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Transition Planning Issues for Father-Son Businesses

Father-Son BusinessesMy father was a great guy.  We shared a love of sports, both prioritized family ahead of anything else in our lives, and our senses of humour were so agonizingly similar that nobody could ever question paternity.  Above all, I learned from him the overwhelming joy of putting a smile on another’s face.

But we also had some of the negative perceptions typical in father-son relationships:  In his eyes, I was always looking for a short-cut, didn’t appreciate the importance of hard work, and didn’t respect the blood, sweat and tears it took to raise a family in hard times.  Like many sons, I figured he was stuck in the past, stubbornly refusing to accept new ideas (especially my ideas), and always looking for a way to burst my bubble.  Nothing new – these father-son perceptions have been around for centuries, and will probably be around for many more.

I believe every father-son relationship has some degree of these perceptions.  So imagine what it must be like in family businesses; not only can father-son conflict derail effective management, but it often creates a generational rift throughout the business, with old-timers on “Team Dad” and younger staff behind “Team Son”.  And the issues often spread outside the business walls, infecting other family relationships.

Before I am accused of being sexist, we do not typically see the same issues in “Mother-daughter”, “Mother-Son” or “Father-Daughter” businesses.  Just with those stubborn, bullheaded fathers and sons.

Moveed Fazail (Founder of International Family Business Group) writes in his article, “Fighting for the Crown: The Father/Son Relationship in First Generation Family Enterprises:

“Family businesses often resemble monarchies where battle is waged between the old king who is not yet ready to give up power and the young prince who feels it is his time to lead. Fighting for the crown is a convenient label to describe this phenomenon but underlying it are real battles for control and autonomy, freedom and power, and the ambition to be numero uno.”

Over the past couple of years, we have worked with about a dozen clients where father-son relationships are a critical dynamic in the business.  In the value enhancement and exit readiness process, these issues create some unique challenges:

  • Often the son is the “heir apparent” to take over the business, but family dynamics get in the way of a successful transfer of mind and management. Other times, a non-family member might be the best next leader, a hard pill to swallow for the prodigal son.
  • If the son has worked in the business since he was young, other senior employees might still perceive him as the “young, entitled brat who used to just get in the way,” no matter how his management abilities have developed.
  • Sometimes there are multiple kids in the business, requiring the father to choose which will be the next business leader.
  • When it comes to structuring a transaction, other issues can muddy the waters. We know of a business where the son paid the father considerably more than the business’ value, simply because that is what the father needed to support his retirement.

None of these challenges are insurmountable.  However, the role of the business advisor is very important – often a trusted outsider is in the best position to mediate a successful outcome.  An important first step is to simply acknowledge that the issues exist.  We like to sit down with the father and son together, very early in the process, and talk about the typical perceptions of fathers and sons.  In almost every case, both are smiling and nodding as we describe the typical attitudes.

As in every new engagement, it is also critical to talk to each party individually about their own personal, family and business objectives.  By understanding what each really wants, we have a better chance to identify a path to achieve a happy outcome.

As Fazail concludes:

In the end perhaps the father/son relationship in a family business will always be tumultuous, but when both men learn to adapt and accept each other’s abilities, ideas and desire, they can often bring change for the better. Family businesses do not have to be a zero sum game and as advisers we can strive for a middle ground, creating structures and processes where both men learn new behaviors and have the tools to combine their talents to form a winning team – the next gen learns from the old pro and vice versa.

 

Contact us to learn how our VEER approach can help achieve your business transition goals.

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