How Do You Solve a Problem Like Retirement?
3rd February 2015
The family business advisory sector has a weakness. You may not even have noticed it, surrounded as we are by a society that seems only to acknowledge the under 35s.
The symptoms are in every family business publication, which are not complete without reference to next generation education, teaching youngsters in families about financial literacy, entrepreneurship or responsible ownership. These are all examples of our focus on the future rather than the past.
Don't be mistaken, these are valuable and impactful topics, and some families are not ready for a conversation about retirement or transitions. However, as consultants and advisors to financial and business owning families, we are not justly serving our clients if we ignore the primary needs and challenges of all generations and focus solely on the needs of the next one.
Moreover, the next generation can become frustrated at this imbalance of advice and support and their parents' inability to pass responsibility and control. In one adviser's words: we are training footballers to play on a pitch, while not supporting the players who have spent a lifetime scoring goals.
Family businesses must address the older generation's feelings about life after a leadership succession, which can be positive but can also be coloured by regret, isolation, loneliness, a lack of identity and boredom. It is vital that families think about a "third career" for older family members, by addressing the following:
1. Aspirations and Skills
Often the older family head is made life president, or given some other similar title, and he or she says they will be happy with that. In our experience they never are. Formally or informally families should aim to identify ways in which goals (and rewards) can be developed for and aligned to a retired leader's new contributions. The failure to be specific about objectives in a new role often leads to unmet expectations in every quarter and can contribute to the further breakdown of relationships. A career coach can help identify areas for new growth in line with the true aspirations of retiring family members. This should begin as early as possible and must be performed in alignment with any succession planning that takes place.
2. Trust and Social Capital
This can involve retaining social capital for the firm, whether that is in philanthropic work, holding non-executive positions, or sending clear messages to the marketplace that the retiring family member is stepping back and letting the next generation take over. Again, specificity of objectives is the key. Surely the older generation is entitled to the same degree of career planning as the younger generation?
It is often powerful to document formally or informally how older members have built the business, what challenges they have faced, what advice they would give the next generation. It is often a revelation for the younger generation to learn how the business was built, mistakes that were made, hardships that were endured. Often the youngsters have little idea about the sacrifices that have been made and surely an understanding of this will aid them in the development of their own responsible ownership.
Without addressing older family members' transition into retirement, families will continue to struggle to achieve smooth leadership transitions. Let us take time to pay tribute to their contributions, provide them with support and allow them to retire with the respect they deserve.
Penny Webb is founder of Familias, a family business consultancy, and Alex Hayward works for Family Office Exchange.
This article is reprinted with permission of Family Capital.