Institute For Family Business
                


      Kent Lutz- Advisors To Families In Business
Generation2Generation

                                       Kent Lutz

                           Institute for Family Business

                             Generation 2 Generation

                         “The Final Test of Greatness”

                        Providing Comprehensive Solutions

                                             For

                           Family & Private Enterprise


 

Family and private businesses represent the engine that drives the US economy, as well as, the global economy. They represent about 70% of all businesses in the United States, and contribute about 60-70% of the Gross Domestic Product(GDP) produced in the US, as well as, provide about 60-70% of  all employment.  The Fortune 1000 companies rely heavily on family and private businesses to provide the goods and services that drive their growth and profits, therefore,  it’s imperative to the US and global economies that family and private businesses be preserved as much as possible. The Mission of The Institute for Family Business(IFB) is to educate multiple generations in family firms on “Best Practices” on how to meet the many challenges they face in running their businesses, as well as, help to provide solutions to these challenges, so their businesses continue to thrive and survive.

 

Kent Lutz, President and Founder of The Institute for Family Business(IFB), spent nine and a half years building the family business center at the University of Cincinnati into one of the leading centers in the US dealing with family business challenges. Prior to that, Lutz spent 30 years in the private sector as a corporate executive, entrepreneur, and family business owner. Lutz retired from the family business center at the University of Cincinnati in June 2008, to start The Institute for Family Business(IFB). The IFB is an entrepreneurial, independent , family firm, with a professional brain trust and educational resources that assists family and private firms in developing "Best Practices" while maintaining their business legacy over multiple generations and encouraging strong economic growth. 

 

One of the most difficult challenges family firms face is the planning required to successfully transition the ownership and management control of the business from one generation to the next. It requires both generations to do significant planning, which normally is outside the comfort zone for most business owners. Through IFB, a series of educational sessions called Generation 2 Generation-"The Final Test of Greatness" has been created that will assist family and private business owners to better understand how to deal with these multiple challenges they face.

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Transition planning is a process that must be deliberately planned and managed. It has three objectives: 1) Efficiently and fairly distribute assets from older to younger generations 2) Pass control of the business in a way that will ensure effective business leadership and 3) Maintain and promote family harmony. It is quite remarkable how the effort to meet these three simple objectives results in the agony, confusion, and paralysis that characterizes so many succession planning efforts. It is one of the goals of Generation 2 Generation “The Final Test of Greatness” to assist family firms with this difficult process.

 

The challenging key concepts just mentioned are ambiguous and emotionally charged. First, what does fair mean? What does control by the next generation imply for those who are no longer in control? Second, one objective may be in conflict with another. The older generation can pass control, but doing so unfairly, can possibly destroy family unity. Third, if the parents refuse to grant certain siblings more power than the others- family harmony is at risk and that could stalemate the business. The possibilities of meeting all three objectives successfully are greatly enhanced if the business owner develops a clear strategy for succession planning and communicates it early. A succession strategy articulates how the process will be carried out, as well as, the purpose and values guiding the choices that have to be made. Generation 2 Generation “The Final Test of Greatness” is designed to help address these matters.

 

Experience has proven that developing a clear written strategic plan is imperative to successfully moving forward with a succession plan. There are a number of key points to consider in developing a clear strategy, and should include the following:1) Keep it simple and establish clear priorities 2) There must be a solid commitment  from leadership 3) Leaders must hold the interests of the company first 4) CEO and key family members must be involved 5) Keep the group to a size of between 6 and 10 family members and key managers 6) An advisor must lead the process, not family 7) Don’t seek perfection 8) Break the process into multiple sessions over several months 9) Pay close attention to assumptions 10) Differentiate from the competition 11) Learn to say no to some opportunities 12) Complete the first plan and improve it the next year 13) Develop realistic action plans based on time and money and 14) Establish rigorous procedures for monitoring progress of the plan and for assessing results. Generation 2 Generation “The Final Test of Greatness” provides significant insight into all these key points.

 

Once a business chooses a strategy and business structure, a transition plan can be crafted. It is recommended that the business create a plan  which will guide the leader of the business in forging a consensus, choosing a successor team, and developing a clear vision of the future. The plan includes the following and are discussed in the Generation 2 Generation: 1) Decide whether you want to retain family ownership 2) Assess whether the family can withstand the stresses that continuity planning inevitably generates 3) The owner(s)-manager(s) must agree to actively manage the development of the continuity plan and the transition in leadership to the next generation 4) Consult and actively  involve other major stakeholders in the process 5) Set up appropriate forums for reaching consensus on key issues-Family Council, Board of Directors/Advisors, Succession Task Force 6) Develop a clear vision for the future of the business that all key family members can enthusiastically share and one that spells out the role each will play 7)  Choose a successor and other candidates for the future top management team and plan a course for training each of them 8) Help the successor build authority both in the family and in the business 9) Design an estate plan that specifies how ownership of the enterprise will eventually be distributed among members of the next generation 10) Make sure family members understand the rights and responsibilities that come with the various  roles they will assume 11) Inform important stakeholders-customers, suppliers, creditors-about the firms continuity plan and 12) Develop a contingency succession plan just in case the primary plan does not gain traction.

 

From these twelve steps, four very clear characteristics of a successful continuity plan emerge and include the following: First, the plan must be strategic and it must be based on a thorough analysis of future markets and growth prospects of the business. Second, the plan must be comprehensive and it must acknowledge the complex interaction of family, ownership, and management issues. Third, the plan must be feasible and a realistic assessment of what the family and business can accomplish at the current stage of the things. Fourth, the continuity plan must be managed, designed, and implemented by those in power.  

 

Generation 2 Generation “The Final Test of Greatness” is designed to address the following:1) Understand the actions and challenges that family businesses face and in particular succession planning 2) Understand the depth of resources available to assist them in accomplishing their plans and goals 3) Improve lines of communications within the company and the family 4) Provide a forum for self development over multiple generations 5) Administer assessments designed to evaluate various aspects of the business and its leadership 6) Hear personal testimonies from family business owners who have experienced many of the same challenges discussed in the program modules 7) Analyze cases to enhance the understanding of the issues discussed 8) Participate in possible roundtables that  provide high interaction with one another  9) The roundtables are led by experienced  professionals that enhances open communication and sharing 10) Roundtable members may choose to visit each other’s place of business in order to gain insight in what others do 11) Roundtable leaders are avaialble to meet with their groups for several months after the session is completed in order to enhance the chances of strong follow through and implementation of ideas learned 12) Participants have an option to meet one on one with their professional leaders between sessions 13) Participants may be asked to complete certain assignments between sessions 14) Participants learn to understand sensitive compensation issues 15) Understand how to deal with conflict 16) Plan for estate and charitable giving strategies 17) Understand the real difference between ownership and management 18) Learn how to hire key non family executive team members 19) Understand the importance of proper governance  20) Consider the various financing strategies available for transition 21) Learn the importance of proper business valuation and 22) Address other matters that are specific to participant companies.

             

Kent Lutz

President/Founder

Institute for Family Business

Serving Family & Private Enterprise

Assistant Professor, Business

Entrepreneurship/Family Business/Finance

University of Cincinnati

Blue Ash College

513-314-7561

 

All Rights Reserved                                 


 

 

Kent Lutz

Founder/President

The Institute for Family Business

Generation2Generation

Advisors to Families in Business

Assistant Professor, Business

Entrepreneurship/Family Business/Finance

University of Cincinnati

Raymond Walters College

513-314-7561


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