Succession Planning

Abstract
Case:  Succession planning without an accepted family successor
Author:   Leslie Dashew,President of Human Side of Enterprise, LLC and Founding Partner of the Aspen Family Business Group
Responding Advisors:  Cathy Sunshine, Founder & Principal, The Sunshine Consultancy, and Michael Zwell, Ph.D., is the CEO of Zwell International

Editor’s Abstract:  Cathy identifies a California-based case in which the controlling 67-year-old senior generation in a six-store motorcycle dealership is resisting a plan for next generation leadership.  He has five active offspring, each of who has partial ownership in one dealership and none of whom he thinks would be an acceptable, and universally accepted, leader.  There are conflict, resentment and resistance themes throughout this case.  Michael and Cathy each share their advice on what to do next.

Case Study for FFI Practitioner
Steven Stills, is 67 years old and owns six motorcycle dealerships in California. Steven has five children and has made each a partial owner of one of the dealerships. Despite their roles as owner/managers, none of the offspring has much control over operations at their individual stores. After ten to twenty years in the business, Steve’s kids are frustrated by the lack of opportunity they have to take a leadership role in the business.

By way of background, Steve left college after a few terms.  Like many budding entrepreneurs, his attention span was limited.  He had trouble focusing on classes that seemed to lack practical application, and he was more interested in motorcycle racing.  He came from a family of modest means, and they could not understand his throwing away an opportunity to get educated for the love of sports.  Steve was determined to prove he could make it on his own doing what he loved.  And he did.

While racing, Steve befriended an older racer who also owned a motorcycle dealership. Steve went to work for his friend in sales and excelled in the motorcycle business.  He bought his way into partnership and ultimately bought out his partner when his partner was ready to retire.  Steve and his wife, Linda, worked together at the store, and raised their five children.  The three boys joined their father in off-road racing as they grew up.  When Dad had a few too many bumps and bruises, he left the racing to the kids and focused his competitive energies on building the business.  He learned how to keep books by manually doing everything himself.  Steve checked every penny as it came in and sought every opportunity to make extra money, from installing soda vending machines, to selling clothes, to renting bikes.  He plowed every extra nickel back into the business to continue to expand.

On the family front, Steve encouraged independence in his kids as well as the same competitive spirit that helped him to be successful. The eldest child, Rosie, went to college and studied marketing.  She excelled in managing her store, gaining the respect of her employees and earning a reputation as a good corporate citizen in her community. She resented her three younger brothers who seemed to be closer to her dad, and who could get away with taking time off to race their bikes or party, despite the erratic financial performance of their stores.

Tom, the next in line, was single. He enjoyed racing, showing off for Dad and hanging out with his buddies who frequently came to the store and bought bikes and accessories from him.  Steve Jr., who was two years younger than Tom, was more of a financial guy and often bailed out his brother by overseeing the business side of Junior’s store as well as his own.  Tom was married and no longer raced.  However, he and his wife have six children of their own, and Tom wanted to spend more time with his kids than his father had spent with him.  So he often left work early to attend school and sports functions for his kids.

Lyn and Bob were twins and managed two stores together.  As the youngest in the family, their oldest sister, Rosie, often seemed like a second mother to them.  Lyn, who had twins herself, was overwhelmed with their care.  Bob, who was single, was close to his twin, but he was more likely to race and party with Tom than to tend to their stores. Lyn’s and Bob’s stores performed poorly, and Rosie tried to help them out.  Lynn and Bob alternated between appreciating Rosie’s input and resenting it.

Overall, the company did well enough to support the six families. However, the conflict and resentment among the five siblings made succession planning difficult for their father.  Steve didn’t feel he could trust his kids since they didn’t work as hard as he thought they should, didn’t get along with each other, and didn’t seem to have much discipline.  “They don’t seem to have the fire in the belly to make this business successful,” he complained.

Some of his advisors suggested that he consider separating the businesses among the kids.  However, Steve wasn’t ready to let go:  he needed the group of motorcycle stores to pay off debt from purchasing the dealerships.  Furthermore, if they each took a shop, the kids wouldn’t have the same benefits of shared buying, central support, and Steve’s oversight.  He feared they would take the businesses down.  He couldn’t see how any of them would accept the leadership of the others.  No matter what advice he was given, there was always a “yes, but…” in response.  The family was at an impasse and father and offspring were frustrated.  They sought outside help.

