The July 11-12, 2020 Wall Street Journal had a fascinating article on the dysfunctional British Barclays family. It’s a good example of why it’s great to plan and at the same time the plan must be solid and emotions can’t play (too large of) a part.
The simple story is how the now 85-year-old Frederick and David Barclay built an $8.8 billion empire from nothing. Literally nothing, no inheritance from dad or grandpa, no government grant, etc. They were a team, described as inseparable. They owned London’s Ritz Hotel, the Daily Telegraph newspaper, an online retail business, a logistics and parcel-delivery company, and more. They were noted for being adept at buying and selling companies.
One good thing they did was start the succession planning process about 30 years ago. How they did it makes one wonder how such smart and successful people can make what appears to be basic mistakes. For one, a big one, they decided three of David’s kids would each get 25% and one of Frederick’s kids 25%. Given they were 50-50 partners does this make sense? Frederick now says he felt sympathetic for his brother because he was ill at the time. This is where the emotions come into play; the hugging at the heartstrings.
Fast forward to recently and it sounds like a bad reality TV show with secret meetings, bugging meeting rooms, etc. No trust, damaged relationships, and a waste of time and money.
If the article is right, a big mistake was trusting others, even family members. As President Reagan said, “Trust but verify,” which leads me to offer some thoughts on succession planning in general.
- Don’t get overly obsessed with succession to your kids or grandkids. It has to make sense for all not just the desire to have your kids continue on with what you started (or bought).
- Get advice from experts and pay attention to it. They’ve been there, done that.
- Start early (the Barclays’ did).
- Make sure it follows Rotary’s 4-Way Test and “Is fair to all concerned?”
- Think through it, there probably isn’t a rush.
- Monitor what you did, things change.
- Consider all options including family, management, outside investors or buyers.
- Know what’s driving the process. Is it money? Is it legacy? Is it giving your kids or team the business? When you know this the rest will be a lot easier.
- Once you do it, get out of the way. Dad and/or mom can’t hang around too long or be too involved. A board seat is fine, coming in every day to look over your successor’s shoulder doesn’t work.
- Relationships rule in buy-sell deals. When there are multiple family and/or management members make sure there are good relationships, or you’ll be doomed, and probably back running the business.
It has to be a fair deal. Mom can’t give the business to her son or daughter. Dad can’t go for the jugular moneywise like I wrote about many years ago when Seattle institution Larry’s Market went under. My theory was the kids overpaid and a banker who rejected the deal confirmed it.
“Is it fair to all concerned?” Rotary’s 4-Way Test