How (Not) to play the generation game
CMC’s Berkshire based advisor and direct descendant of the Maynard Confectionary family, Tony Maynard has shared a few myths of family businesses and the key essential ingredient for a successful succession – Leadership.
There’s a lot of incorrect information talked about the rise and fall of family businesses. For example:
- Misconception: Family-owned businesses are a small part the UK economy.
Reality: Actually family businesses account for 65% of the total 4.6 million private sector according to the Family Business Institute. Their future success is vital to the economy.
- Misconception: Family businesses ‘go from shirtsleeves to shirtsleeves in three generations.’
Reality:The fact is that many family businesses fail because so few have a well-conceived leadership plan in stark contrast to most public companies. It is believed sufficient for father to teach son the ropes and it is just assumed that son will just carry on where father left off.
- Misconception: Family businesses tend to stay in the family.
Reality: Recent research suggests that just 55 percent of family business owners intend to pass their business to the next generation. This suggests that many family businesses will not be handed down in future and has major implications for planning a retirement sale.
- Misconception: Going to work at your family’s business is equivalent to breaking the code of life.
Reality: Only about 6 of 10 family businesses have sufficient resources to divide their assets fairly between all heirs. Furthermore, only a quarter of them foresee an ownership change in five years. And 47 per cent lack any kind of succession plan
Leadership Plan – The Essential Ingredient
When a company is turned over to “the kids” problems abound. What’s missing is a leadership plan, yet the next generation is blamed for the failure.
Competency: Competency comes from developing the right experience and background to work in the company. Current business owners should be objective in matching future business requirements against the abilities of the next generation.
Commitment: Future success is unlikely if the next generation does not have the same belief in the founder’s business goals and philosophies. Sadly, many sons and daughters are drawn into the business through blind loyalty to their parents’ dreams and expectations, with little thought for their own aims and aspirations.
Character: Character is the most critical aspect of leadership. It arises from individual personality, and a vast reservoir of information, experiences and interactions. Business owners should assess the character and leadership qualities of their offspring before saddling them with a level of responsibility that calls for motivational as well as strategic and operational flair.
The more someone recognises about his/her personal and professional demeanour, the more successful will he/she be as a leader. This will almost certainly require the help and guidance of their forbears.
So we should set aside all the myths surrounding the success or failure of family businesses. Put simply, the next generation can lead family-owned businesses to greater success when the preceding generation provides the right preparatory support and commitment. In this endeavour, they may learn from the well-honed business and human resource practices of non-family businesses.
CMC Partners are well-placed with over 20 years experience to support smaller businesses that may lack knowledge and the necessary internal resource to plan the correct succession for their business – family handover or business sale.
Click here to view Tony Maynard’s profile. To discuss your succession plan option contact Tony Maynard on 07774 982596 / 01635 200354 for a free and confidential initial discussion.