10 Most Prevalent Obstacles to Family Business Succession Planning

Tom HublerBy Tom Hubler, Executive Consultant

In a presentation at the University of St. Thomas Center for Family Enterprise Family Business Forum, John Davis, family business consultant, researcher and educator, commented that everything consultants like himself teach, their clients already know. In order to be successful, they need to confront or deal with the obstacles. Of course, the first question that popped into my mind was: What are those issues? As I looked back over my practice, I began to identify some common obstacles—and ways to avoid them.

It begins with family business members realizing they have to help the B.O.S.S. be successful so they can successfully navigate obstacles and deal with their issues. At an orientation meeting when I introduce this concept, which comes from the book Collaborative Team Skills (Miller & Miller, 1994), all heads usually turn toward the father or mother. I then announce to him or her they have just been demoted, and that the real boss around here is the four constituencies that make up the acronym.

The stands for the Business and what the business needs to be successful.

The O, which is the most important part of the B.O.S.S., stands for the Other. What do you want for the Other and what does the Other want? In the context of succession planning, each member of the family has to know that others are committed to help each other be successful - it's a bilateral, mutual process.

The first is what do I want for my Self? This is the one area in which people generally are most concerned - themselves. To be successful, clients need to understand the systemic nature of family-owned businesses and that, for personal goals to be achieved (the S), they must create a win-win success for all four constituencies.

The final stands for the Stakeholders, which generally includes the whole family, the employees, the customers, the vendors and anyone else who is connected with the family business.

Top 10 Photo

After understanding how best to help the B.O.S.S., we then turn toward obstacles to successful succession planning. Here are the top ten most common:

#10: Poor Expression of Feelings and Wants

Feelings and wants are not openly, frequently expressed in most family owned businesses. In order to communicate effectively, people need to be vulnerable, and that is the issue. In many family businesses, the family does not have the capability, experience, and confidence to be able to express their feelings and wants around the other daunting obstacles that follow. In some instances, their experience has been so frustrating and unproductive they give up and are no longer willing to take the risk of vulnerability. As a result, the stumbling block occurs.

Also, in our culture, and in many families, we are taught not to express our feelings and our wants. For example, I was taught not to express my wants. I remember, as a small boy, that when we would visit relatives I would tell people I wanted a piece of candy from the dish on the coffee table. I was immediately told that it was more polite to wait until it was offered. I waited and waited and waited, but no one offered it to me. Then I got married, and I waited and waited. I thought, "If she loved me, she would know what I want." Since she wasn't giving it to me, the fight would be on.

That is exactly what happens in family-owned businesses where family members have expectations of each other about what they want in an emotional sense. They are reluctant to express it and no one offers it, so they think they're not worthy.

The solution I use with my clients is to engage them in a communication training process that allows them to become more familiar with and confident about being able to express their feelings and wants. The Collaborative Team Skills workbook (Miller & Miller, 1994) is an excellent resource for clients. They are able to learn in a relatively short period of time the necessary skills to transcend this obstacle.

#9: Differences Are Seen as A Liability Rather Than An Asset 

When this occurs, it always leads to trouble in family-owned business succession planning. Differences are really the key to an exciting and active life. Yet often in family-owned businesses, differences are interpreted as "you don't love me" and "you don't care." In other instances, differences are personalized with the same kind of result.

Another example of this dynamic is the famous "Hubler's Speck of Dust Theory." Family members often look at things as small, business differences that can wait: “I don't think I want to bring that issue up with my family members. We plan on getting together as a family for Memorial Day, and if I bring that issue up, it will upset our family. I want to maintain family harmony, so I'm going to let it pass.” The same thing occurs on the 4th of July, Labor Day, Thanksgiving, and on and on. As a result of wanting to maintain family harmony in the context of family-owned businesses, family members often inadvertently create the very problem they are trying to avoid by not discussing their business differences.

