Balancing Family Expectations in Succession Planning

An experienced banking professional, Julio M. Herrera Velutini guides the operations of an international bank based in Puerto Rico. Like his family members before him, Julio Herrera Velutini has succeeded in keeping the decades-old family banking business competitive.

At some point, every family business has to transition to the next generation. A good succession plan balances the needs of the business and the expectations of the family. Where is the company in regard to its life cycle and the business environment? Is one of your children ready to take over the business? Who is the best person to guide it into the future?

Be realistic. If your firstborn is not the right candidate and another family member is better suited to take the reins, choose the latter. If no child is adequately prepared, consider separating ownership and management to give the children ownership and leave management to someone more experienced. At the same time, it’s not always in the company’s best interest to give each of your children an equal share in the business or to implement the transition instantaneously. Ownership can vary, and transitions can take effect progressively, one department at a time.

Up to 70 percent of family businesses do not transition into the second generation. Involve your family in the succession plan. If your children want to manage, teach them all the skills necessary to run the business and bring them on board years before the actual transition occurs.