When it comes to family, we all have succession issues

Leadership succession is one of the most difficult issues owners of family-run-businesses will face. Often, many businesses fail because succession is not handled properly. Either leaders fail to organize succession before retirement, they never retire, or they do not prepare their children to work together.

Wrestling with how to create a comprehensive succession plan is something all businesses face, regardless of size. One would imagine that very smart people who run very large businesses would have a better handle on how to develop a proper plan, but even at the highest level, it is still a challenge.

Succession planning is an important factor in generational handoffs, and the benefits—or consequences, if mismanaged—are clear. For instance, compare the outcomes of third- and fourth-generation successions such as the Sulzbergers (The New York Times) and Bancrofts (Dow Jones). The Sulzbergers successfully transitioned The New York Times’ board and publisher to the next generation with barely any public notice, in large part due to meticulous preparation and planning. Conversely, the Bancroft family’s sale of the marquee Wall Street Journal in 2007 resulted in family acrimony and regret years later. These examples reflect the importance of outside advisors.

Failure to properly plan the transfer of a business often boils down to a simple reason—it’s scary for most. Giving away control is not an owner’s expertise. His or her expertise is the management of the business. And for many owners, it is easy to stay in that place. Family dynamics can be challenging enough at Thanksgiving dinner, let alone when deciding who will carry on the legacy of the family business! And the concept of giving every loved one his or her “fair share” can cripple family businesses. In fact, being “fair” can destroy most businesses and many relationships.

One of the most common practices business owners avoid is working ON their business, because they get stuck working IN their business. One of the most common reasons for avoiding succession planning is that many owners do not have a large pool of talented employees they can entrust with managing day-to-day tasks, which limits how they allocate their time. Although finding talented and motivated employees can be extremely time consuming, this is one of the first steps an owner should take when contemplating a succession plan. While there are many different reasons behind why people push off succession planning, here are a few:

  1. We think we’re immortal: As those in the funeral service profession know, life is finite. Long-term tasks are often easy to push off so that more time-sensitive matters can be handled. Succession planning is usually not the most immediate business need, and basic contingency plans, such as a will, can be written to provide generic transition direction. However, “I don’t need to worry about that now” can become a permanent state of mind.
  2. Succession planning asks us to plan for our own obsolescence: Many entrepreneurs and family business owners have a disproportionate share of their identity wrapped around what they do. This is what gives them the most personal satisfaction. But succession planning forces owners to think of themselves outside of their business, which is difficult. For years, owners put in the extra hours that most people would not be willing to and literally shed blood, sweat and tears to build a successful business. Planning for a scenario that does not include them is hard and can also lead to dealing with other challenging questions involving what they want to do after they stop working.
  3. Choosing the right successor is not easy: Sometimes succession planning requires making difficult choices between competing family members, and most of us would rather avoid that topic than risk ruining a relationship. When evaluating who is best suited to the task, an owner may find that some, or even all of their family members may not be willing or able to assume the reins. While it’s easy to objectively say that is perfectly fine, it can be a tough pill for the operator or family members to swallow.

    However, not planning leaves the business vulnerable and could create much larger family issues than if the owner had named a successor. Decisiveness is important and, worst-case scenario, if the owner is labeled as the “bad guy” for a short time, it’s important to realize that the choice ensured long-term success.
  4. Objective business valuation can be painful: We may have to come face to face with the reality that the business isn’t worth what we think it is (or we think it will be worth more later).
  5. Fear of creating internal turmoil: We may fear that doing this sort of planning will create uncertainty, which will hurt the business, even if that is not true.
  6. Managing daily operations gets in the way: Owners are too busy running the business and making money to worry about a succession plan.

From our perspective, the most profound and least researched question in the family enterprise community is, “Who will take over once I am ready to retire?”

Although there are many thoughtful and capable professionals who can help with the challenges ahead, we recommend a few simple tips that will help provide a better understanding of how to develop a solid succession plan.

