This section is by PBY Capital

When picking the next leader of the family enterprise, don’t let emotion get in the way of good decisions

By sidestepping family dynamics, this structured, data-based approach has proven fair and effective, Gerald Pulvermacher writes

One of the most gut-wrenching decisions a patriarch or matriarch needs to ultimately make is which family member should take on the senior-most role of the family enterprise.

Story continues below

Here are just a few of the related scenarios I’ve encountered over the years:

  • At one global company, seven siblings are each interested in the top job, several of whom are quite talented and capable. The wife of the eldest pushes him hard on the basis that he is entitled to the leadership role by virtue of birth order.
  • At another company, two family members are vying for leadership; one is more talented than the other, but the “other” is dedicated, smart, and has spent more time with the firm.
  • A father passes away with no business succession plan in place; three of his children are in the business but have never been able to get along. The father refused to become enmeshed in their conflict by making the designation during his lifetime.
  • A father passes away with no succession plan, and four adult children are in the business. The eldest immediately assumes leadership without consultation, to the chagrin of at least two of the siblings.
  • A medium-sized manufacturing company patriarch has two adult children in the business, and the younger is doing everything in his power to assume total control, frequently undermining his sister. It is the father’s opinion that co-leadership is in the best interest of the business given the relative skillsets of the siblings.

Founders tasked with the challenge of making these kinds of succession decisions have likely lost many a night’s sleep ruminating on how to get through this dilemma, in the best interest of the business and maintaining harmony in the family. And, especially if there are grandchildren in the picture, the problem is compounded by the fear of being alienated by the son or daughter who is not selected for the top role.

Choosing a new business leader from among several family members can be complex, as it involves balancing business needs with family dynamics. What follows is a structured approach that I have used on several occasions and has shown itself to be both fair and effective. It is essential to involve all the family members, and potentially some key executives who are non-family but respected by all family members.

1. Clarify the role and expectations

Define the leadership role: Have everyone involved—patriarch, siblings interested in the enterprise leadership role, and key executives—clearly outline the responsibilities, skills, experience and educational qualifications needed for the position.

Set success metrics: Establish criteria for what success looks like in the role to avoid subjective judgment later. When identifying what “good” looks like, it is important to keep in mind that what “got the business here won’t necessarily get the business there” (to borrow from Marshall Goldsmith). In other words, a carbon copy of the current leader’s style may not reflect what will be required for the future success of the business.

2. Assess the candidates

Skills and experience: Evaluate each family member’s education, work experience and track record within or outside the family business.

Leadership qualities: Assess attributes such as decision-making skills, emotional intelligence, communication style, strategic thinking ability, knowledge of the business or industry, the ability to inspire others, results orientation, etc.

Commitment to the business: Look for genuine passion and a long-term vision for the family enterprise.

Story continues below

3. Use objective tools

Psychometric testing: Employ assessments to understand the candidates’ leadership styles and strengths. Indeed, using a 360-degree leadership assessment tool, a process to be completed by all the candidates, is essential, and I will explain why shortly.

4. Prioritize business needs

While maintaining family harmony is vital, the ultimate goal is to ensure that the business continues to thrive. Choose the candidate who is best aligned with the company’s vision and capable of driving growth.

The needs of the business become the touchstone against which the data collected regarding each candidate will be assessed.

5. Formalize and objectify the decision

Create an anonymous “viewing gallery” for each person/profile in the same room. Remove names from all the data collected and summarize it on a few large sheets of paper. Be sure to include the information from the 360-degree leadership assessment. Create separate wall spaces for each candidate’s data. Ask all those who participated in the process, including the candidates themselves, to rate each candidate based on the data.

With the ratings completed, reveal the names associated with each of the galleries, and there you have it. A data-based, inclusive, highly communicative, fair process that takes the patriarch off the hook, anoints the best candidate to continue the success of the business and preserves family harmony.

6. Focus on succession planning

Prepare the next leader: Over the next three to five years, ensure that the successful candidate is provided with opportunities for mentoring, training, skill-building and coaching.

Determine leadership roles for other family members: That could be in the business’s  divisions, functions, board membership and the family office.

Does this process always work? Of course not. Major pushback often comes from individuals who have coveted the senior-most role and perhaps even felt entitled to that role, whether due to birth order, time with the company, statements they have heard from other family members, the profile they have created for themselves in the business and/or community, and so forth.

Story continues below

When such a situation arises, it can be quite traumatic for that person and there is no question that they will have work to do in order to come to terms with the outcome of the process. The saving grace is that they are unlikely to point to favouritism, poor judgment, jockeying or capriciousness as the cause of their disappointment.

Dr. Gerald (Gerry) Pulvermacher, Ph.D., C.Psych., is an organization psychologist who has been in practice since September of 1972. He is a dual citizen of the U.S. and Canada, is married and has two daughters and five grandchildren. His clients at Gerald Pulvermacher & Associates (GPA) are located throughout North America and can be found in many industries. Gerry does not believe in retirement, so he hasn’t transitioned his own business; he has, however, transitioned himself on several occasions. Apart from transitioning from clinical to organization psychology in the late 1970s, he has been the managing partner of his consulting and clinical practices (PSS Consulting and Pulvermacher, Stevens & Shack), he owns or co-owned a summer day camp for children, a restaurant and real estate, been a senior partner and Global Service Line director for Deloitte Consulting, president of a Canadian change management firm and in the 1970s and early 80s developed the first group fear-of-flying programs. Gerry has also taught as part of the Queen’s University Executive MBA program and lectured at the University of Ottawa Family Business and Entrepreneurship Program. He plans to continue consulting indefinitely, helping family businesses, organizations, leaders within businesses and individuals grow and develop to be successful. Gerry does not see limits to growth and development. Contact him at gerald@gpulvermacherassociates.com.

The Canadian Family Offices newsletter comes out on Sundays and Wednesdays. If you are interested in stories about Canadian enterprising families, family offices and the professionals who work with them, but like your content aggregated, you can sign up for our free newsletter here.

Please visit here to see information about our standards of journalistic excellence.