Choosing Among the Children

Sometimes, family businesses have two or more children in line to take charge and sibling rivalry erupts. Too often the matter is not discussed because it seems impossible to resolve and requires difficult decision-making. But avoidance isn’t the answer.

Engage in honest discussions at specified intervals — quarterly, monthly or even weekly if necessary. Encourage open communication, keep interruptions to a minimum and be sure all concerns are aired.

If you’re lucky, you’ll learn that only one person really wants to run the business or everyone agrees that one particular person is the best choice.

But don’t count on it. The discussions can ease some of the sibling tensions but you probably need to take further steps to ensure a successful transition. Here are a few ideas:

Launch a Trial at the Helm

One way to handle the succession question is to give each child a separate tenure as the chief executive officer, then evaluate their performances. This obviously takes time and needs to be done long before the passing of the torch. Consider three ideas to help make this approach effective:

1. Give each child six months or so to be in charge. Retain the ultimate authority to veto decisions that would do major damage to the company. But remember the more you maintain control, the less the candidate learns and the less accurate the ultimate evaluation of the child’s abilities will be.

2. Make sure that other employees — family and non-family — know that the child has the authority of an acting CEO. This prevents people from calling you to double-check with each decision made and every task assigned. Remember that you are evaluating leadership qualities, including the ability to gain respect and cooperation.

3. List the qualities you want to evaluate before the trial period begins and do your best to be fair in each candidate’s evaluation. It can help to call in a disinterested party to help ensure an unbiased opinion.

Test and Interview

Another strategy is to put siblings through a series of written tests and interviews to determine who is the most capable of taking over the company. This type of assessment can reveal aptitudes for different aspects of operating the business (for example, leadership and decision-making), although they may not be as accurate as an actual trial period. Again, an unrelated third party can assist in the process to help keep the results objective.

Leave it Up to the Kids

Some businesses simply let the younger generation decide. If you have several children, they can set up a board or committee and choose who would be the best successor. This group could include one or more outside advisers. They collectively make a recommendation, which you review before making a decision.

One thing is certain: Regardless of how you approach the issue, you must have a succession plan that can be put into place as quickly as possible. It may need to be changed at some later date, but in the meantime, it helps ensure the family business will continue running in the event of an unexpected death.