By Ian and John Ardill
As you likely know, Ardill Group is a family business. And when a family business gets passed down from one generation to the next, it can be disastrous. For family members’ relationships with each other, and then for their relationships with clients.
That didn’t happen to us. In contrast, we regard our succession as hugely successful. We started the process in 2016, and it’s now in its closing stages. John is happy in retirement and a mentor role, Ian is happy running the business, and our clients are happy with the entire arrangement.
How did we do it? What advice would we give to business owners who want a really successful succession? We’ve given it a lot of thought – and we think it comes down to these Six Secrets of Succession.
SECRET OF SUCCESSION #1: PICK THE RIGHT PERSON
This is clearly the job of the person planning to pass along the business. This is not the time to pick your favourite child, sibling or cousin. What kind of leader, exactly, are you looking for? Does the person you’re considering truly have the right stuff? Conduct personality profiling to find out.
And make sure your prospective successor succeeds somewhere else before joining the family business. Ian, for example, was already having great success as a pastor. John already knew he was a rainmaker: it was a role that required Ian to have ideas and take them to fruition with efficiency, growing the church and ensuring its financial success along the way. He was a natural.
In a good, healthy marriage, you need two parties who really want it to work, or it won’t. It is the same thing in business succession: both the person leaving and the person coming in need to really want this.
Having trouble choosing just one successor? Whatever you do, don’t give the job to two people and have them share power. It’s a recipe for disaster.
Also make sure you really, truly respect your successor. It also helps if you believe they are more talented than you are, and that they have natural ability for the gig. If you aren’t convinced on either of these scores, you’re going to have trouble letting go.
SECRET OF SUCCESSION #2: GIVE UP
Which raises another issue: control. Are you really ready to give up the business? Not all at once, of course, but in a structured, pre-planned way, over time? If you’re not completely committed to letting go, you’re going to create pain for everyone.
SECRET OF SUCCESSION #3: KNOW THAT FAMILY BUSINESSES ARE NOT ALWAYS LOGICAL
We know of a family business owner who saw the purpose of his business as employing all of his family members.
That sounds nice, but it also sounds more like government than having to do with the competent operation of a profitable, sustainable business. It is the kind of thinking that uniquely affects family businesses, which get themselves into other unproductive situations, including hiring and promoting lesser qualified family members over more qualified outsiders and giving family too much room to make mistakes.
The inside of a family business is a different world. They have many advantages over other companies. Just be aware that there are many landmines to watch for.
SECRET OF SUCCESSION #4: MAKE EXPECTATIONS VERY CLEAR AND PUT THEM IN WRITING
You should make it this simple: the successor is on trial. We did that for a year: John did not even start giving up his industry licences and transitioning the business to Ian until a full 12 months into the succession process. The up-and-coming leader needs to know that this might work out, and it might not. That they might be staying, and they might be leaving.
The essential element is a clear set of expectations that you both agree upon in advance, so the decision to fish or cut bait is as straightforward as it can possibly be.
Here’s what we did: we decided on the model of succession we were undertaking. What will it be for you: vendor takeback? Wasting freeze? There are many different models to choose from.
Then we wrote out our financial obligations to each other. And we designed a process to measure profit sharing. And we talked about accounting checks and balances.
And so important, we built flexibility into our agreement and discussions. At one point, for example, Ian realized he was not so jazzed about some aspects of the agreement. So, we talked about it, made some adjustments, and came up with a very reasonable compromise.
SECRET OF SUCCESSION #5: GIVE ROBUST FEEDBACK
What you need is a contractual agreement and framework that facilitates brutal – but loving – honesty between you.
As Ian puts it, “There has been a pattern of robust feedback. From day one, I have always felt respected, and that my opinion is valued by my dad. And I think that is mutual.
“We had a system of doing a pre-meeting, then the actual client meeting, and then follow-up meetings where we talked about how we could be better. This led to some very difficult conversations between father and son, but always in a respectful way. That kind of ‘iron sharpens iron’ experience is not always great fun, but the successor needs it.
“For the first two years, we did almost every client meeting together. Dad led almost every one of them in the first year, and I listened and added my two cents. In the second year, I led every meeting and my dad gave me feedback.
“And it was robust. It was not all warm and fuzzy. At times, it was ‘Why the heck did you do that?’ We had this one meeting at a car dealership. It was the worst we ever had. We argued right in front of the client, right in the meeting.”
But says John: “It was probably the best meeting we ever had in terms of what we learned.”
SECRET OF SUCCESSION #6: PLAN, PLAN, PLAN
In far too many family businesses, this stuff is done seat of the pants. That’s why there are far too many disasters. So make sure of this: that you are starting the process early enough, so you can roll out all the groundwork.
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There is actually a seventh secret, and here it is: call us if you need help.
