her to let go of control is a difficult undertaking. A succession plan that does not deal with the needs, concerns and predilections of the entrepreneur will probably have problems in its implementation. I am reminded of the story where the father went on vacation and while he was gone, his sons removed his desk from the office in order to get him to "let go."; While effective, I do not recommend this method of helping the senior generation let go of the business.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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