Pass the Torch Without Burning Down the House

Pass the Torch Without Burning Down the House

For family businesses, succession is a significant process of transitioning management, leadership, and ownership from one generation to the next. It involves transferring both tangible assets and the intangibles defining the business—its values, history, culture, and accumulated learning. Despite the critical nature of succession and a common desire to continue into the next generation, many family businesses find themselves unprepared. Or worse, they risk striking a match under the foundation they’ve worked so hard to build. As the torch is passed, it’s important to recognize the common problems and misconceptions that can fuel conflict, jeopardize relationships, and threaten their legacy. 

Believing It’ll Work Itself Out. Believing that succession will work itself out is a common misconception among family businesses. Many overlook the need for an intentional succession planning process, viewing it as a singular event rather than a comprehensive process. They may assume that the transition will happen naturally or that family members will somehow figure it out independently. However, such beliefs often lead to chaos, uncertainty, and disputes, rather than the smooth transition they anticipate.

Ignoring Unresolved Conflict. Turning a blind eye to emotional baggage in a family business is like ignoring a lit match in a room full of gasoline. Simmering resentments and unspoken tensions are fuel, ready to ignite at the slightest provocation – and succession, with all its complexity and pressure, is more than a little spark. Acknowledging and addressing these underlying issues, seeking professional help if necessary, is an important step toward a smooth transition.

Confusing Equal with Fair. Treating each family member equally when it comes to ownership or leadership roles may seem like a fair approach. However, “equal” doesn’t always mean “fair.” An equal distribution of assets or responsibilities may not align with each family member’s strengths or contributions. Instead, ownership and leadership should be based on merit, skills and interests, rather than solely on family relationships. This approach ensures that the right people are in the right positions.

Failing to Engage the Next Generation. Succession isn’t just about preparing the next person to stand at the helm; it’s about involving the entire next generation in meaningful ways. Opportunities for learning, decision-making and professional development foster a sense of ownership and commitment to carry the family legacy forward. Neglecting to actively engage the next generation in the succession process is leaving the future of the family business to chance.

Holding Too Tightly to Tradition. While traditions can be a source of strength and identity, they can also be a stumbling block. Clinging to the way things have always been done may alienate younger generations or prevent the exploration of new ideas and approaches. To pass the torch smoothly, family businesses should strike a balance between honoring tradition and embracing evolution, allowing for flexibility and openness to change while preserving the core values that define the business.

Successfully passing the torch in a family business is a complex and delicate process. The issues that can arise are potentially destructive – including our own emotional blind spots and logical fallacies. Key pillars such as careful planning, conflict resolution, open communication and emotional preparedness play a critical role in succeeding at succession and lighting the way for future generations.