Reflection of succession in regard to Ilapak and personal aspects

Reflection of succession

Today we ended the class with the Ilapak case. At the very end of our passionate discussion Ed suggested it is an option for family businesses to plunge children, i.e. potential successors in at the deep end. Let them make their own experiences, mistakes and thus show if their capable of successfully running a business, without the permanent help and guidance of a mentor or coach, which could be an experienced, wise employee working for the business for several years.

The way our parents founded a business was quite the same and in my case it is definitely true. My father had no guidance, he could not ask his father any question about  the products or the industry. Since my grandfather operated in a completely different industry and my father founded his business himself. In this sense he was isolated and the only possibility he had was to prove himself through becoming successful, that he is able to run the company. It was a matter of sink or swim.

I am not sure if it is necessary to do so, when transmitting the family business from one generation to the other. I also do not want to say here that spoiling children is good either. Finding a compromise between the two might be a reasonable solution. I make this claim because of the following: imagine, referred to our Ilapak case, Guy who manages the business in the US, fails to successfully run the company. Imagine he completely fails and goes bankrupt, he really screws the business up. Hundreds, maybe even thousands of employees will be unemployed, they lose their income, their security and face serious issues in their lives. What I want to state here is that as managers, owners, we have a social responsibility that should not be hazard, only because one successor has to prove his ability and capability of succeeding in the family business. This also underlines and even emphasizes how tremendous the pressure upon the founder is to find an appropriate, qualified successor to whom to hand over the business. When I personally thought of succession, I always took the viewpoint of the successor, of the children, simply because I might be a successor one day, it was easy for me to identify with this role, cause it will affect me. So, I completely disregarded and underestimated how difficult the situation is for the founder, i.e. for the generation that will hand over. Now, for the first time I understand why founders often do not want to plan succession.

What I also learned today was to focus on the business and not on the family. One clearly has to differentiate these two. And most of all emotions do not belong into the field of profession and business.

I think it is the decision of the founder of the family business who will be the successor. This is a decision which is so difficult to make. A father who has several children, normally wants to treat them equally (at least this is the case in Western society). The founder has a responsibility towards himself to make sure the business he developed, survives and stays successful. He also has a responsibility towards employees, who are dependent on their incomes in order to make a living. And lastly, he has a responsibility towards his children, i.e. a father wants his children to become happy and enable them to do what they want. In this sense a family business should be seen as a great opportunity, but not as an obligation.

This raises the question of how to select between ones own children or maybe even choose an external? From what I learned I can argue that rationality is the most important factor while taking these decisions. In order to make succession prosperously it might also be of importance to consider these aspects:
Think ahead, try to start early, exclude emotions when it comes to business and differentiate between the family and the business.

What is your opinion on this? Do you think other aspects are also important, if so, which?

Please feel free to comment! :))