Business Succession Challenges—More Food (or Beverage) for Thought

Last week’s post used true stories from the food industry to illustrate the importance and challenges of Business Succession Planning. Today’s post quenches the thirst for more business transition lessons by shifting from food to beverage, using real life succession strategies from wine and beer empires.

Let’s start by popping open a Heineken beer. When Freddy Heineken died in 2007, voting control passed to his only child Charlene de Carvalho, a 47-year-old housewife with no business education. “Within a week, daughter Charlene uprooted her tidy life in London, began traveling the globe to study Heineken’s far-flung operations, and learned how to become an effective owner and the guardian of a dynasty.”

Though her father Freddy failed to groom her to take over, Charlene was a quick study. Her transformation from housewife to entrepreneur is especially fortuitous, given Charlene’s sheltered upbringing. She vacationed with the likes of Onassis and Monaco’s Prince Rainier and Princess Grace but lived a mostly simple life eating dinner with her parents on TV trays. After her father survived a frightening kidnapping during Charlene’s honeymoon, Charlene dropped Heineken from her surname and retreated to a reclusive life raising her five kids. Then Daddy died.

Charlene replaced the CEO with a more aggressive leader, embarked on 49 acquisitions, and tripled revenue. Her crash course in business succeeded, but Charlene is determined to be more prudent with succession planning than her father.

Eldest son Alexander is on the board and being groomed to take control. Charlene’s advice to Alexander on selecting board members: “Surround yourself with the best possible people who are not yes men,” unlike Freddy who would only select board members who would agree with him.

Each of the other four children are being educated to be responsible owners. Charlene hired a consultant on inherited wealth to meet with the family as a group and also with each of the five children individually. The consultant addresses with each child “your ambition, desires, questions, maybe even fears of inheriting a legacy.”

Each child is encouraged to pursue some business education which Charlene lacked. Nevertheless, she wants each to follow his or her passion. Those not info business “may play roles in Heineken’s work on philanthropy and social responsibility.”

Shifting beverages from beer to wine, a Wall Street Journal study of 21 family-owned German vineyards (the average founded 11 generations ago) revealed several factors as key in successful generational transition of legacy wineries. Though some may go against your grain, here’s what worked for these families:

  • Preserve family stories: Tell stories at the dinner table of how the family overcame obstacles. “It is hard to complain about losing a customer knowing your great-grandparents overcame war and starvation to build the business.” Research shows that “telling and retelling tales about the family’s entrepreneurial legacy inspires children toward entrepreneurship.”
  • Start training at an early age: Kids can do planting, pruning, packing, and shipping. “The families actively resist the view that childhood is foremost a time to play and explore.”
  • Get a practical education: Attend the best colleges and study business and law, become multilingual, and go to work for competitors before joining the family business.
  • Learn from your children: Allow younger generations to teach the older about new product lines, markets, and the latest technology.
  • Designate one child to have control: Having one child in control protects the business from being split. But, provide the other children with education and financial and emotional support to pursue their own entrepreneurial ventures.
  • Embrace in-laws into the family: Include in-laws in family retreats and hire consultants to foster family communication. In-laws play a critical role in raising the next generation of entrepreneurs.

Whether your business sells wine or widgets, these tips merit consideration. While some may fit your parenting philosophy better than others, these suggestions are certainly good food—or should I say beverages—for thought.

Marvin Blum (with wife Laurie on a vineyard tour) uses family-owned wineries and the Heineken story as role models for business succession planning.