Your Life, Simplified

Finding Success in Succession Planning

April 13, 2021

If you own a business, planning for the transfer of ownership is something that you’ll eventually need to consider. While giving up that ownership may not be an easy consideration, our guest, Rochelle Clarke, Business Transition specialist and CEO of Succession Strength, offers guidance on things you should be considering and how to make the transfer of your business go more smoothly. In this episode, we discuss examining the strengths of potential successors, preparing them for the position and other factors of the process.

Scott Sturgeon:

Welcome to another episode of Your Life, Simplified. My name is Scott Sturgeon. I’ll be the host for today’s episode and I’m excited to be doing so, because our guest on the program today is Rochelle Clark. She’s the founder of Succession Strength Incorporated. A company that helps business owners protect their operations and really focus in on smoothly transitioning from its current ownership structure to potentially heirs of the family business. Rochelle is also the author of The 5 Critical Succession Conversations, a comprehensive guide for the family business. And as if that wasn’t enough, she is a graduate of the University of Pennsylvania’s Wharton School and has a storied career working with a variety of different businesses of all different sizes. Rochelle, welcome to the show.

Rochelle Clark:

Scott. Thank you so much for having me. I’m very happy to be here.

Scott Sturgeon:

The feeling is mutual. We’re excited to have you on. So, Michelle, really your role from previous conversations we’ve had is focusing in on succession planning for businesses. And I think a lot of that pertains to family businesses as well. Do you want to, for our listeners that maybe aren’t as well-versed in that, explain what exactly a succession plan is?

Rochelle Clark:

Absolutely. So, succession planning for family owned businesses is essentially the process of identifying and preparing new leaders in the family. They could be in the family or outside of the family, to take over from the older leaders when they leave the business, retire or should they pass away. And all of this is done with the objective of ensuring that the business continues into the future smoothly.

Scott Sturgeon:

That’s a great description. It sounds very simple. I guess that wraps up our episode. Great, thanks for tuning it now. Completely kidding. Clearly, there’s a ton of nuance to that. Just out of curiosity, it’s very much a niche practice. What drew you to working in this space?

Rochelle Clark:

The way it started for me is that I grew up in a family owned business. I grew up in and around family owned businesses. But I pursued a career in the corporate world. I was a consultant for a number of years and then I moved into this industry. A few years ago, I found myself being drawn back to one of the businesses within our family that had a little bit of a succession crisis, so to speak. In helping that family out, what I recognized is that quite a few family owned businesses are just as vulnerable. It was at that point that the seed for succession strength really took root. And that’s when I decided to start the company to really serve, as let’s say, as a part-time referee, part-time strategic coach for families in business who are approaching or coming up to a succession. Or those who just have some issues within the business that they need some expertise in getting over.

Scott Sturgeon:

I think just to provide a good base for our conversation, what exactly does that process look like for you when you engage a family and in a business that’s maybe been run by a founder for many years and they’re looking to transition onto the next generation. Is there a specific process you go through or is it all contingent on situation? Could you walk through that a little bit?

Rochelle Clark:

Absolutely. And it’s definitely situational, because families bring us in for a number of issues, but essentially we speak with the family member who brought us in. We have an initial conversation or an initial meeting with that person to understand what their issue is. After that, we typically have interviews with different or key members of the family or family business, because there could be key employees whose input is also valuable. The reason that we do that is to get a full understanding of what the issue is and where the issues might lie. We then have a group meeting with all of the key members of the family to go over or to present what we feel the issues that we would have discussed before are. It is during that session, very open discussion, that we really prioritize what issues the family wants to address and tackle. We work with the family in addressing those issues and provide support for them afterward. We never really step away unless, and until the family is fully supported and fully integrated into their new role.

Scott Sturgeon:

Really interesting. It sounds like a very much kind of a combination of an emotional approach. Well, I guess the coach and referees, you mentioned, but family dynamics are always a little tricky. I think that they vary widely between groups.

Rochelle Clark:

Yes, definitely.

Scott Sturgeon:

I think one of the questions that came up in my mind when you’re meeting with families and you’re having those conversations, how do you generally approach, looking at the dynamics of the family to say, which child would be a good fit or how do you encourage a child to take over a business? Is there a playbook for that?

Rochelle Clark:

That’s a good question. And to be quite honest, I’ll just be very clear, that’s something that we do not do. We do not persuade anyone to take over any role within the family business, the reason for that is that we believe that this should come organically from the person themselves. What we do is we sit with the family members. We observe their interactions. We hear from the patriarch or matriarch of the family, whoever’s in charge of the business, what their take is on who they believe should take over the business. We do what is called a skills gap analysis. Now in that skills gap analysis, what we do is we evaluate that person to get a full understanding of where they are along their development path, in relation to assuming their intended role in the business.

