In a typical company, succession hinges on performance and planning. Decisions are based on data and logic. But in a family, relationships and emotions are the driving forces. So, when it comes to family businesses, and in particular succession planning within a family business, sibling rivalries and emotional attachments to ways of doing things can get in the way of clear-eyed decision making. Family systems and business systems are governed by very different principles – and trying to make business decisions driven by family values can quickly descend into chaos.
It’s no wonder film and TV mine this rich seam of inspiration for drama, from the power struggles of the Roy siblings battling for control of a media empire in Succession, to Netflix’s The Parisian Agency following the Kretz family’s luxury real estate business.
In the latter case, after a few seasons of being followed around by film crews while they showed off jaw-dropping Parisian apartments and spectacular country chateaux, the parents briefly decamped to semi-retirement in Brazil, leaving their sons running the show, but were back on the scene the minute they felt control was slipping.
“It boils down to the sense of whether the next generation are capable,” says Oliver O’Connor, partner with Grant Thornton. “And as with all families and businesses as well, the older generation never think the younger generation are as good as they think they are.”
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It speaks to two of the biggest issues he sees when dealing with clients in the midst of succession planning: firstly, when the founders hand over the business but struggle to let go of control, and secondly, finding a new sense of purpose to direct their attention towards. After spending 24/7 on a business the founders can feel quite lost when they pass it on.
The fact that many Irish family businesses are embedded within communities, with close-knit employee and customer relationships, makes stepping away even more difficult. “The emotional detachment is actually the piece that takes the most time and is probably the most difficult for the original owner to accept,” he says.
In many ways, selling a business on to a third party is a much cleaner break, and O’Connor says very few businesses survive more than one generation of handing down. A small business, much like a small farm, isn’t going to be enough to sustain numerous siblings and their families if it’s split up.
With clients he has advised, O’Connor says the financial and tax advisory side is often the easy bit – there are clear yes and no answers, ranges of numbers to be decided on. It’s his unspoken role as some mix of therapist and confessor that is the delicate side of the work – not just delving into the books and the assets of the family but hearing opinions that might not be openly voiced to the rest of the family across the dinner table.
Ever since the financial crisis, the level of handover has been sluggish he says. “From 2010 onwards, we haven’t seen a huge amount of family businesses passed on because they were trying to come to terms with the result of the crash and how it impacted their business.”
However, better late than never and it’s never too early for business owners to start thinking about it, as putting together a succession plan requires careful consideration. “They have different thoughts going through their head as to what they want to achieve or what they want the business to achieve,” he says. “And it generally doesn’t come down to anything to do with tax or valuations; it comes down to what and how they want their family dynamic to run years from now. And it’s that piece that can take an extended period of time, and I mean years.”
Done right, good succession planning creates conditions for a business to thrive. The Doyle family’s Arboretum garden centre business exemplifies a well-thought-through transitioning process with the business handed over to brothers Fergal and Barry by parents Frank and Rachel.
The Carlow-based garden centre business, founded in the back garden by Rachel in 1977, has grown over the past four decades, most recently with a €4.5 million expansion of the newly renovated state-of-the-art garden and retail centre in Kilquade, Co Wicklow, officially opened by Taoiseach Simon Harris in April last year.
Rachel retains shares in the business and sits on the board, but the baton has been well and truly passed on to the next generation. The brothers became directors of the business in 2006 when they were both in their 20s, and a decade later began to re-examine their roles and think strategically about how best to bring the business on.
From spending time away working outside the business to gain experience when they were younger, to bringing in good advisers and outside non-executive directors, their approach has set them up for successful succession.
Being the family’s only two siblings, each with complementary skill sets and interests, has made it easier. “We’re as different as apples and oranges which is a good thing,” says Fergal. “If we both had a similar personality type there could be more conflict.”
He emphasises the importance of everyone playing to their strengths and taking ego out of it when it comes to the formalities of titles. Although it might be more traditional for the eldest sibling to take the top role, they flipped the script, “primarily because Barry was leading on the ground with a horticultural background”, he says. “Ultimately we’re in partnership and we’re jointly leading the business,” he continues, describing his brother as strong on the day-to-day of being “in the business” whereas his own focus is more strategic, and “on the business”.
Fergal is proud that he is also taking on a role as vice-president of the International Garden Centre Association this year, following in the footsteps of his mother, a former president. The international outlook gained by this membership – learning from global peers and adapting successful practices to the Irish market – has stood to them and diffused into the family’s approach to their business. That includes an open outlook and a willingness to take on expert advice that has stood them well in their succession planning and handover.
While many families fear bringing outside influence to bear, taking on non-executive directors to the board and having a board structure has been invaluable, he says. Although he recalls they did, at first, have an attitude of “we can figure it out ourselves”, he consistently comes back to the value brought by their outside non-executive directors, including economist Jim Power and Kevin Neary, founder of GameStop, with whom they connected through the Retail Excellence Ireland network.
The board’s role in challenging and supporting the business has been crucial in driving growth, helping the business focus on long-term goals and avoiding family conflicts.
“The game changer has been doing that succession piece, and involving external consultancy, tax planning, shareholders agreements,” Fergal says. Each of the three people in the shareholder’s agreement (Rachel, Barry and Fergal) took their own legal advice and a key person policy was put in place. “Knowing that it’s done, you’re not looking over your shoulder worrying about it, and that allows you to move forward and scale. By figuring out what we needed to do as a family – to be super clear with each other and for the team – the clarity that brought to the business was immense.”
His advice to any family business is to implement these measures at an early stage to provide a structure and a clarity for the business to move forward, grow and scale. “It’s harder to drive the business on to where it should be if you haven’t addressed the elephant in the room.”
