When Citigroup’s 75-year-old former CEO John Reed criticised his successors for closing down the banking operations in 11 markets last week – operations which he opened during his time at the top of the bank – many in family businesses will have given a wry smile.
Although Reed retired 14 years ago, he still appears to have strong opinions about his former employer – and to be fair the journalists who asked him about it evidently still think that his thoughts matter. The situation is familiar to those in family firms, and even more so if the former boss in question is the founder of the firm, and/or the parent of the current boss.
So what can families do to ensure that parents, once retired, keep out of the business? And, at the same time, balance that with ensuring that their wisdom doesn’t go to waste?
A study about “retirement planning” published in 2011 in the journal Family Business Review found that many family business leaders “struggle to come to terms with the state of the business as they approach retirement” and yearn for “one more chance to prove themselves”. However, there are plenty who do leave the scene successfully. So what differentiates the two? And how can you raise the chances of a smooth retirement?
The study found that leaders with good “goal adjustment capacity” – that is, who were able to find other things to do in retirement – had smoother retirements. People who equated retirement with loneliness and aimlessness found it tougher to let go, while those who viewed it as a time “full of interesting new work projects” and “learning new things” left more readily. Secondly, the more leaders trusted their successor, the smoother the transition.
The implications are obvious: that leaders and their families should ensure that retirement is seen as something filled with activity, and not putting your feet up. And secondly, that the successor should work hard to convince the old leader that the business is in good hands.
While some of this is obviously “soft” and probably has to be done in delicate conversations with the parent, there are “hard” steps you can take to improve the chances of a smooth transition. Michael Louie, a family business advisor from D+H Group who has been working with families for 25 years, says that there has to be “clarity around governance, preferably in writing” and that you should remember that the people with the votes have the power. It’s up to the next generation leaders to make sure the right people have them.
It is also important to “clarify with non family management who is in charge to avoid any misguidance or conflicting direction,” says Louie. “This means the parent cannot have the apparent or actual authority on operational decisions.”
But rather than sending your parent out to pasture, successors should ensure that they don’t completely alienate someone who has potentially valuable insights. “Invite the parent onto the advisory board with regular meetings,” says Louie. “This advisory board has persuasive, not conclusive, powers.”
It’s probably pretty easy for Citibank’s current management to ignore the old boss’s comments, but it is surely harder when the loquacious critic is your own father or mother. And, to be fair, it is possibly perilous when the critic in question knows the business inside out and (whisper it) might even be right. Getting the balance between helping the old leader leave, and not losing their insights, is hard but vital.