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Succession Planning: Preserving Your Legacy in a Family Business

Succession Planning: Preserving Your Legacy in a Family Business
From Recruiter - August 31, 2016

Family businesses face unique challengeswhen it comes to leadership and management. My brother, Eric Hohauser, and I are the second generation leading our family business, Harvey Hohauser & Associates, a strategic cultural executive search firm founded 30 years ago by our father, Harvey Hohauser. Handing a family business down from generation to generation is a delicate process and something that many of our clients struggle with.

The passion upon whichmany family businesses were initially founded can eventually become a destructive force in terms of growth, leadership, and retention. Power struggles emerge between past and current generations attempting to lead the company. It is at this point when a founder must recognize and accept their detriment to the businesss future success.

By some estimates, roughly30 percent of family-run organizations are successfully handed down to a second generation, 12 percent remain viable for a third generation, and only 3 percent successfully operate in the fourth generation and beyond. These low numbers may result in part from the emotional and financial pitfalls of leadership hand-off between generations, which few businesses proactively address.

The appointment of new leadership in any company is always a challenge. However,succession planning in a family-run organization is different from in most other companies. In some cases, future generations are ready to assume a leadership role, while in other cases the rising generation does not yet have the right experience and skills.

A successful and smooth transition between generations is rooted in proactively establishing and defining a clear path years in advance. When I started at Harvey Hohauser & Associates in 1999, my father came to me on my third day of on the job and ask, Are you ready to takeover? He was joking, but his intention was to start mentally preparing me for my eventual role as CEO of the business. Over the next 10 years, we implemented a plan to achieve this and gradually transfered leadership responsibilities from Harvey to me.

I have also seen scenarios where this transition has taken much longer. It has taken some of our clients nearly 20 years to transfer leadership from one generation to another. It all depends on how ready and willing that next generation is.

Hiring for the Next Generation

Afamily-owned operation can also seek leadership beyond the family to run the business. When we work on a search to foran external CEO to appoint toa family-run organization, the approach we take is very different than the one we take whenlocating a CEO for a privately owned or publicly traded company.

Throughout my career, it has been evident that family-owned businesses focus heavily on long-term visions and emphasize long-term strategies when assessing new leadership. It is not uncommon for many family businesses to have the same leadership in place for 20-25 years. This is nearly triple the lifecycle of a CEO at a publicly traded company: According to a global study published by IIC Partners in 2014, the average CEOonly spends 7-8 years at a publicly traded company.

A publicly traded company or private firm will think quarter to quarter, while a family business will think generation to generation: Will this CEO be able to train and develop the next generation of leaders in the business? Will this CEO be able to steer the company through the next recession or bubble?

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