The key persons in the entire process of business transfer from one generation to another are the founders. Preparing the company is almost impossible, and the preparation of the family is definitely impossible without their decision and their full cooperation. Preparing successors is uncertain without their proper support and approach to the whole process of transition from the first to the next generation. In addition to participating in these three facets of preparation, the founders must also work on their own preparation, and it is paradoxically reflected in the fact that one day they will no longer do what they have been used to doing all their life. Their preparation is reflected in the fact that when, according to the desired scenario the willing and prepared successor takes over a professionalized company, they are ready not only to approve it but also support it.
Planning to exit the operational business management
I think and I am certain, and I also warmly recommend that the founders think long and hard about when they will retire from the operating business, how they will do it and what they will do next. Yes, when they are nearing the end of their contemplation on the subject, they should sit down and talk, not once but several times, with the members of the next generation and only after having done so make the founders’ joint decision. It is neither a typo nor a logical mistake that it says „make a joint founders’ decision“ here. Joint, because they will talk, and founders’ because in the end they will choose. With a cool head. Slowly. Why?
Let us take a few steps back again. Let us repeat. Our starting point is the assumption that the successors first wanted to, and then prepared themselves in order to work in the family company. After years of preparation and work, they are ready to become the head of the company, manage and take responsibility for business results. Judging by the founders’ high demands, which they came to by looking in the mirror and seeing in it what others were telling him, the successors will never be ready enough to run companies as founders. And that is right – they will not be ready to run companies like the founders did. Luckily. But biological successors can be better than their parents, the founders, in many things. They will have better knowledge of planning, budgeting and working with people. Let us emphasize this again – it is very unlikely that they will be better at what the founder did best, that they will have such a good and insightful entrepreneurial flair as the charismatic founder had. Successors are more likely to be challenged to lead a compact team that will run the company. And I remind again that entrepreneurial spirit and energy are necessary to start a business. An educated manager, or if you really want and you like it better, a leader, should provide the company the business further development. And after all the listed preparations, it is time to give them a chance. I am talking about seriously prepared people who have to show what they know.
And what about the founders? The founders, primarily in their heads, should clearly separate the role and function of MANAGEMENT / OPERATIONAL MANAGEMENT from the role and function of OWNERSHIP MANAGEMENT. First and foremost, I am talking about the transition in management and not about changing the ownership structure. The change of ownership share while founders are alive is part of a completely different set of contemplations and decisions“. No one has asked him/her to die, far from it. No, he/she is not expected to go fishing or look after grandchildren or great-grandchildren. He/she is required to refrain from interfering in the operational management of the company. They will be the head of, for example, the supervisory board. And the hard truth is that this is not enough for the founders. There is no adrenaline rush they are used to, yet they must not and should not seek that adrenaline in their company. Using the terminology of young people, the founders are hooked on their companies, they are dependent on them as a drug addict is be to drugs. Well, no serious drug addict gets off the drug „cold turkey“. That is why the founders need another career.
My advice to the founders is to plan their new career. They ought to plan what they will deal with on a daily basis. They can start some new related business. Or start doing something completely different that occurred to them in the early days of the company’s crazy growth, and which they wisely gave up so as not to jeopardize their company’s business. They can turn to some passions that they could not realize then. It would be wonderful if this new career was a foundation that would leave their mark.
I find it important to add something else – there is an age when it is best to make such plans. There is both a lower and an upper limit when a plan to retire a founder needs to be prepared, both for when it is too early and when it is too late. It is too early before they approach the age of 55, because until then there is still a lot of enthusiasm and unfulfilled dreams about the company that the founder started and it is not yet time to dream new dreams. As the sixty-five passes and the seventies approach, it becomes increasingly difficult to plan what to do in the coming decades. More and more, the one from above interferes in such plans, both with those who believe that he exists and with those who know it and with those who hope that he is not there, but who has nevertheless kept them safe all these years. I note that I am talking about the age when one approaches the process of planning another career, and not about when that other career begins. Another career can start full throttle at, for example, the age of 67, which resulted from planning that began at the age of 62, for example.
I must further explain the recommendation „each founder must tell their successor when they intend to cease running the operations in the company.“ The answer can also be – I will never retire, I will come here as long as I live, and I will interfere in every operative nonsense that comes up. However, that sentence must be uttered loud and clear. If someone is so selfish as a founder, then at least let him be a responsible parent and let him say this out loud so that the successors can make a decision about what they will do with their lives and their careers.
Excerpt from book “Founders, successors, managers”, Boris Vukić
Boris Vukić is an author of the book „The Founders, Successors, Managers“, created as result of ten years work with companies that are dealing with a change of management and ownership transfer from the first to the second generation. In the book he explain his approach based on four preparations – successors, companies, founders and families.