What owners wish they knew about succession years before they started:
The need for psychological safety, emotional intelligence, and empathetic communication
What happens when family connectedness becomes entangled
The consequence of unresolved envy
A tool needed to pass authority and decision-making to family members
The pressure cooker environment for upcoming leaders
The difficulty with labels and classifications
Transition is a Perilous journey
You have made the decision to plan for succession of your family business. After years of involving family members in the business; training, developing, and exposing younger generations to the intricacies of your company, it’s time to begin putting a formal process in place that will allow you to celebrate your success while witnessing your loved one’s step into the role of owner-manager. Swelling with pride and anticipation, you announce your decision during a family meeting. As you close the meeting, you find yourself thinking, “This is going to be a piece of cake. My children are excited and ready to begin this process, and I’m ready to take more time away from my business.”
Six months later the excitement turns into frustration as the realities of transition set in. No matter how prepared you and the family are for the activities and tasks of transition, there is something more going on. Significant transitions trigger hidden threats that can rock the foundation of the family and the business during this 3–5-year journey. The intersection of the family and business systems and the personal psychology within the family and key business leaders play a critical role in the family succession process.
The Intersection of Family and Business Systems
During the early stages of succession, impending change can create psychological triggers that destabilize the family system and impact the business culture. The long-standing ways of being and doing subconsciously embedded into the family create obstacles for family problem solving and decision making; family relational dynamics become more pronounced, and without effective preparation personal psychology can create stumbling blocks for a successful transition.
Family System Hang-ups
As a result of family and life experiences, unresolved hurts (both conscious and subconscious) can erupt through interpersonal behaviors of family members and negatively impact the family relationships and workplace culture. When behaviors emerge that threaten success, there are at least three helpful approaches an owner can take to reduce their impact:
Create a psychologically safe environment. When people feel comfortable being themselves, they bring their best to the group. It allows for openness, receptivity, and freedom to share ideas, make mistakes, and recover in a gracious manner. According to Dr. Amy Edmondson, author of The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth, it is a space to share “half-baked” ideas, ask questions that seem unrelated to the topic, and brainstorm without judgement. It also gives room for some reactionary behavior, emotion, and irrational thought. In this space harmful undercurrents of family and individual interpersonal challenges can appear, giving the opportunity for the group to gain insight, awareness, and resolution can produce healing across generations.
Develop a pattern of empathetic communication. Increasing the emotional intelligence of family members can support the development of empathy. Taking time to ask how the other person is feeling, assessing how you are feeling, and seeking a way to move forward together models empathetic learning and understanding. In essence, encourage curiosity toward each other rather than judgement. Practice actively listening to one another, looking at the emotion being communicated more than the words being spoken. Seek to understand before being understood. Create an environment of respectful speech, while challenging each other’s thinking opens the way for deeper, more meaningful conversations that address root issues instead of surface level symptoms.
Encourage awareness of self and others. As the owner, and likely leader of the family and business transition, your role of telling people what to do shifts to helping others with personal growth. As in most situations, transformation begins with the owner’s awareness of the need for personal change, and then reproduces that awareness throughout the family and company. As you move through your business transition, family dynamics shift, business roles change, times of uncertainty and ambiguity materialize, and complexity increases to create a “hot bed” of psychological triggers for both family and non-family leaders. Your decision to shift leadership style during this significant time of change, and then supporting the awareness of others, can cool the heat rising to the surface.
Family Entanglements
Seek family interdependent independence. In family business environments, it can be more difficult to establish a healthy sense of self while staying connected to the family. These family entanglements stunt the growth of the younger generation and frustrate owners as they prepare to pass their life’s work onto them. This stage of self-expression typically occurs as a rite of passage during the transition to adulthood. But family members who entered the business early likely forgo their differentiation process to gain approval from their parent, both as a child and a contributor to the family business. As members in the next generation become motivated to establish a sense of independence, they may seek opportunities beyond the family business, push against embedded family roles, and struggle to build sufficient space for constructing a separate identity, ultimately impacting their marriage relationship and ability to successfully establish their own nuclear family outside the parent/sibling family. You can avoid this struggle (and reduce your personal frustration) through the intentional development of interdependent independence by collectively establishing family and business boundaries that support connectedness of the family, role clarity in the business, and separateness of the individual.
Avoid Fueling Rivalry. As an owner you may be tempted to spark competition and comparison among the next generation to determine who will rise to the level of CEO. Afterall, these strengths have been highly valuable to your entrepreneurial drive and success. However, comparisons among children, cousins, or family branches can have a negative impact on succession. There is fine line between growth and destruction when family members begin jockeying for approval. Envy is driven by the perception of resource scarcity, a sense of inadequacy, or a need for love and approval. Left unchecked, healthy familial competition can turn into overt jealousy and rivalry among its members. Owners can quickly find themselves in meetings filled with inappropriate, child-like behavior, causing shame and embarrassment to the family and shock or disdain from non-family employees. As you move through succession, it will go a long way to express love, allow for emotional sharing, affirm the strengths and contributions of each family member, and establish clarity for the role each will fill in the future. Most importantly, avoid making succession an interpersonal competition.
