By Fredrick P. Niemann, Esq. a New Jersey Passing on a Business Attorney
Smooth family business succession needs a lot of work and understanding. Appointing a leader of a family business should never be a spontaneous decision—or an assumed foregone conclusion. The requirements of the job, the timing of the transition, and the demands of leadership’s and its responsibilities need to be understood well ahead of time by all of the parties involved, parent and children alike.
When chosen heirs are in their late teens and early 20s, tell them the business will not be a gift but rather a business that comes with “tremendous responsibility they must earn the privilege to receive it.
Parents can, however, go overboard in having heirs prove their worth, he says. Setting unrealistic expectations or hovering over an heir’s work often can drive away other talented offspring and other key employees.
To eliminate a sense of entitlement, show your prospective business children how the company is important to the lives of others, such as employees and customers, or involve them in company philanthropic activities.
In cases where the family, decides to appoint a CEO from outside the family, make sure family issues don’t interfere with the selection process.
Create objective criteria for the position, making them known to everyone involved. Using a selection committee that includes objective people and outside advisers also helps maintain focus, he says. All qualified candidates should be reviewed using the same criteria. Once a decision is made, it’s important for that conversation to take place in an office or neutral setting and to be facilitated by an objective, trusted adviser.
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