Letting Go—How Business Owners Can Pass the Torch

How to help the founder relinquish control and maintain peace in the family

Here’s what Naama Dvash has learned about small business owners in the five years since joining her father’s New York-based jewelry company: It’s really really hard for them to let go.

When her father David, 52, takes a few days off from the family business, A to Z Bohemian Glass, he calls in constantly, even reminding her to lock the door at night. If a supplier sends her an email and copies her father, Dad will zap the message to her, too, as though she hadn’t received it the first time. Then there was the time she and her father agreed she would be involved in developing a new pricing strategy. That seemed like a real breakthrough—until she found out a week later that he had gone ahead and done it himself. “He wants to let go, but he can’t help himself,” says Naama, 27, who would like to take over management of the firm eventually, along with her sister, Azital, 25, who joined the company two years ago.

There are a lot of Naamas—and Davids—in the business world. When it comes to stepping back, owners of family-owned companies often say they want to bring their offspring into the business, hopefully grooming them to take over one day. But, the clinging controlling founder, who can’t bear to take his hand off the steering wheel is the norm, says Thomas Davidow of Thomas D. Davidow & Associates, a Brookline, Mass., consultancy specializing in family-owned businesses.

Of course, who can blame them? Often, business owners have spent a lifetime nurturing their babies—lavishing more attention on them than on those flesh-and-bones babies, who are now all grown up and ready to take over. Like other parents, business owners sometimes have trouble treating their adult children as grown-ups. And the successful business owner may be the kind of powerful, dominating personality who has trouble delegating to anyone. Finally, there is the fear that the offspring are not up to the job and the business won’t generate the retirement income the owner needs.

But business owners who put some thought into it, can manage this transition and can even come up with ideas that will improve both the business and the parent-child relationship. Some important steps:

• Bring in reinforcements. One tactic for stopping unnecessary parental interference is to get outsiders involved. Ira Bryck, director of the U Mass Family Business Center in Amherst, Mass., recalls a son whose father was “constantly breathing down his neck,.” he says. So, the son proposed setting up a board of directors with non-family members, something the company had never had before. The upshot: The eight directors “minimized the influence of the rest of the family,” says Bryck. “The father was just one vote among many.”
  
• Institute conventional performance reviews. Without a formal management system in place, it’s easy for the parent to interfere whenever he or she wants to. To ensure that everyone understands just what Junior is supposed to be doing, create a detailed job description. Specify the types of decisions the offspring are allowed to make on their own and those they need to discuss with the boss. Also, define exactly what constitutes satisfactory performance, using conventional management –by-objective techniques (listing goals to be met and when they need to be achieved.)
  
• Make a retirement agreement. Just because a parent says he or she is going to call it quits in , say, 10 years, doesn’t mean that’s going to happen. Often, it doesn’t. When the adult child joins the business, create a timetable that describes when the parent will retire, as well as what steps need to be taken, “in five years, in two years, in two months,” to get there, says Bryck. And put it in writing, otherwise the parent is likely to forget.
  
• Prove it. Adult children may feel they should take on positions of responsibility in their parent’s company, just “because they have the same name,” says Clay Nelson, who heads Life Balance, a Santa Barbara, Calif., coaching firm specializing in family business. The child can prove to the parent—and to himself and to coworkers—that he is indeed up to the big job by mastering smaller ones. Nelson suggests that the child start by writing a five–year business plan. That will not only show that the individual has an understanding of the business, but also that he or she can think independently.
  
• Honor Thy Father/Mother. Sometimes it is clear that it’s the parent who is not up to the job any longer. This is the toughest scenario, says Sherry Amanpour, who heads Aman Consultant in New York City. She recommends tact and tells the story of a publishing business, where revenues were falling because the owner wasn’t able to keep up anymore. Over seven or eight causal conversations during dinner or over drinks, his son broached such subjects as how his father felt the company was really doing and where it should be headed. “He planted the seed,” says Amanpour, that it was time for the father to step back. Eventually, she says, it worked.
  
• Create a special role for the parent. “The owner may not leave the business completely, but he can at least get out of the way,” says Bryck. Case in point is the founder of a construction company. When it was time for him to think about letting go, he reviewed all the jobs in the business, and realized the task he had most enjoyed was driving the crane. So, he became the crane operator, while his four children ran the company. “Owners need to focus on the next phase of life, on something new that will have meaning,” says Henry Landes, founder and head of the Delaware Valley Family Business Center in Sellersville, Pa: If that’s golf, that’s fine. If it’s driving the crane, that’s fine, too.