Develop a problem-solving system. Problem identification, framing, and solving are crucial skills in any business. Providing opportunity for upcoming leaders to critically think through the problem-solving process and creating space for them to fail is essential for developing competent leaders. Many owners struggle to let the next generation make mistakes fearing things won’t be done right, they may get out of control, or believing the leadership team may be incapable of solving the problem. All of these beliefs will tempt you to take back responsibility or override the team’s problem-solving process. Yet, next gen leaders must develop these skills and it is often best done in collaboration with peers. Your ability to institute an effective problem-solving system creates room for development of the leadership team and reduces your stress as you hand-off decision-making. Keep in mind that your personal style of problem-solving may not match the needs of the larger team. Working together to form a simple system will reap both psychological and tangible reward.
The Role of Personal Psychology
Beyond the family system dynamics that occur both below and above the surface, personal psychology adds further complexity to succession success.
The personal psychology of owners. Identity is a powerful driver of behavior and our identities are shaped by both nature (biologically determined characteristics) and nurture (life experiences; particularly with caregivers in the early years) - owners are no exception. As an owner of a mid-market business, you are likely achievement oriented, dislike routine work, have a high level of energy, are willing to take calculated risks, and convey a sense of purpose and conviction that is contagious throughout the company. An owner’s identity can be difficult to separate from their role at points of significant transition. As a result, transferring responsibilities and workload, may create subconscious responses that make the process difficult because the psychology that produced the behaviors that made you successful will continue to emerge and can become disruptive to the transition plan. Absent intentional effort and despite your cognitive decision to make changes, the emotional and psychological self needs time to catch up. The obstacles owners must overcome to navigate transition well include:
Curbing the natural tendency for “just in time solutions” to move through transition with intentionality.
Using self-awareness to monitor their needs and reactions to identify and rationalize triggers
Actively engaging in self-regulation of their emotions and need for control
Subduing their typically adverse reactions to the constraints of structure, process, and limitations
Conquering their need for autonomy and independence.
Failure to succeed in one or more of these areas can lead to power struggles between generations, repeated failed transition attempts, broken trust and ineffective or uncoordinated leadership decision-making. Taking time to evaluate your inner needs and create new avenues outside of the business to fulfill those needs, can go a long way in smoothing the road to succession.
The emotional family stew. Transitions mean change for everyone. Next gen family members come face to face with their inner narratives at the same time the current gen owner(s) must face their own inner struggles. Adult children may experience the need for independence and autonomy heighten, as uncertainty and ambiguity advance in their growing role. Adult children who have not work outside the family business may find their desire to satisfy unmet needs for independence create an inner turmoil filled with competing loyalties to self and family. Current gen owners may struggle with concern about burdening their children and/or the children not being adequately prepared to take over. Regardless of the generation, spending time in self-reflection; seeking out root motives and the underlying psychology that drives their emotion before the transitions begins will increase resilience when the challenges of transition peak. In addition, socioemotional wealth can be enhanced when both current and next generation owners work to prevent their psychology getting the better of them by using empathetic communication, self-reflection, and self-regulation.
Labels and classifications. Creating a sense of identity is a natural part of being human. People want to know and be known. This need for identification creates a desire to label and classify many aspects of life. In the workplace titles help fill this need. In families, the labels revolve around the position in the family: parent, middle child, youngest, oldest, favored, black sheep, and the list goes on. When labels are reinforced, it can both help and hurt. Someone labeled as the black sheep in the family during their teen years, may find it almost impossible to shake off, even after a decade of successful adulthood. Another child may be deemed the “good child”, creating a belief that this child will always get more favor than the other siblings. The label of parent can cause the owner to continually treat their offspring as little children, even when they have grown and have families of their own. Learning to release long-standing classifications and relating to each other as adults, creates an opportunity for openness and new learning to occur. Considering each person uniquely distinct from their job title or family labels establishes value in the individual while accessing more opportunity for collaboration. It can elevate discussions and reduce self-serving or self-protective behaviors that threaten to hinder solutions for the overall business need.
Conclusion
Of the three types of significant transition (scale, sale, and succession) owners face, family succession is the most challenging. It is fraught with intergenerational conflict, competing needs, and triggers that create turmoil in the inner world of both current and next gen owners. If you expect that more is going on in your succession planning than the task and activities at hand, but can’t pinpoint the issues reach out to Orange Kiwi, LLC to learn how our services can unearth the hidden issues and get you moving forward again.