Rochelle Clark:

And coming out of that, we then have the conversation with that person, of course, to understand their intentions as well. It’s one thing to say that Suzanne is fully equipped, she has what it takes in terms of the training to take over the business. But I don’t know, maybe Suzanne wants to go surfing and own a shack on the beach. Now, in that scenario, we don’t want to take on the role of trying to persuade Suzanne or anyone else to assume a role that doesn’t come naturally for them. And the reason for this is that what you find is that if someone is in a role that they really do not want to be in, or that they feel is a heavy obligation to be in when the challenge of owning a business and of running a business happens, when that rubber hits the road and times get tough, it’s usually very hard for that person to reach deep down inside and really see the business through for the benefit of the business and the employees who might be there.


It’s really a matter of coming to the table and getting a full understanding of everyone’s intention. Before we then take a look at what potential next steps are in terms of who takes over the business. Because sometimes if we have enough time to go through this exercise, perhaps someone within the business is not the right person to take over. And in that case, we then go to an external person or do a search externally to find someone to take over the business, but that usually takes some time. So, there’s definitely the emphasis to start early.

Scott Sturgeon:

Oh, that makes total sense. The passion piece has to be huge. I think really for anyone in any career that you choose, you’re going to be, just in general, much better at whatever you do. You’re going to have much more of a commitment to that if you really have the passion for it at the end of the day. So, it makes perfect sense to have that approach. Certainly, having a resume fitting of the job is key, but I have a hunch that the piece you just described as incredibly important. As you look over the long term, I pulled some statistics, and I’m sure these aren’t surprising to you, but from the family business Institute, roughly 30% of family owned businesses survive at the second generation and then 12% survive into the third generation. And I guess in looking at numbers, number one, are you surprised and number two, do you sense that there’s likely, I don’t want to say a failure, but maybe a lack of just that type of planning that you described?

Rochelle Clark:

Yes. You know, as you say, those statistics are not surprising to me at all. And for anyone who’s actually working in a family owned business, you get it, you’re probably shaking your head right now saying yes, sounds about right. The statistics are very dismal when it comes to the success of family owned businesses into the future. It’s unfortunate, but it comes down to, like you say, intentional drowning. There are certain things that successful family owned businesses have done to get to their levels of success, unfortunately, many more have not duplicated or replicated that playbook.

Scott Sturgeon:

Yes, it seems like it’s probably just not top of mind for a lot of business owners. You’re very stressed or much of your time is consumed in running the day-to-day operations of the business to ensure its success over the long term. Providing for your family or your loved ones, or what have you, that future looking piece just maybe isn’t there as much or the thought at least to have conversations around, who’s actually going to take over when I leave, as opposed to simply just, all right, what’s going to be the selling price of this business or something to that effect.

Rochelle Clark:

Yes, you’re absolutely right. The business owners are deep in the weeds sometimes trying to get the business going or running from day to day and time, really it goes very quickly. So unfortunately, and sometimes by the time they recognize the need for this type of planning, it can be too late. But what we always say is, listen in a family owned business, the onus of the success, or the responsibility for the success of the business lies with everyone in the family. So it’s not necessarily only on the leader, the named leader to take charge when it comes to these conversations or ensuring that some of this action is taken, but everyone in the family has the responsibility of at least ensuring that this is a topic that’s on the radar. That can be done in a number of ways.

Scott Sturgeon:

Sure. That’s maybe actually a good segue, some of our very brief conversation prior to today, you referenced what you call conversation guides. My question had originally pertained to, what are the biggest pain points you see in the transition of a business. It sounds like the conversation guides you mentioned address some of those. So, I found those really interesting. Could you touch on what those are and what that entails?

Rochelle Clark:

Absolutely, coming back to your initial question, the biggest pain points when it comes to transitioning a business. Sadly, 60% of the businesses that fail to transition will fail because of communication issues, and a further 25% will fail because of insufficient preparation. Now, if you add these together, that’s 85% of the failure rate of these transitioning family owned businesses are due to what some of us would term very controllable areas, communication and preparation. I think on the surface, it looks simple, and that’s what lulls a lot of families into a state of inactivity when it comes to these areas and it’s the inactivity or inability to take action, that’s what ends up, becoming an issue in the long run. So, communication is the number one reason followed by preparation.

