What can you do when the company founder doesn't want to retire?
Dear Annie: I had to laugh when I read Fortune’s recent piece about the awkwardness of having to fire a friend because while I’m sure that’s not easy, it’s a piece of cake compared to what my two siblings and I are trying to do. Long story short, we’ve been running the family business, which my father founded almost 50 years ago. The “kids” (ages 35, 39, and 42) started part-time as teenagers, and have worked our way up over the years to the point where we are in charge of just about everything. The problem is, our dad is still CEO, at age 82. We love him but, for the past year or so, he’s been making some decisions that we think are wrongheaded and could send the business in the wrong direction. We’ve been encouraging him to retire (for one thing, my mom would like to travel and see the world while they still can), so now the whole extended clan is angry with us for trying to “force him out.” If there’s any way to make this easier, I can’t see it. Can you? — The Three Musketeers
Dear T.T.M.: Cold comfort though it might be, this is one of the thorniest issues family businesses face and a big reason why only about a third of them survive from the first generation to the second, and just 12% make it to the third. Sometimes that’s because entrepreneurs’ offspring screw up, but it’s also not unusual for founders to hang on long after they’ve started to damage the company. For a spectacularly messy (and public) example, just look at what’s been going on at Viacom. The trouble, as you’ve noticed, is that emotional relationships get all tangled up with what’s best for the business, especially when the “whole extended clan,” as you say, starts chiming in.
Luckily, there are ways of making this a little less awful. “The first step is to change what you’re trying to achieve, at least in the short term,” says Henry Hutcheson, author of a new book you might want to check out, Dirty Little Secrets: Ensuring Success From One Generation to the Next. Instead of insisting that your dad retire completely right away, “create a new role for him, where he stays with the company. He just doesn’t lead it anymore.”
Hutcheson speaks from experience, both his own and his clients’. He grew up in a family business, Olan Mills Portrait Studios, which had over 1,000 locations across the U.S. in its heyday (before cell phones made its product obsolete). Like you, he worked for the company part-time in his teens. After college, he did a stint with IBM in Asia before starting his consulting company, Family Business USA.
He points out two reasons why a gradual, phased-in retirement usually makes more sense for everyone than an abrupt exit. First, having devoted decades to building the business, most founders can’t quit cold turkey. “The big hurdle is psychological,” Hutcheson says. “The business is a large part of their identity.” A second consideration: Why throw the baby out with the bathwater? The company can most likely still benefit from your dad’s contacts, his relationships with customers and suppliers, his technical expertise, or all three. If he’s suddenly gone on a cruise around the world, you could lose access to that.
So try slowing down a little. First, Hutcheson says, if you haven’t already done so, schedule a meeting. “Have a frank discussion with him,” says Hutcheson. “Explain exactly why you and your siblings believe it’s time for you to start carrying the ball, and be ready to counter any reservations or objections he might bring up. Point to facts and figures about how the business is doing and how you see it progressing. Before he can let go, he needs to be persuaded you’ve ‘got this.'”
At the same time, cut back your dad’s hours in the office. “Begin with Fridays — no coming in to work, no phone calls, no email, nothing work-related,” says Hutcheson. “Then, gradually extend the time when he’s not working to two days a week, then three, and so on.” As the company’s founder and CEO for five decades, he’s probably not used to taking much time off. He might find he enjoys it.
Another tactic that often works: Put your dad in charge of something. That may sound counterintuitive, but “you can identify a role he can play and say, ‘We need you to run this piece of the business,’” says Hutcheson. “It’s a big step down from running the whole company, but now he has a specific functional job he’s good at. This lets ‘the kids’ get on with running everything else.” Hutcheson worked with one agribusiness company where the patriarch was a trained horticulturist whose children put him in charge of “solving a persistent production problem they were having. His expertise in that one area was a real asset.”
Then, since your entire extended family is already weighing in anyway, invite everyone to an all-family meeting at least once a year. “This is the most important thing you can do to keep family conflict to a minimum,” says Hutcheson. “Hold these get-togethers consistently, tell how the business is doing, and explain the thinking behind important decisions and plans. Then give everyone a chance to ask questions and air whatever concerns they have.”
Naturally, relatives won’t see eye-to-eye with you on everything. But giving everybody as much information as you can, and encouraging open discussion, “obviates the need for the grapevine and the rumor mill to go wild,” Hutcheson says — and might even make next Thanksgiving dinner a little less frosty.
Talkback: Have you ever worked for a family-owned business where succession at the top became an issue? How did it turn out? Leave a comment below.
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