Succession Planning Is Not the Problem in My Family Business; It’s the People My Dad Hired I Can’t Get To Go Away!

Dear Stephen:

I am writing you about people who cannot take a hint. Sort of like when you finish up hosting a fantastic dinner party but that one guest just won’t leave your house.

My dad started a furniture manufacturer over 40 years ago. We have had good times and bad, but the business has grown, and we remain successful. At first, my parents didn’t want me in the family business and they invested heavily in my education and were even able to put me through a graduate program in history. I thought I would be a professor for life until one day my father decided I might be an asset to his business. The money was good, and I decided to give it a shot. This was 8 years ago, and I have never looked back.

I now stand on the precipice of inheriting a fairly large business as the second-generation CEO. I am in my 40’s, my Dad is semi-retired, in poor health in his 80’s and we have a clear succession plan. The problem is not the plan but rather the myriad of executives and workers I am going to inherit along with the business. I think a lot of us taking over a family business have the same dilema. Here is the picture: these are great men (and they are mostly men) who were talented executives in their time and who served my father well. Every one of them is an outstanding person and hard worker, they are loyal and have earned every penny they have made over the years. But now I own the company and for many carefully thought-out reasons I feel it is time for them to go. It is as simple as that.

It is not an age thing, more a mindset. It happens that many of these people are close to retirement anyway, but I can tell that none of them have any intention of leaving. They like the money, need the validation and most concerning, see me as someone incapable of leading the company which they helped to build. These guys are all under the impression that they are the crutch on which the younger executives stand, they don’t see that they may be the weight tied around our ankles.   On top of that we currently have people quitting right and left and in every exit interview I hear the same thing; the culture is too old school, with a cadre of upper executives too entrenched in their own small fiefdom. Ironically, many of these people quitting had initially been hired by this same squad.

A lot of these guys are people I have grown up around and have long respected, so I want to be sensitive. It is now my turn to take the reigns and I will not let myself be second guessed or dragged down by a gang of executives who think the rest of us are children. How would you handle this?

Junior CEO

Dear Junior:

Your story is very common in the interiors products industry. Many furniture, textile and floor covering manufacturers are family owned and now in their second or third generation. And it is just as common in furniture dealers as well.

I get a lot of questions and letters from a full gamut of business owners. Some of these entrepreneurs were immigrants, others investors, more still are inventors or designers who had a great idea and struck it rich.  One thing all these business owners have in common though is that they want the best for their children and will invest heavily in their education. You are not alone in your background. I know people who were practicing doctors or lawyers before catching the bug for their family’s business and returning home.

You have a plan to take the reins. The difficult part is always how to remove the people who helped your business get far enough for you to take it over. It’s a touchy subject. It would be too harsh to call these old timers “hanger-onners”. But let’s call them that to set the tone. Harsh language aside, you want them gone and likely for good reason. For better or for worse, you are charged with modernizing the company and securing its future growth for the next generation, your children, and for your employees. Here is what I can suggest:

First, somewhat related although it sounds like it is too late for you, I suggest every company institute a mandatory and blanket retirement age of 65. Of course, this can be extended at the CEO’s discretion but a mandatory retirement ensures that your employees remain smart and fresh. You will avoid stagnation in your strategy and always have new voices to listen to.   This usually helps. If you do not have that, you can be the first to start it. You pointed out something that many second or third generation business owners often contend with. It is not the age of your employees that is your enemy but rather their “mindset”. You want your own people who can think outside the box. Hopefully, you even want to bring in some diversity by placing women or people of color in executive level positions, something that we see all too little of here in the interiors products industry.

Second; do the right thing by everyone you want to let go. By this, I of course mean that you should offer a generous severance.  Once a fair severance is in place, simply terminate the employment of the senior executives that worked for your Dad. No consulting contracts or part time work just rip the band-aid off and send them out the door. Just remember to do it kindly. Nice counts! These executives have perfected the art of making themselves seem indispensable. It is a talent that all of us end up learning after spending some time at the top. I can assure you, it is just an illusion. Let them go. Take your chances but reward them with cash and a non-compete and send them on there way with dignity. Dignity is as important as the money. (like I said, nice counts)

Whatever you do, be sure the key family members be it your Dad or whoever hired them to begin with are in the loop. Running a business with your family is hard enough and there should be no secrets or surprises. Just explain that you want your own team.

Lastly, just do it. You know you’re a softy, but do it as soon as you finish this paragraph. There is no good time to show someone the door so simply get the hard part behind you. Sit down with HR and your corporate council in advance to work out severance and then start calling the old guard into your office. I wouldn’t stretch it out either. If you have 6 people you want gone, fire 6 people tomorrow. You are now the boss and it is about time you started acting like it Jr.

Listen to your gut and take control. I promise that sales will grow, and business will thrive. The next generation of employee will show themselves soon, and together you can grow your family business well into the future; at least until your kids step in and again have to “clean house” 😊.