The Emotional Factor in a Family Business Succession

 

We reckon that in 2021, 70’000 to 80’000 SME will undergo a succession process, thesesnumbers represent circa 20% of the small medium enterprises in Switzerland. Yet amongst this high percentage, only very few companies have engaged in a real transmission process be it internally or externally. Some constraints such as taxation, legislation, stock market or market opportunities could refrain owners to undertake the process but it’s certainly not the only reasons.

A family business handover is a long process mostly complex and emotional which we only see the tip of the iceberg:

For the transferors who have difficulties to engage proactively and postpone the deadline as far away as possible. For the future generations who inherit heavy responsibilities and have to ensure the company’s future between tradition and modernity. For the companies who take over which are mainly driven by financial efficiency and might underestimate the human factor.

 

 

Successions raise up a variety of feelings and emotions

 

The Owner’s Stages of Grief

 

One of the possible pitfalls may arise for the owner/founder himself as getting closer to retirement might trigger mixed feelings between will and refusal. The will to handover the  reins before retirement and the refusal to give up a lifetime hard work. This ambiguity derives from the notion of loss of status, as a leader. Not only the company that is transferred, it’s also about its position and power which are passed on to the future

generation. The challenge for the owner is to initiate his own departure.

 

Extra Pressure on the Successors

 

The most challenging is to move from a status of heir to the position of a leader when the owner has been in control of the business and particularly close minded and not open to new ideas or different management style breaking with the tradition. As outlined in her book “Travailler en famille avec plaisir”, Anne Juvanteny wrote “If some children of entrepreneurs are ready to endure conflicting relationships with their parents it is also a question of love. However, in some cases, they have to struggle to find their way and take their place. They tend to do it with the fear that accompany the decision to succeed, not to be as good as the parents, to fail or even worse the danger of causing a family’sbankruptcy”. Actually due to their loyalty, a very few question their real desire on whether to accept the succession. They devoted solely in the challenges ahead e.g. taking ownership of the leadership, reassuring the employees, convincing the investors and developing solid strategic and managerial competencies to lead the company.

 

 

"Actually due to their loyalty, a very few Next Generation

question their real desire on whether to accept the succession"

 

 

Loss of Stability and Bearings for the Employees

 

Katia Rihomme-Huet in her book “Entreprises familiales et phénomène successoral” remind us: “the complexity of succession holds mainly due to the right balance between persevering the existing environment and integrating the new, between what needs to be kept and what is necessary to change. A new leader might be faced with employees accustomed to working with the predecessor’s style”. Unsettled, ignored or despised employees during a change in management might deliberately undermine the succession. This resistance could be expressed by the loss of talents, which are assets to the company and to its core business, or worse, by the anchor of dead-weights who will act as a force resisting any change. The replacement of a leader is not a neutral event and could be a stressful experience when a new comer is from a totally different environment as witnessed by an employee of ASTRE Energy, a German company acquired by Chinese investors. The new management team is not considering discussing with social partners and went as far as breaking the cultural rules and the well established agreements. “these actions made us become bitter and less motivated. The situation is serious and people express their dissatisfaction by leaving the company”. Many crisis meeting took place in a row and the then successful business has become a company without a soul. The succession process generates a great deal of emotions leads to strong emotions more or less frustrating which require to be accompanied to avoid blockage to actions.

 

 

External Professional Coaches to accompany the transition phase

 

The transfer of a family business is a key step which requires strategic guidance and individual coaching in areas such legal, taxation, finance…and emotions. The latter being a powerful and efficient tool providing the advantage of a neutral and caring posture with the sole objective being to help the coachee reflect and bring on his/her own solutions to a given situation.

 

Stephen Skelly, in charge of financial planning at HSBC Private Banking, in an interview at Le Temps newspaper about the need to shape the future: “The vision must be shared amongst all family members if business continuity is the aim”. As a matter of fact, the creation of a family council, for example, allowing each member to express oneself and decide. This a powerful medium for clarification, relationship improvement and cohesion. Only then , the succession’s operational implementation could take place.

 

"The transfer of a family business is a key step which requires strategic guidance and individual coaching in areas such legal, taxation, finance…and emotions."

 

 

As part of the coaching process, the objectives and means are numerous and below are some examples:

 

- Accompany the current owner and help him anticipate the succession and identify his or her successor, while ensuring knowledge and skills transfer.

- Organise with coachee his gradual withdrawal.

- Provide a coaching framework which encourage exchange and dialogue, discuss the competencies and qualities required to lead the company.

- Address all aspects related to the succession including tax issues and patrimonial situation and encourage transparency on subjects which might lead to possible heritage imbalance.

- Involve family and employees in the reflection and decision process.

- Help prepare the successor to take into consideration the cultural dynamics and let him participate in meetings with parties involved, to shape the future with the current teams.

Planning and deploying a personalised coaching with the transferor and the successor as well as with the team and the family would allow raising relationship issues which, if not made aware or dealt with, might jeopardise the company’s future.

 

 

How about you sharing your experience on this subject? I would be delighted to hear from you whether you are a founder, successor, employee of a family business, a shareholder or a future owner.

 

 

 

Céline Chatti

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