I spend a fair amount of my life sitting around tables with families who own businesses. If you stay around those tables long enough, the conversation eventually turns to succession.

Who gets what?

Who runs what?

When does Mom or Dad step back?

Who sits on the board?

What happens to the shares?

So the attorneys come in. The accountants come in. Trusts get created. Documents get signed. Boxes get checked. All important stuff.

But there’s one thing you can’t put in a trust.

Judgment.

Dad knows when a customer is full of it. Mom can tell within ten minutes whether someone is going to make it in the company. The founder knows when to spend the money and when to sit tight. He knows which banker to call, which customer needs a visit instead of an email, and when something that looks like a problem is really nothing to worry about.

Ask them how they knows and you may get a shrug. “I just know.”

Well, they don’t just know. They’ve been paying tuition for 35 years.

They hired the wrong guy. They borrowed money when interest rates were ugly. They lost the customer they thought would never leave. They made payroll on a Friday when they didn’t quite know on Wednesday how they were going to do it. They trusted somebody they shouldn’t have. They probably didn't trust somebody they should have.

They made a few bets that worked and a few they’d rather not talk about. Do that long enough and you start to develop a feel for things.

We call that judgment.

I think judgment is pretty simple: Principles × Experience × Reflection.

You need all three. Principles give you something to stand on. Experience gives you something to work with. Reflection is how you figure out what the experience was trying to teach you.

And this is where succession gets tricky.

The next generation may be every bit as smart as the generation before them. Maybe smarter. Better educated too. They may understand technology, markets, and people in ways their parents never will.

But they haven’t had the reps yet.

That’s not their fault. You can’t be 38 and have 40 years of experience.

And you can’t hand someone judgment on your way out the door.

This is where I see families get themselves in trouble. The founder spends 40 years making every meaningful decision, then at 68 decides it’s time for the kids to step up.

Well, step up to what?

They’ve been sitting in the passenger seat. Maybe they’ve been in the room. Maybe they’ve had a nice title. Maybe they’ve even been running a division. But when the big decisions came around, everybody still looked at them.

Then one day that entrepreneurial soul wants them to drive.

It doesn't work that way.

If you want the next generation to develop judgment, they need to start carrying some weight while you're still around. Bring them into the conversation before you need them to lead the conversation. Ask them what they think before telling them what you think.

Let them sit across from the banker. Let them deal with the unhappy customer. Let them make the hire. Give them a decision that matters and then, this is the hard part, let them make it.

They’re going to get some wrong.

You did too.

We just tend to forget our own mistakes once we've had 30 years to turn them into wisdom.

The goal isn't to protect the next generation from every bad decision. The goal is to let them make decisions where the tuition won't bankrupt the family. Then sit down afterward and talk about it.

What happened?

What did you see?

What did you miss?

What would you do differently next time?

That conversation may be worth more than another MBA.

And there's another side to this that founders don't always love. Your kids aren't supposed to become you.

They won't lead exactly like you. They won't value every relationship the way you do. They'll spend money differently. They'll probably stop doing a few things you've done since 1997.

Some of those decisions will drive you nuts. Some will be wrong.

And every once in a while, they're going to do something differently than you would have done it and they're going to be right.

That's part of handing something on.

Ownership is actually the easy part.

The harder work is spending years helping another human being develop the confidence, scars, principles, experience, and wisdom to carry something you spent your life building.

So don't wait until you're ready to leave. Start while you're still there.

Give them a seat at the table. Then give them something real to carry. Let them struggle with it a little. Ask good questions. Bite your tongue every now and then.

And when they get it wrong, don't immediately grab the wheel back.

Talk about it.

Because someday the documents will be signed. The shares will move. Your name may still be on the building, but somebody else will be making the call.

And when that day comes, the most important thing you handed them won't be the stock.

It'll be all those years you gave them room to become somebody capable of owning it.

You can transfer ownership with a signature. Judgment has to be grown.

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STEVE KNOX
Stewardship Advisor to Founders, CEOs & Family Businesses
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