Preparing for a family business succession conversation

By Steven Seel, Wealth Strategist and Dan Griffith, CEPA^®, Director of Wealth Strategy

When planning to pass down the family business, owners grapple with challenges common to all companies, but with the added overlay of family dynamics. Will one child feel less favored? Is an uncle still seething over a succession plan he opposed? Will your sister think she’s being pushed aside?

Open communication will be key to easing tensions, avoiding strife, creating a shared vision for the family business, and resulting in more effective leadership. Getting everyone talking can be particularly important when a business is being transferred to new leaders inside or outside the family. For constructive and efficient conversations, there are several issues to consider.

What’s necessary for a constructive family business succession conversation

Before sitting down to discuss important family matters that may change a person’s life or significantly disrupt a family’s dynamics, it would be wise to consider some guidelines to avoid or reduce such impacts.

• Create the right guest list. Invite the people affected or involved in a planning decision, but not every person needs to attend every conversation. You may want to have separate conversations with those who are actively involved in the business and with the nonactive participants.

• Invite an objective outsider. Family dynamics can throw a meeting off the rails without warning, so an impartial facilitator can help keep things on track. An objective, non-threatening outside party can sit down with everyone, talk through the planning process, and ask the right questions.

• Get an early start. The sooner you begin including family members in business conversations, the easier it will be to make family communication a habit. Starting early can also help you manage inevitable changes and difficulties—including the fact that the younger generation may need more time to prepare or may not want to participate.

• Set limits on information. Involving more of the family doesn’t mean disclosing everything to everyone. As you prepare for a family conversation, consider what should and shouldn’t be on the planning agenda. Each participant may require different types of information.

• Incentivize participation. Some invitees may be reluctant to attend. You may be able to draw family members in with incentives specifically tailored to them. These lures could be financial, emotional, or something unique to your situation–whatever you feel might work best.

• Keep a specific focus. It’s easy for family business succession planning meetings to get hijacked by long-buried resentments and other personal factors. If you see that developing, move quickly to get the conversation back on track. You can acknowledge people’s points, but move on, saying ‘It’s not our intention to favor one person over another. We’re here for family business reasons, and these are the ultimate results we’re looking for.’

• Be clear. As important as it is to have open communication, it’s also essential to be clear about who’s in charge and who’ll make final decisions . Ultimately, the people who own the business have the right to do as they want. If they want to donate it to charity or sell it to an outside party, they can.

• Coordinate a date to meet—and soon. The longer you delay getting the family together to talk, the more likely that the meetings will never happen. Start as soon as possible—and that basically means today, even if all you do now is schedule a meeting for six months from now. The sooner you’re doing it, the more options you’ll have—and the better the probability you’ll get the result you’re looking for.

With so many factors involved with family business successions, open and frank conversations are necessary for a successful and (hopefully) strife-free transition. Structured and thought-out discussions can be constructive and efficient with the help of a qualified team. To learn more, please contact your Huntington Private Bank team to see how we can help or find a Huntington Private Bank office near you.