Albert Froom, who heads up AltoPartners’ family-owned businesses practice, says this about family-owned businesses:

• The first generation builds the company up
• The second generation builds it out
• The third generation spends the money

But if a company makes it to the fourth generation, it can go on forever (more or less). His slightly tongue-in-cheek long-term view is based on years of experience in the Netherlands, where family-owned businesses can be as old as 300 years or more. Froom says that succession planning is a well-understood process once a company has matured. While issues of ownership can be complex in later generations where there may be many family members involved, there are generally well-established ways of dealing with that complexity.

One way of dealing with the complexity is to create a family statute, which governs how the family members deal with each other. For instance, the statute might determine that there’s an annual meeting of family members and outside shareholders, which irons out issues the company and the family is facing.

Froom’s Leaders Trust runs what they call a “glass elephant” initiative, where the non-executive directors of family-owned businesses gather in a safe environment to discuss their dilemmas. Four times a year, 10 people gather and talk, based on a non-disclosure agreement. The NDA is necessary because the issues on the table are not usually discussed openly (or perhaps not even consciously understood). “We act as if there is nothing in the room but professionalism - but in the middle of the table you have an enormous elephant called family,” Froom says.

One thing is clear from these meetings: the dilemmas (including succession issues) that are shared are the same, no matter what the size of the company.

He notes that while mature family-owned businesses may have succession planning ironed out, there are different challenges when a company moves from first generation to second generation. These challenges are often centred around founders, who are talented and visionary people. “They can be lonely. They’re not given to discussing their issues even with their children, and if they talk to an outsider, it has to be one-on-one,” Froom says.

In his work as an executive search consultant, he’s learned that it is crucial for a consultant to understand the values of each individual company, and to take the time to build trust with a founder.

Albert Froom is Partner Leaders Trust / AltoPartners the Netherlands and AltoPartners Global Practice Head Family Owned Businesses

READ AltoPartners White Paper on succession planning in family-owned businesses