In terms of the conversation guides that we spoke about. So, what our team ended up doing is saying, okay, there are a number of key conversations that we know families in business are not having. And for a number of reasons, there’s a lot of hesitation when it comes to having these conversations. Just because there’s so much on the line, you’re talking about a family dynamic, folks more or less don’t want conflict in their family. They may think, if it’s just the business that I can walk away from, that’s fine, but not with my family members. I don’t want that type of conflict. So, there’s a hesitation when it comes to having those conversations. What we’ve done, and it’s just through the behavioral psychologist on the team, we’ve created a number of conversation guides that essentially provide step by step advice for families to help them handle these tricky conversations. So, that’s what the conversation guides are about. And there are about 18 of them. Although, we have three of them that are the top sellers related to having that initial conversation about, can we take over the business? The second one is around performance management. So, how do we ensure that family members are pulling their weight in the business? And the third one is how do we prevent this business from really taking over our lives? And those are the top three ones but there are about 18 of them.

Scott Sturgeon:

It’s really interesting. I think for even just a business owner off the street, as if there’s tons of them walking around the street, but I have to think that even if you had owned a business for many years and you had come into mind, wow, I should maybe look at succession planning or how do I transition out of this? I don’t know that it would immediately come to mind to have those types of thought processes in place, to have those types of conversations or even where the heck do I even begin? I think that’s so important to have that, it makes total sense. Even just listening to you just describe at a high level, it’s like, well, yeah, they should probably have that type of conversation. That would seem to make complete sense. It seems that it would be very difficult for someone who really hasn’t spent the time, like you have, to really think through those processes and come at it from both that organizational aspect and then also the psychological element as well. It seems to be really huge.

Rochelle Clark:

It is. That’s the feedback that we’ve received, because you can have successors who really don’t have any intention or want to take over the business. They’re just going along day by day, knowing that let’s say, for example, if it’s their parent, knowing that their parent intends to pass this business on to them, but no one’s really stepping up and addressing the elephant in the room. So, on both sides. So, the successor not stepping up and saying, by the way, this is where my interest really lies. And of course, there’s the owner or the person in charge, not stepping up and saying, by the way, these are my intentions. Are you on board? What are your plans? Sure. That makes total sense.

Brian Leitner:

Thanks again for downloading this episode of Your Life, Simplified, which is produced by Mariner Wealth Advisors. At Mariner Wealth Advisors, we’re here to serve as your advocate. We help people chart a course to reach their personal and financial goals so that they can have greater peace of mind that may lead to a more fulfilling life. We do this by always putting our clients first, because as fiduciaries we’re required to provide guidance, that’s in the best interest of clients, not in the best interest of a company or shareholders for anyone else. So, as you listened to this podcast and have questions about maybe your own financial situation, or we’d simply like a second opinion, or even you have an idea for a future podcast, please go ahead and email us at podcast@marinerwealthadvisors.com. If you found the information in this podcast, valuable, please go ahead and share it with a friend or family member that you think might benefit from this information. Please don’t forget to subscribe to this podcast, so you don’t miss an episode. Thanks for listening. And now back to the episode.

Scott Sturgeon:

That’s actually probably a good segue. One of the items I’d wanted to touch on, we addressed it in a few ways, but family dynamics. I think just what immediately comes to mind when thinking about succession planning and family dynamics, Hollywood has maybe done a service or disservice to presenting what I would almost phrase as a caricature of maybe there’s the patriarch or matriarch who’s run the business for many years, who’s very set in their ways. There’s the rebellious oldest son or the various astute younger daughter, who’s the prime candidate to take over and there’s conflict there. When you get into scenarios like that, playing that coach and referee role, how does that conversation look if you have multiple children or multiple family members competing or there’s tension as to what the next step is going to be? Is there a certain approach you take to diffusing that as sticking to the process, is it deviating from that? What is that?

Rochelle Clark:

That’s a really good question, but to be quite honest, there’s no playbook that we use when we deal with all of our families. Instead, what we do is assess each situation as it comes. What are we seeing here? What are we hearing here? This is true through observation and conversation with the key family members. Coming out of that, what you say is absolutely right. Maybe Hollywood is taking a little bit of liberty, but to be quite honest, working in some family businesses can be very tough. One of the most impactful things that we do in workshops with the families is around their values. Knowing, and being guided by the family’s values helps to keep family members grounded. So, in a lot of cases where there’s a lot of conflict going on there, of course, I’m not sugar coating this or saying that it’s easy. Of course, there can be other issues.

