Do you recall school days when you would raise two fingers to your forehead in an abbreviated salute to ask “permission please” to go to the bathroom? I am often reminded of that gesture and the power differential it signifies in my work with family businesses. Except in these cases, it is founder Dad or Mom who is the dispenser of all privileges to adult men and women held captive by the promise of things to come. “One day this will all be yours,” they entice their children, whom they expect to wait patiently for the top post, or a better salary or dividends or shares in the business. Or worse yet—for the authority to make and execute business decisions in their own capacity. It is a fairly common occurrence and one that is painful to watch.
Whenever I encounter these situations where presumed successors are given responsibility without the authority to implement the goals, or are expected to work for peanuts waiting for the dangling carrots, I look at the senior generation to help me make sense of what is clearly an untenable position. The answers are fairly typical: “Oh, they need to develop more” and “nobody ever gave me anything, I had to earn it” and “we need to keep reinvesting in the business and cannot take dividends.” It boggles the imagination these comments refer to men and women who have been working in the business for more than a decade and to a business that has achieved stability and profitable growth. In the meantime, their adult children are chafing at the bit to get on with their own self-actualisation and frequently suffer the humiliation of having to defer to their parents to meet their expenses. Let us first consider the issue of relinquishing or at very least sharing the decision-making.
The granting of more power to the next generation is very difficult for some of the senior generation who plan to hold the reins till they die. There is no retirement plan: God is their human resource consultant and they go only when they depart this world. While still alive, they cede not an iota of control to their children. The literature in family business succession offers many reasons for this—seniors fear that the next generation will do a better job and show them up; it will become obvious they are no longer needed; they fear the business will fall apart; and, of course, they have no idea what they will do if they lose their total authority and position. The latter is particularly poignant and some people actually believe if they “slow down” in any way, they are bound to die within the year. These folks are able to cite evidence of some friend or random person who retired or reduced his workload and suddenly died right after. There is a deeper reality than all these excuses and it is intricately connected to the kind of ego that drives an entrepreneur as well as good old-fashioned rivalry, especially between the alpha males in the family. The remedies for these situations are sacred and profane. Sometimes it is addressed by setting up a new role for the senior member of the family. At other times, the family must confront the demon of power and control. Failure to effectively deal with this problem, though, opens the door for stagnation in the business and conflict between parents and children.
Carats and carrots
The senior generation’s power extends to the purse strings. They hold on to the shares and dispense financial remunerations as they see fit. The guise is that if we keep pouring the profits back into the business, it will expand exponentially and someday the rewards will be astounding.
The message to the next generation is to keep working like the proverbial donkey and you will get the reward one day, except that the day and the reward are never identified.
This may have motivated a founder in a different time, but it just will not hold water in today’s environment.