Executing these tasks takes vulnerability, collective clarity, transparency, objectivity, patience, and a lot of repetition and discipline. At the end of the day, planning (whether ownership succession, management succession or strategic business planning) as an exercise is selectively eliminating options and narrowing focus, and we humans struggle to accomplish this. Even though the general process outlined may be hard to complete, if followed, it will assist you when sharing your plan with a service provider, wealth manager or your family.

  • The process should be as objective as possible and begin with the business needs. Sometimes, one family member clearly stands out as the next leader, but this is not always the case. A proper process will start with documenting both the long- and short-term needs of the business and identifying the skills the leadership team should possess. Once these items have been addressed, potential candidates can be considered. It is important that the new leader should display an evident alignment with the family values, work ethic and vision for the business.
  • A clear, comprehensive vision for the future must be identified and should use empirical data gathered during the evaluation of the business. Once the needs of the business have been documented, the owner can use the information to drive a future vision for the firm. Is there market potential for expansion? Is there a need to diversify offerings? As the owner works through the vision of the business, they can begin to create a rough list of candidates who would best fit with both the current and future vision of the business. As the vision is finalized and key goals are created, the owner will be free to narrow their list of successors.
  • Several options should be considered, including hiring a non-family executive and changing the structure of the leadership team. The future leadership team is not fixed, and it can take a different form if a change will lead to increased success. In most family or entrepreneurial businesses, the founder is often the CEO, which leaves a substantial hole to fill. However, a restructuring of how business decisions are made can ultimately improve efficiency.

    This could take the form of a more collegiate approach with the creation of an executive committee that works together and votes on business dealings. Too often, family businesses limit their thinking to the obvious candidates, such as the leader’s children, which can put undue pressure on the children and severely limit the potential for proper recruitment. Evaluating family members who have not been active in the business can be a good option to foster stronger relationships.

    Similarly, considering appointing a non-family CEO can extend the choices to the benefit of the business. Leadership teams can take any form the owner likes but should always be driven by the evaluation of the business and identification of needs.
  • Begin the transition process early and allow the next generation to get involved as soon as possible. Work closely with those who have been chosen to lead the business as early as possible. After all, the business only became successful due to the systems implemented by the owner. Share all the knowledge you can with the next leadership team. However, remember that honoring family traditions should not be done at the expense of future growth or firm success. During this stage of the process, the owner can also begin planning beyond the next hand-off and address any internal succession issues that may arise.
  • Be aware of the federal tax reform law Congress passed as it has ramifications for family-owned businesses and how they are ultimately transitioned from one generation to the next.
  • After retirement, remain supportive of the leadership team and act as a mentor. Although it may be emotionally difficult to transfer control, vision and authority of the business, the previous owner can still play an active role and be there to provide sound advice or act as an ear to listen to any issues the leadership team faces. Although the owner may not be officially active in the business, a smart leadership team will know to come to him or her if they need help.

We find the succession planning process is much more effective if all parties are open to discussion, self-reflection and resolution of current or future conflicts and relationship issues, as well as seeking professional help as needed. We recommend starting this process sooner rather than later. Without any planning, the result can be intra-family discord potentially including litigation, that could cause damage to or loss of control over ownership of the family business.

As each family and family business has its unique issues and goals, and succession planning involves complex considerations, it is important to work through the process with advisors who have extensive experience in this type of planning in order to reach the most successful outcome for your business.


The Roosevelt Investment Group, LLC traces its roots back to 1971, when President Theodore Roosevelt’s cousin, P. James Roosevelt, started the investment firm P. James Roosevelt, Inc., focused on endowments and high-net-worth individuals. Throughout our history, we have emphasized risk management and long-term capital protection. We know our clients have worked hard to build wealth, and we see our role as long-term stewards of your capital. We build investment plans that span generations. We have been privileged to manage the investment assets for prominent families including several members of the Roosevelt family*, various institutional clients, individuals, business owners, and professionals in the funeral and cemetery business.

We also have Practice Groups that specialize in the unique needs of:

  • Financial Planning
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  • Trust Management


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