This morning I enjoyed immensely speaking at the Transeo Summit. Besides speaking on the need for family business to become more strategic and beefing up their corporate governance, I spoke extensively on the needed for family businesses to think ahead on succession planning and to treat it as a journey and not an event.

I had fun retelling my favourite joke about succession planning in family business:-

A successful businessman sat down with his son to discuss his role in the family business, now that he had finished successfully his university studies . He said to him, “To show you how much I care, I’ve made you a 50-50 partner in my business. All you have to do is go to the factory every day and learn how everything works.”

The on said, “That’s very kind of you but I hate factories. I can’t stand the noise.”

“Oh, I see,” said the father. “In that case, you can work in the office and take charge of some of the operations there.”

“That’s very kind of you but I hate office work too,” said the son. “I can’t stand being stuck behind a desk in an office all day, every day.”

At this point the father was getting a little annoyed and said “I just made you half-owner of a huge money-making organisation, but you don’t like factories and you won’t work in a office. What am I going to do with you?”

“Easy,” said the son “Buy me out.”

Academic research points to the important role that exposure and affective commitment play in family business succession. Engagement with the business at a young age and ongoing conversations about joining the family business can help lay a strong foundation for a successful transition. In my work with family business, those who succeed at succession often speak with the next generation about growth opportunities, competition, the history of the firm, and the ups and downs of a family business. They actively find ways for the next generation to explore how their priorities and desires could line up with the company’s goals and aspirations……and whether this alignment is possible. Founders can also give their offspring opportunities to shadow family business leaders.

I often face circumstances, where the 1st generation family business leaders, sees his offspring as sincere, reliable and caring, but then do not believe that they are sufficiently competent to run the family business. How to go about such instances? It helps on agreeing on the criteria to increase their competence, on how to expanding business networks.

This is just a taste. There are then the circumstances where an in-family succession is not possible and hence a sale to 3rd parties needs to be considered. But that is a discussion for another day.