What we found is that in many cases, the family members are not really aware of what the guiding values and the guiding principles are for the business. In the absence of that, in the absence of them being able to say, this is a business, this is what we’re about, this is our intended purpose. Without those strong values, what you find is that individual values start to play out. It’s the one who’s more about business and earning money and the family may be coming at it from a more philanthropic position. So, you could have a number of issues and a number of ways that this can play out. Long answer to your question is each family, as they come in, is assessed individually to determine what the best way would be for us to solve the issue that they brought us in for.

Scott Sturgeon:

Long answer, but a good answer. It seems like that value piece is vital to success. Even from perhaps a mother owns the business, and the son is looking to potentially take over. As you mentioned, if the mother is very much focused on maintaining quality of products within the business, whereas the son specifically is looking to expand the business substantially. As a result of that, potentially reduce quality of a product, a widget, whatever the business may be producing. There’s a potential for issue there. Addressing that from the beginning seems immensely more helpful than simply just handing the keys to the family member and saying, best of luck, see how it goes.

Rochelle Clark:

Absolutely. One of the things, Scott, is that you remember a lot of this tension, doesn’t only sit with the family members. You also have to keep in mind the impact that this has on the employees and others who work in the business. Operating a business is stressful enough without the unnecessary stresses of employees having to deal with the family drama. So, it can be frustrating for employees and in some cases, some customers or some vendors, if they become aware of turbulence within the family, because this can really damage the relationship. For example, what you were saying about the family member, wanting, let’s say, cheaper products and to expand faster. Well, think about this scenario. If he’s working in a manufacturing company where all of the employees were fully brought into his mother’s vision of providing high-quality work. When the son then comes in with his grand plans of blowing things up and really expanding very quickly, he not only has to contend with his mother, so to speak, but then he’s also contending with employees who may not be in agreement with his approach. They can end up sabotaging his work and sabotaging the direction that he’s trying to take in ways that may be known or unknown to him. So, some of this conflict that we see sometimes plays out on the stage of the business in a way that’s not intended.

Scott Sturgeon:

That makes total sense. I candidly hadn’t even considered that aspect or element of things. It really is an entirely holistic approach. You have to be looking at all elements of the business. How does that specific business line or specific employee group or team, or what have you fit into the grander vision or values of the company, that makes total sense.

Rochelle Clark:

Yes.

Scott Sturgeon:

I’ll just focus specifically on children as taking over or moving into the business to start working in the family company. From what your experience has shown you, do you think that there is credence to having that, we’ll just say child, maybe they’re an adult or what have you, but having that child step into more of an executive or senior role or leadership role within the company from the get-go? Or do you find it’s best to have them start day one in the mail room, or entry-level positions to work their way up, really gain full experience of what goes on within the company to then really take on leadership roles down the road? Is there a specific best practice you see there? Does it really matter? I was just curious.

Rochelle Clark:

It’s a good question that you raised. To answer, what I would say is, let’s keep in mind that successors for a family owned business are not only minors in this day and age. With people living much longer, what you might find is that you have people, potential successors coming from multiple generations. So, you can have a successor to a business who is in their 50s or in their 40s or in their 30s. When you talk successor, it’s not just about a minor or someone just coming out of college. To answer with that context in mind, what I would say is that when it comes to that person, that successor taking over, it really depends on their level of experience in relation to their intended role in the business. This is why we do the skills gap analysis to really understand and really develop a preparation plan for that person, to hold them accountable along the way to ensure that their goals are met.

What we find is that if a family member is young enough with sufficient time to prepare, then the longer experience rotating through multiple departments within the business may indeed be one of the recommendations. But it really starts with that family member, to understand what their true desires are for the business, and then be convinced strategically, explore options for themselves and for the business when that time comes. In terms of a, let’s say, I don’t want to say a minor necessarily, but a younger successor who is perhaps in their early teens or early 20s, when it comes to preparing for succession, timing is important. The amount of time that this person has to prepare. In all fairness, you need to give them sufficient time to take over a business that might have taken decades to build. It’s a little bit unfair for an outgoing leader to say, I’m retiring in two years, figure things out.

So, just doing some quick math, back of envelope math. I don’t know for yourself or for your listeners, if they’re in this situation where they are a family owned business and they have a potential successor coming onboard, or thinking of passing the business on, if that successor had just graduated from high school. Assuming that that successor is intending on going off to college, a four-year college, let’s do some math. So, you take the four years that that person will spend in college, then we want to add some time because, ideally, it’s usually good for them to get some outside experience. The reason for that is so that they have the experience of being managed by someone whose name is not on the company.

