Why do founders dislike retirement?

IN one of my meetings yesterday here in Vancouver, I heard this reaction from a founder and visionary after I posed a challenge on the urgency and need to initiate succession planning: “Professor, building a family business from practically nothing is all about hard work. My children never experienced any of the hardships I went through. And planning for the continuation of my business long after I am gone is actually many times harder and poses the greatest challenge for the next generation.”

“So put yourself in my shoes. There is no doubt that I deserve to enjoy life outside of the business. Who doesn’t want to spend time with one’s grandchildren? But under the circumstances, tell me, how can I let go?”

With that said, I am not surprised why founders refuse to give up power and control. For one, the process of handing the business over to the next generation is something that’s specific to each enterprise. And there are various elements that may work for one family business but not for another.

A family is strongest when united. Unfortunately, all too often a family can fall into infighting that can compromise family business succession.

Available estimates (Dun & Bradstreet, 1973) indicate that approximately 70 percent of all family firms are either sold or liquidated after the death or retirement of their founders (Beckhard and Dyer, 1983). The founder’s unexpected death can force a major upheaval in the pattern of authority and ownership distribution.

In this situation, conflict among the founder’s heirs often becomes so intense that they are unable to make the strategic decisions needed to ensure the future of the firm. Failure to plan for succession also threatens the family’s financial well-being by leaving many thorny estate issues unanswered; a distressed sale of the firm is often the result.

Max Weber, the great German sociologist, was among the first to identify the importance of having the founder of an organization turn over power to a successor who could solidify the administrative structures required for the continued development of the enterprise.

Weber (1946) referred to this process as the institutionalization of charisma and saw it as one of the greatest challenges of leadership.

Ambivalence: a major cause of a failed succession

The word “ambivalence,” according to Merriam Webster Dictionary, is a simultaneous and contradictory attitude or feeling toward an object, person or action.

Founders adopt different ways of coping with their ambivalence toward succession planning. One common response is to compromise opposing feelings by enacting a number of self-defeating behaviors. Let’s look at the case of a founder who chooses his oldest daughter to be his successor but undermines her authority by refusing to give her the coaching and training that she needs to perform competently in the top position (Rogolsky, 1988).

Anointing his daughter as the successor addresses the founder’s desire to “do something” about the continuity problem. Passively compromising the daughter’s development placates the founder’s need to remain in control. The two behaviors prevent any real progress toward a feasible succession plan.

(esoriano@wongadvisory.com)

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Prof. Soriano is an ASEAN family business advisor, book author and executive director of ASEAN-based consulting group, W+B Strategic Advisory. He is also an international business lecturer and professor at the Ateneo Graduate School of Business.
He is slated to deliver a talk to family business owners in Cebu on Feb. 18. The series of talks are part of W+B Cebu’s advocacy campaign related to family and business governance for SME’s. Those interested to reserve a slot should call the W+B Group 09228603186 and look for Ms. Jen. Registration is a requirement.
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