Twenty One Clear May Newsletter
Your family company's next president probably isn't a family member, plus a thoughtful WSJ article and podcast update. But first a cute video.
Twenty One Clear Explained
Before we get to this month’s newsletter, I want to share a video with you!
A second generation family owner asked where the name Twenty One Clear came from, so I put together a one minute explanation.
My thanks to Mike Ellwood at vidwav for producing:
Now, on to the newsletter!
You need a successor, but its probably not your son or daughter
Succession is the inevitable clock running against all family companies. When you think about who may be best to lead your family’s company in the future, the company, its customers and the family will be better if you start by assuming it’s not a family member.
Two weeks ago, Warren Buffett announced he will step away from leading Berkshire Hathaway. Buffett will become the company’s chair and, despite him having two sons and a daughter, including his son Howie, who has been on the board for 30 years, Buffett’s successor is a non-family member.
Other prominent family-owned companies follow this example. Marriott chose their first non-family CEO in 2012. Each successor to Sam Walton has been a nonfamily member. Chick-Fil-A has had a non-family president since 1968.
Buffett prepared his son Howie, 70, to become non-executive chair instead of having operational control. Howie will monitor the company’s culture and evaluate the CEO. Click here for a great WSJ article about the Buffetts. The other families above maintain a similar, and sometimes greater, influence over their organizations.
Naming a new president or chief executive is a major event in the life of your family’s company. When you hit this inflection point, the family has to balance three sets of priorities in finding a successor:
Customer
Company
Family
Put someone’s interests first, second and third.
Putting family first looks like defaulting to picking a family member as the company’s leader. This is flawed for two reason.
First, customers do not care about whether a family member is the president. Family is not a customer value proposition!
I remember asking a client how much our company being family owned and operated mattered to them. “I choose the company because its processes and delivery are better than your competitors. What I appreciate about the family business is that whenever I have a problem, either you or your father show up. Your competition lets Vice President #34 call.”
Customers want your company to have a top leader who produces the results they need, regardless of their last name.
The second reason defaulting to family is a mistake is that you run a slim chance of the timing working out.
You start with a limited pool of people (sometimes quite limited). From there, a) the customers and the company have to trust the next generation family member to step into the lead role, b) at the SAME TIME the controlling generation is ready to step away and, c) the next generation member has to like the actual job presented at the time.
Regarding the final point, family members risk tailoring jobs to their preferences instead of focusing on client and company needs. That prioritizes family, even individual family members, over company and customers.
I talked to a Midwestern software company owner who was the Vice President of Human Resources in her own company. I asked her why she was not the chief executive. She enjoyed HR work, and didn’t like the CEO job, so she hired someone who could perform the role.
As you think about succession, start outside the family. Craft the role your customers and company need and evaluate next generation family employees against it.
I lived this as our family company’s VP of HR. My father and I replaced him as President with a non-family member. It was the right decision for the clients, company and family.
One last note - choosing a non family executive creates a unique opportunity to rally family employees and owners, and the process can improve collaboration, trust and communication between family members.
Generation to Generation, a cornerstone book in the family business space, tells a story of the Rockman company, whose founder, Wyatt, chose a non family successor.
Wyatt worked with his son Joe for sixteen years. Wyatt openly groomed Joe to succeed him as CEO. However, after a series of tough years, Wyatt lost trust in Joe’s ability to lead the organization, and elevated the company’s CFO to the top job. Wyatt and his wife decided that alone, and surprised the family with it at the first family council meeting.
You can imagine the terrible ending of this family session. Wyatt and his wife forgot that, just because you can decide alone, does not mean you should.
Imagine an alternative, where Wyatt drafted the CEO role, with a board’s oversight, and presented it at the family council meeting. Together, they could discuss goals and expectations for the job, talk with the chosen recruiter, and even allow Joe to decide if he wanted to apply, or let him self-select out. This process, versus the silo, provides transparency and communication, encourages collaboration, and builds trust in the family.
When you read the WSJ article above, pay attention to how Buffett communicated with his sons and daughter. He provided an example of how to chaos proof hiring non family members.
One article to read
Rachel Wolfe wrote a great piece titled, A Young Generation Goes to Work for Mom and Dad Inc.
This statistic jumped out at me, “The share of small businesses that employ a young adult child of an owner has doubled since 2018 and is up 13% year-over-year as of January…”
The need to work on the family business inside of companies is only increasing. Thankfully there is a podcast for that…
Goings on at 21 Clear
New Podcast!
Our pilot podcast episode has been out for a week and I am thankful for the listener response. My favorite story yet came from a friend of my middle school son, who said to him, “My dad was cleaning the kitchen last night, and I think he was listening to your dad talk.”
Click the image to link to the podcast. Listen for the next episode later this month.
Kennesaw State University Webinar
I’m thankful to Kennesaw State’s Family Business Institute for inviting me to host a webinar in late July. We’ll be covering the ever fascinating topic of hiring family members! More to come in the June newsletter and on LinkedIn.
Wrap up
As my grandfather would say, thank you so very, very much for reading,
Adam Hatcher, for 21 Clear
Excellent!