I use the Myers-Briggs Type Inventory as a resource tool to help people understand and objectify the notion of differences. It helps teach people in a positive way about their differences and how they can use the synergy among their differences to create a third or fourth way of doing things they otherwise would not have considered.

#8: Indirect Communication 

One of the most insidious problems in family-owned businesses is the use of indirect communication. When differences occur, as they often do in succession planning, it is almost always a problem if people do not talk with each other directly. Family members involved in the business often talk indirectly with other family members who are not involved. This creates a triangle that destroys the quality of family relationships. Again, I use the Collaborative Team Skills workbook, especially the chapter on "Styles of Communication," as a resource to educate clients about the pitfalls of indirect communication and to assist them in using direct communication for a win-win result.

#7: Entitlement 

Often entitlement is seen as a younger-generation issue. Certainly, that is true when younger generation people use their name as a wedge or variance to achieve advantage over other people in the organization. When this occurs, it has a negative effect on morale. In a recent client situation, a 30-year old second-generation member of a family-owned business, was about to embark on a self-destructive course to take over the sales department of his father's organization. He had been encouraged by outside professionals. Luckily, the son was able to do some career planning with our industrial psychologist. By having a discussion about expectations for his position and role with his supervisor and the director of sales, the son created a career plan and was able to realize the inappropriateness of his unrealistic expectations. As a result, the son was able to create a realistic career plan that met his goals, the needs of the non-family managers, and his father's ambitions for his son's success.

Senior generation members of family-owned businesses often have this same issue of entitlement. Being the founder of the company and/or being in the senior generation, gives some a sense of entitlement that allows them to think they should continue to take on the primary responsibility of leadership. This is often at the expense of their younger generation adult children, who sometimes are in their 40s and 50s, still waiting for an opportunity to lead the company.

Clearly, the solution here is to work together to talk about the best interests of the B.O.S.S. and how we can continue to help the B.O.S.S. be successful. When family business constituents have a common family vision, it alleviates this issue of entitlement and makes it much easier to create succession strategies and solutions that are win-win.

#6: Scarcity 

Scarcity is insidiou because of the underlying assumption within the family that "there isn’t enough to go around." It often manifests itself in the discussion of money, roles and power. In a family owned business, there are two bottom lines. The first is the standard financial one, and the second is the more invisible, emotional one. It is the lack of expression of appreciation, recognition and love that is the underlying problem with emotional scarcity.

There are a couple of things that can help with this. The first is having family members talk directly about what they expect from each other. This relates to the number one issue, which I will address later in this article. The second has to do with helping them to empower themselves to achieve their fullest potential - whether it is inside or outside the family business. In doing so, they begin to understand the sense of abundance that exists in the world for all of us.

A resource I have found to be particularly helpful to clients over the last eight years is the Empowerment Workshop offered by Gayle Straub and David Gershon. Clients who have participated in this come away with a sense of abundance that allows them not only to be fulfilled but also to talk more directly about their emotional expectations from their families.

#5: History 

This is a big factor in all families, and it is certainly true in the context of family-owned businesses. A book on families entitled The Way We Never Were (Coontz, 1993) captures the essence of the concern about history. Though family history generally includes difficulties, we go out of our way to talk only about the good things. We mistakenly try to protect our children from our experiences in our own families of origin. Overlooking history is a major factor in family-owned businesses that are having a hard time creating their future. Soren Kierkegaard, the Danish philosopher, has been quoted as saying, "Life can only be understood backwards, but it must be lived forwards." Therefore, the full celebration of history is essential for continued family business success.

In terms of my experience, family businesses often do not celebrate their histories, and instead take the positive aspects of their histories for granted and keep them low key. Yet as family-owned businesses are able to celebrate and embrace all that life has to offer, they open the door to the future.

#4: Other-Oriented Regarding Change 

Even when change is positive, it is difficult. In the context of family-owned businesses, it is not unusual when people expect others to change in order for something good to occur. But this expectation is a formula for disaster.