Biographical Information on Author of Case:
Case study created by Leslie Dashew, President of Human Side of Enterprise, LLC and Founding Partner of the Aspen Family Business Group. Leslie has also recently become a member of the Family Business Faculty of the Thunderbird School of Global Management. Leslie combined her background in organizational development and family therapy to specialize in helping families achieve their visions for the future of their families and their businesses. She co-authored Working With Family Businesses:  A Guide for Professionals and has written two other books in the field. She writes often for Family Business Magazine and serves on their advisory board. She can be contacted at 480 419-4243 or ldashew@aol.com

Response 1
This case study demonstrates a common scenario in family owned businesses. It is time to think about leadership changes, and Dad is emotionally attached to his children. He wants them to be one happy family, and he wants them to be highly competent at running the business and working together. However, the reality does not match his desires. The children exhibit sibling rivalry, and their motivations and abilities are not up to the job. Dad sees the weaknesses in his children, yet seems emotionally unready to face the reality of the situation.

It is often useful in this circumstance to take a competency-based approach to the solution. Instead of starting with the problems between family members and their issues, focus instead on the competencies required to run the business. Ask the question, “What are the key behaviors, traits, skills, and experience needed to make the business a success?”

To run Steve’s business successfully, a leader will need to be strong in results orientation, initiative, satisfying customers, analytical thinking, motivating others, concern for quality, relationship and team building, and communication skills. As Steve evaluates his children in relation to these competencies, he will most likely discover that Rosie, his eldest child, is the only offspring who is even close to having sufficient proficiency in these competencies.

Once Steve realistically evaluates his children as potential leaders, he will probably see his options more clearly. In his heart he knows that it will not be good for the business nor his other children for them to run it and fail. The options will most likely be: 1) to promote Rosie to run the business; 2) bring in an outsider to run it; 3) promote a non-family member to run it; 4) or sell the business. By analyzing the positives and negatives of each option, the best solution will emerge.

Biographical Information on Reviewer of Case:
Michael Zwell, Ph.D., is the CEO of Zwell International, a firm specializing in competency-based executive search and assessment. He has worked extensively with family businesses, and is the author of several books and many articles. He can be reached at mzwell@zwell.com, (312) 919-9494, www.zwell.com.

Response 2
Without a concerted and unified effort, the father’s resistance to letting go of control is likely to keep the kids divided and frustrated. If the children can get their acts together, perhaps there may be hope of breaking through the father’s resistance and building a unified team for the future.

Till now, Dad has had the best of all worlds: singular authority and ownership of the business as well as loyal family managers who are busy being mad at each other.  As the level of discontent rises on the parts of the children, they must resist the temptation for infighting and focus on their collective wishes and the long term benefit of the family and the business.

My approach:

Work with the children:

-Identify and align their individual and collective goals and their vision for the future of the business; build on what they have in common.
-Clarify the expectations they have of each other with regard to individual store productivity; support and assist them in working through their conflicts to become a “team.”
-Share best practices and provide strategies for mutual and cross-store support.
-If consensus can be reached, design a communication strategy to be presented to their father.

Work with the father:

-Assist the father in addressing his resistance to:
-listening to the unified needs of the children
-understanding the risks of continuing the current course of action
-releasing fears to gradually test alternative strategies
-Work with the family
-Provide strategic facilitation with the family to structure the process for future management and ownership of the business.

This approach can place the family on a track of agreement and bode positively for the future of the business and relationships among all members of the family.

Biographical Information on Reviewer of Case:
Cathy Sunshine
Founder & Principal, The Sunshine Consultancy
Cathy’s specialty is in facilitating growth in complex business and family systems.  For over 30 years, she has assisted individuals and organizations successfully set strategies, move through change, difficult transitions and conflict. She does this by coaching business executives, developing business and succession strategies, and designing environments that allow people to move ahead and achieve goals. She can be contacted at 303-629 -1991 and css@sunshineconsultancy.com.