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Edition 237 – Abdication

It’s somewhat curious to me how a great number of family business owners decide, one day, to take a step back, but don’t actually prepare the business or their management team for that event. The decision is puzzling and often, the consequences can be devastating. Let me explain.

Founders of family businesses tend to get to a point where they’ve decided the business doesn’t quite excite them as it used to. Or, it has got to a point where they’re comfortable, the business is ticking over and they start thinking “what’s next?”.

What never ceases to amaze me in these scenarios is that none of the “what’s next” conversation actually involves developing a plan for ensuring the business continues to grow and thrive into the future. What’s next usually involves considering “what’s my next project?”.

As such, this is what happens:

  1. Founders and owners appoint the best employee to the “beefed up” role – not the best individual. There’s a marked difference.
  2. Employees are given greater responsibility – but within a limited or non existent framework.
  3. Employees are told their new role – not consulted on it.
  4. Little or no handover takes place between the founder/owner and the newly promoted employee.
  5. Employees often don’t know how to lead – sure they can manage, but leadership and management are two different skill sets.
  6. The owner doesn’t engage in a formal review process with the employee in their new role. So, performance management is immediately lacking.
  7. Things start to go awry, but the owners have removed themselves so quickly they’re disengaged from the process. This also means that, as there is no overview from the board, the management team keep doing what they’ve always done – because they are unaware that what they are doing is wrong.
  8. The first warning or wake-up call is one of low sales, low cash, rapidly increasing debt or a key customer firing a shot across the bow.

So, the owners have not consulted, not provided a structure, stepped completely away and then, when things go pair-shaped, usually get flustered, angry, or both and ask “what’s going on”.

Listen up! Just because you have a license doesn’t mean you can drive everything on the road. Most family business owners in these situations give their chief employees, who’ve previously driven a Ute, the keys to a 40 Tonne truck and expect them to deftly manoeuvre it, in all conditions, the same as they, the owner has always done. It’s not going to happen.

None of that is a successful passing of the baton. All of it is abdication by the owner – and the fault of that only rests with the owner and with no one else.

So, if you are in this space in your own family business right now, remember this process is only successful if there is a transition over time – not a running away from the big chair. It should involve you formulating a plan around these key areas: 

  1. People.
  2. Framework.
  3. Process.
  4. Performance Measurement.
  5. Knowledge Acquisition.
  6. Trust and Responsibility.
  7. Leadership vs. Management.

The key ingredient to making all of this work is TIME – from all parties and at every step of the process.