So, if as we discussed in our last post next generation “heirs apparent” need real P&L experience how can this happen in a way that helps everyone develop confidence without putting the entire enterprise at risk?
The answer, of course, will be different depending upon the family and the business itself. But here are a couple of examples:
- Some family businesses have subsidiaries where the P&L can be judged separately from the main business.
- When family businesses decide to grow through M&A activity they may have the opportunity to allow a developing leader to take-charge of the P&L of a newly acquired organization for a significant period of time to prepare its operations to be better integrated into the parent company.
One great family I know found an interesting solution to what was becoming a bitter family conflict. Father and son were simply not able to work together and the tension was becoming unbearable.
The father was a “production guy” who had built great value in his business through innovation. Son was a “marketing guy” who saw that the national market in which his father had taken the company required a different approach to compete. The rest of the family believed this son was the right one to succeed his father at retirement but the father could not see that ability in his son.
When an opportunity presented itself to enter a different business in the same market as the family company the son pitched the idea to his dad. The father saw danger in integrating this new type of business into their proven business model but offered to finance a new start-up if his son would leave the family business and run the new enterprise.
The father’s motives may have been a combination of helping his son and relieving tension in the family and the company but it turned out to be a brilliant strategy. When the son’s company proved the success of the new business model over the next few years his dad was proud and began to see his skills in a different light. Today, the two companies have merged and the son has succeeded his father, “just the way dad always dreamed it should be.”