Multi-Generational Transfer of Control Requires Strategy and Testing

A generational transfer of control is one of the biggest challenges a family business can face. Despite the enormous risks involved in a transfer, proper strategic planning is often poorly executed. It is not a matter of simple estate planning. Generational transfer requires strategic thinking and testing, as the transfer of control can create systemic danger for the company.

Testing a Family-Business Succession Plan for Success

A recent study found that two-thirds of family-enterprise risk assessments ignore the evaluation of family-system risk. It is not always easy to convince members of a family enterprise to accept that the family-system risk needs to be managed. A family with one or more of its members making irrational, emotionally charged decisions can threaten the entire family enterprise. Additionally, professional advisors tend to complicate the process by failing to consider the cross between family-, business-, and wealth-management systems. Any family business going through a generational transition of power should be aware of these hazards—and know how to prevent them.

Ensuring Successful Transition Between Generations: The Family-Business Sanity Check

To mitigate the risks, I have developed a Family-Business Sanity Check. It is structured around my research on the resources, processes, learning skills, innovations, and competitive strategies that result from family enterprises succeeding in generational transfer of family-enterprise control. The point of the check is not to prescribe a narrow, universal template of what a family enterprise should or should not do, but rather, to identify the actions and decisions that are often rushed or made irrationally. These decisions will have a negative impact on more than just the specific system—they will affect the family enterprise as a whole.

Executing the Multi-Generational Transfer of Family-Business Control

We typically go through the sanity check in private, one-on-one interviews with family members and non-family members actively involved in the family enterprise. We then try to consolidate and present the feedback objectively. The goal is to initiate a rational and emotion-free family discussion regarding the succession of control.

If you are interested in viewing the Family-Business Sanity Check or would like to meet to discuss risk assessment and family-succession planning, call my office at (508) 753-7100 or email me using this form.

Matthew Erskine is the fourth-generation owner and operator of The Erskine Company, located in Worcester, Massachusetts. He specializes in estate planning, trust services, tax planning, risk management, succession planning, and unique-asset management. The Erskine Company provides peace of mind and security through quality estate-planning services. Call or visit today for a consultation.


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