Succession Planning -Part 11: Status Quo Blocks Growth
When some of the relatives in a family-owned business grow older, they develop an attitude of status quo. They don’t want things to change and are afraid of risk. With this attitude, they can, and often do, block growth in their family’s business.
The solution to such a problem is to urge or suggest that the status quo members slowly disappear from the scene of operation. One way to do this is to dilute their influence in management decisions. For example, the status quo relatives might be given the opportunity to convert their stock in the corporation to preferred stock. Or they might sell some of their stock to the younger relatives.
It might also be possible for the status quo relatives to think in terms of gradual retirement. Their salaries can be reduced over several years, and they can relinquish some of their interests. With the proper advice, it might be possible for a small corporation to re-capitalize. A new partnership agreement might be drawn up when the company is a partnership.
Such actions can take into account all of the growth of the business to that particular point and can enable the retreating members to recover their equity. Meanwhile, the manager and active relatives can renew their efforts toward expanding the business.