A W+B Family Advisory research initiative focused on family firms operating in advance and emerging economies within Asia discovered that fewer than 30 percent of business owners have a succession plan. Most glaringly, when we excluded respondents from Japan in the study, a paltry 15 percent of founders polled were actually prepared. This is indeed a clear and present danger not just for the family but for the business. As key business leaders procrastinate and get consumed with short-term operational issues such as taxes, finances, marketing and day-to-day operating problems, succession issues become an elusive event. Aggravating this reluctance is the inability of the founder or business owner to formulate a clear plan on ownership and control. It is very clear that in the next five years, 35 percent of family-owned firms will soon experience a change in leadership due to the founders’ death, advanced age, retirement or semi-retirement. So if the leader wants his or her family to be in full control of the business, he or she must initiate the succession process immediately. It does not matter if a little less than 30 percent of the owners surveyed were not confident of the next generation’s commitment to the business. They can be trained. What is critical is this: A solid transition plan must be set in motion lest the family end up struggling emotionally and financially should a triggering event happen.
But over the weekend, I witnessed a wonderful event. It was the death of a founder and the culmination of his efforts in effecting a generational transition that started many years ago. After a tumultuous start between the family and my firm that lasted for two years, our team, with great effort, finally managed to get the seniors and successors working together. With our extended mentorship over the offspring, we finally piece the succession puzzle together after five years.
Sadly, the founder passed away due to complications following bypass surgery. He was 81 years old. But the legacy he left behind was his greatest gift to the family. For years, I would constantly hear him express in a booming voice that only through unity, a purposive vision and shared values can growth be achieved and that family members wishing to have a piece of the business must prove themselves worthy of being part of the organization. He knew the dangers of having unqualified, entitled successors inflamed by an unclear management structure and he just could not afford to lose everything he nourished due to indecisiveness and inaction.
Despite different time zones (Eastern Standard Time), I attended a virtual memorial service honoring the death of this remarkable founder. Someone that I truly admire because he challenged my team to initiate the transition process “no matter what it takes” and to transfer power to the most qualified executive (family or non-family member). In short, he wanted to exit at the soonest possible time as this was his second attempt to retire. His original plan was at 70 years of age, but the global financial crisis rolled over so he had to extend. This was the time when the founder finally stepped back at 74 years old. Recounting the text message I received from his daughter last week, “The family is devastated to announce that our dad passed away. He left us on Sunday, May 23, 2021, surrounded by family members.”
In the memorial service done via Zoom, the founder was honored by his children and senior executives, especially the daughter who became his successor after the non-family chief executive officer retired and these were her exact words: “Dad was deeply loved by his family, friends and colleagues, and we can’t put into words the loss that will be felt by his passing. He knew this day would come and he prepared all of us. And for that, we are eternally grateful.”
To be continued...