One of the major problems and challenges in a family-owned business are overlapping circles of position. A young man once said to me, “If my dad were drawing these circles, his business circle would be very big, and his family circle would be very small. On the other hand, if my wife were drawing those circles, her family circle would be very big, and her business circle would be very small.” I asked, "what do your circles look like?" The young man said, "I’d rather not say." Basically he was caught in the middle between two people he loved. Just two weeks prior to the seminar, the father had called me and said, "I’m in a manufacturing business with my two sons. My oldest son is an engineer, and he's my successor. He's been absolutely terrific up until two years ago when he got married. My daughter-in-law is the problem. Can you come and fix her?"

Whenever I tell that story people laugh. It is quite an amusing story, but I believe it demonstrates the issue of other-oriented regarding change. The overlap of circles, which is an organizational problem in the context of family-owned businesses, is experienced by family business participants as an inter-personal issue. As a result, they often blame each other and expect the other to change.

The solution is taking responsibility for what we successfully contribute to the family business and also taking full responsibility for our contribution to the problem. One of the major challenges in succession planning and family-owned businesses is helping clients take full responsibility.

#3: Control 

The issue of control, which is the very thing that makes owner-entrepreneurs successful, is also their Achilles' heel. I often cite Curt Carlson, one of Minnesota's most famous and successful entrepreneurs, as an example of this. His struggle with the issue of control and the number of different people he had in his organization as potential successors was well chronicled in the media. He finally successfully dealt with the issue of control. But it’s a good example of how change is difficult, at times especially for entrepreneurs who spent the majority of their lives closely involved in a business.

Succession planning can cause entrepreneurs to think that people are trying to change them and take away their companies. Entrepreneurs are driven by their dreams. Since it is not possible to change or control entrepreneurs, it does not make sense to continue to fight that battle. On the other hand, it is possible and realistic to assist entrepreneurs and their families in developing new dreams in relation to their family, their business, their communities, their leisure time and philanthropy as a way to effectively deal with the issue of control.

#2: Lack of Forgiveness 

It is impossible to go through life and be involved in a family business without inadvertently stepping on each other's toes. I have observed that those families that don't have the capacity to forgive each other for their transgressions clearly have a hard time being in business together. In order to bridge this gap successfully, I have generally used and drawn upon my client's religious background, since most religions have a philosophy of forgiveness that is often helpful. I also suggest that clients read A Little Book of Forgiveness (Miller, 1994). It helps clients change their perspective about forgiving each other, and sometimes even themselves.

#1: Lack of Appreciation and Recognition

Based on my experience with family-owned businesses, the number one obstacle to healthy succession planning is lack of appreciation, recognition and love. When I read in the press about family business catastrophes, as well as review in my mind where my own clients' breakdowns occur, lack of appreciation is often at the root.

The senior generation desperately wants this from their adult children, but they will deny to their dying day the fact that they want it and need it. At the same time, I have had clients who say, "What I really want is a little love around here." It is the same issue for the younger generation adult children. They are still looking to be recognized by their parents for their accomplishments and uniqueness. The lack of feeling recognized and appreciated underlies many of the problems in family-owned businesses.

The solution lies in teaching family members how to talk about their expectations of each other in an emotional sense and to express appreciation, recognition and love. Many families have a hard time doing this, and just take it for granted. From my experience, most families across the board, need to learn that the emotional bottom line in family-owned businesses is just as important, if not more important, than the financial bottom line. Appreciation, recognition and love need to be expressed on a regular basis.

Over the years I have come to realize the importance of planning for success. As a result, it is critically important to incorporate a plan that addresses obstacles such as the ones I just mentioned. Doing this proactively and positively can only enhance a family business' opportunity for continued success and prosperity – both financially and emotionally.

Tom Hubler is a nationally renowned expert on family business issues and author of The Soul of Family Business: A practical guide to family business success and a loving family.