In many of the conversations I have had with the founders of family businesses, one of the hardest discussion topics is whether or not they have managed to find a person of equivalent ability to themselves in the second generation.
Many business leaders have shared with me that their sons or daughters are "brilliant" having completed their MBA studies at Harvard, MIT, LBS or INSEAD whilst simultaneously sharing how they believe their children "think differently" to them.
So is entrepreneurial talent in the genes? In cases where the founder steps aside to let their child take on leadership of the business, has the next generation in question soaked up the ability to make clear business decisions by just living for 20 plus years with the man or woman who built the business from scratch? Or is it actually a mirage?
Many of us tell others that our children are far superior to us – but do we really believe it? Does the founding entrepreneur really believe that anyone, let alone his own child, could run "his" business as well as he could?
Taking control
In practice, I find it to be a rare case where a founder can really let go and a very rare case where he does so because he genuinely believes that his heir has the ability to take his business from here to the stars and beyond.
Many people have written about the nature of the entrepreneur, characterising them as a "control freak". I see the reason they often continue to wield control, despite outwardly saying they are doing otherwise, is because they are exceptionally talented, they make the right decisions (more often than not) and they make good judgement a habit. The question is – does this habit extend to family matters? Do they use the same criteria for appointing a family member to the CEO position as they would for a non-family member?
It is interesting how many founders become 'Executive Chairman' once their son becomes CEO - why do they do that? I'm not suggesting that it might be the wrong thing to do, I just wonder why they do it, and I think it is a good question for the outgoing CEO to ask himself.
Honesty
Handing over the reins to the next generation successfully is all about honesty and open communication. If I was a Formula 1 driver and my son wanted to be one, I wouldn't simply give him a Formula 1 car and say "there you go" unless I honestly believed he was good enough.
We would work together on a plan, probably involving driving school, and then I might buy him a go-kart or a Formula Ford car and allow him to show me in practice how good he was. What's more, we would be able to see his talent from the results, so there would no pulling the wool over anyone's eyes, least of all my own.
It is important to remember that there is no reason why an heir should necessarily be as good as the founder. If he believes he is, too early, or if his parents tell him he is brilliant without really believing it, there is likely to be danger ahead. From my perspective, honesty is crucial, however hard for the parents and children in question.
Practice makes perfect
Practising honest conversation can help to ensure that the transition of power is a genuine transition and a transition for the best.
However, it must be remembered that there are some lessons that need to be learned the hard way. Whilst it is not necessarily desirable for heirs to work their way up all the way from the bottom, giving them the chance to run a small operating division or lead a new project – without any interference from above – can help them develop the leadership skills that seem to come to the founder so naturally.
My view is that our children need to fail by themselves to be able to deal with it and learn from it. We know that when it comes to life generally, but often choose to ignore it when it comes to business.
The way forward
Others have better discussed how the use of a family constitution and proper succession planning can ensure that leadership transitions are a success. These aspects are undeniably important, but on their own they are not enough.
For the founder, honesty with one's self and others about the true ability and experience that a family member can bring to bear is often missed. Likewise, a next generation member really needs to question his or her motivations for wanting to take on a leadership role in a family business – in certain cases could a non-family person be more appropriate? Brilliance is rarely replicated by nature so don't rely on it - acknowledge the situation you find yourself in and take whatever steps with your family you deem necessary.
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