SUCCESSION PLANNING
How Kids and Cousins Can Become
Good Business Partners

BY MIKE COHN

For many entrepreneurs, having the kids take over the family business is part of the dream of building a company. What could be a sweeter family legacy than a successful operating business that might last for several generations? But before you make the mistake of thinking that the three or four or five siblings (or cousins or in-laws) are going to get along as business partners, you need to take a step back and do a reality check.

Family members may trust one another (because they are family), but that doesn't mean they will agree with one another, respect each other's decisions or get along in the business. Dad or Mom may have been a successful owner-manager who had the luxury of making all the decisions (right or wrong) without having to answer to other partners. Thinking that the next generation will automatically know how to work successfully as partners, because they are related, may be naive.

One client had three bright and capable sons, all working in the family business. They said they wanted to be partners, but day-to-day they avoided working together like the plague. They tried creating a shared co-presidency. It soon failed because the brothers wouldn't listen to one another.

Each son actually wanted to be an owner-manager like dad and call the shots. The sons knew they disagreed on issues but didn't know how to successfully negotiate their differences. They thought all decisions had to be unanimous.

Rather than getting stuck in an impasse with one another (since they didn't know how to resolve disagreements), they created their own departments inside the business to avoid interaction. They soon learned that although they could each make their own decisions, the business began to suffer. I began working with this company when the brothers realized the succession process wasn't working.

Together we came up with the following six rules for partnering:

ONE: Partners support one another verbally and consciously. Partners present a unified front to the world at large and support each other publicly. Differences should be worked out in private. Partners don't embarrass one another by arguing in public. This is especially important when the senior generation is trying to ascertain how the next generation is getting along. When the three brothers made a joint presentation to their dad and supported one another, they learned it was hard for dad to say no.

Two: Partners don't take individual credit; it's a group effort. When a team has a win, it's a group effort even though some may have played better than others on that particular day. Partners share their successes and don't place blame for failures.

Three: Partners collaborate with one another and seek each other's advice and counsel. Partners respect one another. The question is what is right, not who is right. The goal is for the business to do better. What's important is to listen to other partners' opinions and viewpoints. Each partner has a contribution to make.

Four: Partners "step up" so no one can be accused of doing less than the other partners. A partnership is only as strong as its weakest link, so each partner tries to be the best he can be. A partnership in which each individual is contributing is a powerful force that is tough to beat. The commitment needs to be 100 percent.

Five: Partners create a safe space, emotionally, so they can challenge one another without jeopardizing their relationship. Partners don't have to agree all the time, and decisions don't have to be unanimous. It's OK to disagree. Decide if decision-making is by simple majority or something more; allocate sufficient time to a discussion and vote on it. Then, move on. In the example above, each brother took turns running the meetings and found they could share power, could debate one another and learned to respect the voting process.

Six: Partners understand what each partner's contribution is supposed to be and hold one another accountable. Each brother was asked to write his job description (not just what he wanted his job to be, but what the company needed from each of them). These were reviewed and critiqued by the other brothers until mutually agreeable. They also developed a new bonus plan for the three of them if the company realized specific performance goals. This gave the brothers experience in negotiating an issue, reaching consensus and sharing rewards if they were successful.

These rules are meant to serve as guideposts--they don't guarantee success. When the next generation does not support one another, doesn't have the competence, or is not willing to work on partnering skills, it points to bigger problems in the succession plan. The sooner you and your successors address needed partnering skills, the more likely it is that you can realize your family business dream.