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Helping Family Businesses
Prosper Across Generations®

Don't Answer Too Quickly

Who should be my successor? How much of our profits should we distribute to shareholders? Should we invite my nephew into the business? How much debt should we have on our balance sheet? We hear questions like these almost every day. We are asked such questions when answers are not obvious — or when the questioner fears that the obvious answer will lead to conflict.

When such immediate and demanding questions are asked, the asker usually earnestly wants an answer. But quick, straightforward answers are rare. And as strange as it may seem, answers are often less important than processes through which answers can be developed and the structures in which processes can operate.

A high profile, publicly-traded family-controlled company recently dealt with the selection of a successor to the CEO and Chairman. Since there were several candidates, including two family members, much speculation ensued about who might be selected and family conflict over the decision.

As a public company, a well developed board with outstanding outside directors was in place. And in anticipation of difficult questions arising in the process of the coming generational transition, the family developed a family council with acting committees. With these structures in place, the family engaged in processes that clarified inputs, facilitated discussions and provided mechanisms for resolving conflicts and making decisions.

Ultimately, a successor was chosen. Feared conflicts did not materialize. The family’s commitment to the business and to the family remained untarnished.

Since the board and family council were in place and functioning well, the probability of making the right decision was improved. The likelihood of the decision being accepted by all was enhanced. At the same time, the danger of making a wrong decision was reduced. Without the ability to process decisions appropriately, the risks to the family and the business would be much higher, despite reaching the same conclusions.

Family businesses should strive to anticipate critical questions far in advance and to establish structures and processes to gain answers before those answers are needed.

 

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