Succession Planning is No Laughing Matter
A recent episode of the hit television comedy series, Modern Family, tackled the issue of succession planning. The series features three families who are interrelated through the family patriarch, Jay Pritchett, the successful owner of a closet construction company.
For the past few years, Jay’s adult daughter Claire has been working for him. Previously, she had been a stay-at-home mom and she now works very hard – including putting in long hours, working on weekends, and missing family functions – all for the family business.
In the recent episode, the family is gathered to celebrate Christmas when Jay announces he is ready to begin transitioning to retirement and has selected a very capable successor to run the company – Chuck Feeney.
The whole family is shocked, and as one might expect, Claire is angry. But it turns out Jay’s story about Chuck Feeney is just a test to make sure Claire truly wants the business and doesn’t accept the responsibilities out of a sense of obligation.
While the show is merely a parody, unfortunately Jay’s ruse is not all that far from the truth of how some family businesses are transitioned.
So where did Jay go wrong and what lessons can we learn from his mistake?
- Succession planning is a process. Deciding today that you are retiring and handing over the keys to your child tomorrow may not be the most prudent move for the long-term health of the company. What about the other key managers in the company who may have been there many years before Claire’s involvement? Would one of them be more suited for the role of president? Will they respect Claire? How will they react? Does she have the management skills to oversee the finances, operations and sales of the company? Will she have credibility with customers, vendors, the marketplace, even potential new hires?
- Discussions need to be made with the family long before the transition is to begin. Jay could have saved a lot of heartache and frustration had he been honest and candid with Claire in advance.
- One aspect of succession planning the show did not address was the impact on Jay’s other children, in this case his son Mitch, as well as on Gloria – his second wife — and her son Manny. Will they expect a voice in the decision or the future running of the company? Will this preclude certain opportunities for them? Will they have shares in the business? Will they have seats on the board? Voting privileges? Will they get their “fair share” of their ultimate inheritance?
- The show also doesn’t tell us what Jay is getting out of the business as part of his retirement package. Surely he isn’t going to just walk away without reaping the benefits of his years of investment and commitment in building the company.
- Perhaps the most important lesson we can glean from this story is that the future of the family business is too important to engage in mind games when it comes down to making some of the most important decisions. An orderly transition plan that includes and is developed with family members and other key stakeholders dramatically increases the chances of family businesses surviving multiple generations.
It also helps to ensure peace and harmony within the family which is no laughing matter.