It helps them build that ability to be well-managed and of course, helps them be good managers at the end of the day. So, let’s give them about two to three years of that outside experience. This can vary, but let’s say on average, two to three years. Then to that second number, let’s add insight experience because they’re coming in to potentially take over this business. So, we would hope that they would have spent a substantial amount of time trying to get to know and understand this business. Let’s say on average three to five years. Of course, these figures aren’t the rule, they’re based on the complexity of the organization. So, how are we doing on the math? We’ve got four years for them to be in college, two to three years of outside experience, for inside experience, let’s say three to five years. What are you looking at? Timeline, you’re at least talking nine to 12 years. But guess what, let’s throw another curve ball in there. Suppose your intended successor at the end of college decided, or at the beginning of the middle decides, you know what? I don’t want to do business anymore. I want to study biology because I want to be a scientist. Well, there goes your plan of having that potential successor takeover the business.

So, this 15-year timeline gives a little bit of wiggle room so that you can adjust if plans do end up changing as they can. So, if you’re about to retire and you have a successor who is in this position and you’re giving them less than 15 years, then you really need to explore what the options are to ensure that they are well equipped to take over and to run and manage this business. There are other solutions that can be found to ensure that the business is well supported while they get the time that they need to prepare.

Scott Sturgeon:

Sure. But much better to have those options or to research those options, at least. Essentially the time frame you’ve described, which I think makes sense, to really have all your ends covered, is essentially almost a multi-decade process. Really being intentional with what you’re going to do, that makes total sense.

Rochelle Clark:

Absolutely. Actually, what we find is that with successful family businesses, they don’t just wake up one day and stumble into success. I mean, most of them are not shouting it from the rafters. They’re not shouting what their playbook is, but the ones who we have seen and the ones who we have heard of and read about, have taken a very intentional approach to their succession. So, they plan, and they prepare for the success that they seek. And they do this tangibly by putting plans in place. And by preparing their members of the younger generation, they can be preparing multiple ones at the same time, but also in the mindset so a tangible plan, but also in the mindset. So, what values will the business be guided by and what will keep this business together in the event that there is conflict or disturbances.

The glue that holds the family together tends to be values. So successful family businesses are really taking a very intentional approach to ensure that they are being able to pass on successfully from generation to generation. And when things Dole, they get help. So many of the businesses will run into trouble, but these businesses don’t ever think that communication issues are small or fixable or without consequence. I don’t know if you’ve heard of this saying, Muhammad Ali, he said in one of his quotes, it isn’t the mountains ahead to climb that will wear you out. It’s the pebble in your shoe. For us, I think it highlights that it truly is the little things, but smarter family-owned businesses don’t let these issues sit because they just know the potential impact that they can have.

So, they take action immediately. We have some clients who just at the hint of conflict, or just at the hints of tough situations call us and say, “Hey, I’m going into this how should we approach it?” A lot of them say that they take the role, not necessarily as owners of the business, but as custodians or caretakers of the business. Where they’re caring for this business for the next generation. This is why they are taking the approaches of avoidance is better than cure instead of handling these issues before they come up.

Scott Sturgeon:

It makes complete sense. Well, Rochelle, this has been, in my opinion, incredibly informative. Having this conversation with you has been really informative, and I certainly appreciate you taking the time today to chat with us. Actually just before we part, I would ask one final question and that’s, if you had one very simple, concise suggestion for business owners who maybe hadn’t even thought about this, maybe they’re listening to this had never even thought about it. What would be the single biggest piece of advice you could convey to them?

Rochelle Clark:

For me, it would be, you don’t know what you don’t know. We have a pre-assessment on our website where anyone can just go on and families can know where their issues lie within the family business, and they can get some recommendations on how to solve those. Don’t let ignorance be the stumbling block for your family’s continuity is what I would say. And then of course the conversation guides they’re out there, if you’re at that stage. But knowledge, I think is the most important thing. If they do the free assessments, they’re able to pinpoint what their issues are.

Scott Sturgeon:

That’s at succession strength.com. Ignorance is bliss, unless you own a business, in which case it is not bliss. It’s a bad succession plan in the making. Well, Michelle, listen, thank you so much again for coming on today. We really appreciate you taking the time again.

Rochelle Clark:

Scott, thank you so much for having me.

Scott Sturgeon:

To our listeners, thank you for tuning in as always, if you have thoughts or suggestions or ideas of topics that you’d like to hear by all means, we really encourage you to reach out to us  at podcast@marinerwealthadvisors.com. Thanks for tuning in.

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