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Address generation gap when succession planning

Monday July 21, 2008

Agreeing on a suitable transition plan can be immensely challenging, particularly when generational differences are involved. The number crunching is the easy part. It is the non-financial side that is the real task. But when the emotional issues are resolved, the nuts and bolts of succession planning can fall into place quickly.

The biggest emotional challenges stem from generational differences in values, beliefs, priorities and communication methods. That is a particularly potent problem in today’s work force, which consists of four generations: Baby Boomers (born 1946-1964); Cuspers (late Baby Boomers and early Generation X); Generation X (born 1965-1980); and Generation Y (born 1981-1994).

But what defines a particular generation is not as simple as the year it began. Ethics, entertainment, family, education and technology shape each generation, so world views and approaches to work can vary greatly.

For example, career achievement tends to be far more valuable to Boomers than it is to those from later generations who seek creativity and flexibility. Most Boomers grew up in two-parent homes, yet they may not have created the same for their children. As a result, Cuspers and Generation X may reject marriage altogether, yet they may simultaneously tend to derive greater meaning from their families or personal lives than their careers, according to a Western Michigan University study.

The top career concern for Generation Y workers is compensation, including salary, health care and retirement benefits, according to a survey by Robert Half International and Yahoo! HotJobs. Those surveyed were focused on practical concerns, such as saving enough money for retirement and balancing work and family obligations. And most members of this generation are technologically savvy, routinely using computers, MP3 players and juggling their e-mail on a BlackBerry while talking on a Blue Tooth.

One of the biggest generational conflicts is the question of work load. Older generations wonder how much work the younger generations can get done and whether they can carry their share of the load. But different generations have different perceptions of “efficiency” at work. The work ethic of older generations view time spent on the job—being visibly there—as most important, while later generations see working smarter and more efficiently as most critical.

So what is a family-owned business to do in terms of succession planning amid this generational gap?

Here are some suggestions to help create an appropriate plan of action:

•Family Council. Identify all parties who need to be involved in the planning, including spouses, when necessary, and then establish a “Family Council” that can serve as a platform for communication among all parties. Honestly address generational differences regarding workplace issues and be willing to compromise to reach consensus on those issues.

•A 360-degree approach. Include all key positions when creating a succession plan and not just family-held positions. Review the organization’s long-term goals and objectives, identify the work force’s developmental needs to meet those goals, determine work force trends and predictions that need to be taken into account, and develop individual development plans for each key player in the organization.

•Independent decision-making. Let the children make their own decisions. While it can be heartbreaking for parents to realize their children are not interested in taking over the family business, it is better in the long run to learn that up front and address it head-on than to force an unwanted succession scheme upon them. It is equally important to allow them to have input on decisions that will impact the business, should they agree to inherit the company’s operations.

•First-hand experience. If the children decide to carry on the business, make sure that plans include how they will first gain some experience. One option is to allow them to work in the business during the summer, under the supervision of a non-family member and for the prevailing wage. After college, they might work several years elsewhere and receive one promotion on their own before they are brought into the business. Coaching and mentoring programs also can be helpful in this realm.

•Fair decisions. Treating family members fairly in the transition is an important consideration. Leaving an equal percentage of the business to each child, for example, even if only one of them is working in it, generally creates ill will. A better approach would be to reward the employed child with control of the business and use other methods to provide an inheritance to the siblings. Another option is for the non-employed children to retain an ownership interest in the business, while the working child has decision-making authority and receives additional compensation through salary and bonuses.

•Relinquishing control. For many owners of family businesses, relinquishing control can be a major challenge. Planning for a slow transition can help. A middle ground between full retirement and hanging onto the business may be the best strategy for some. Consulting for the business also could help ease owners into retirement, as long as there is an agreement about how many hours and for how long. Another transition option is to allow the senior generation to make critical operating decisions while the younger generations gain experience making less-impactful management decisions. Remember, giving up a business can be like letting go of a security blanket, so owners may need something else to replace it.

•The brain drain. Succession planning should address the pending brain drain where retiring Boomers take valuable institutional knowledge with them. According to a Monster Worldwide survey of 550 human resource managers, only 20 percent of companies have formal strategies to manage and preserve organizational knowledge. Potential solutions include: mentoring programs; incentives for sharing knowledge such as stipulations in employee performance measures; intranets, blogs and other electronic discussion forums to foster employee sharing; and the establishment of a chief knowledge officer who is responsible for organizational knowledge management.

•Outside expertise. An objective outsider can be critical to business succession planning. If your company already outsources its human resources function to a professional employer organization, for example, that would be an excellent resource to help navigate the generational transition. Other possibilities to consider are hiring “bridge” managers to get the business to the next level or creating an advisory board of both family and non-family members who can consult on issues ranging from employee compensation to selecting the next leader.

Although there are no quick or easy answers to succession planning, making time for it helps ensure the business will survive. That can provide financial security for the family while achieving increased leadership preparation, better retention, greater employee satisfaction and an enhanced commitment to the business.

Karen Codere is a Chicago-based senior human resources specialist for Administaff, a leading professional employer organization that serves as a full-service human resources department for small and medium-sized businesses. call 800-465-3800 or visit http://www.administaff.com.

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