The death of a company founder creates many challenges for the surviving family and business. The newly widowed faces the most dramatic upheaval possible in her household, and very often assumes the new responsibility of running the family business. She possibly held a position in the company prior to the founder’s death and has knowledge of the day-to-day business activities, or she might know very little about what makes the business run. In either case the position of leading the company is a new challenge in difficult circumstances.
Many businesses, particularly entrepreneurial businesses, are driven by the personality and business acumen of the founder. When that individual dies, it’s important for the company to find a new equilibrium with the surviving spouse at the helm. Reestablishing client relationships, defining the chain of command and even ensuring day-to-day operations continue without interruption are all important during the transition to new leadership.
Taking over the business
Companies that have taken the step of business succession planning are in the best position when the company founder dies, but all too often entrepreneurs leave little, to no, succession plans in place. When the company is left to a surviving spouse through planning, steps have typically already been taken to ensure a smooth transfer of authority and responsibility. When the business gets “dropped into the lap,” so to speak, of the widow, the transfer can be more difficult. Longtime employees, maybe even family members, can be resentful of the new boss. The company could have financial issues only known to the now deceased founder, such as financial difficulties or business debt secured through personal assets like the family home. And if the widow is nearing retirement age, running a business may not be an appealing option.
It’s not pleasant to consider, but during times of business upheaval — and when the transfer of leadership at any time is extremely disruptive — the opportunity for fraud increases. Examples of potential abuse include the creation of false jobs or employees on the payroll who don’t actually perform work, paying advisors or business consultants fees in excess of their value, or sales staff offering vendors undisclosed discounts for a portion of the profit.
Becoming the leader of a family or entrepreneurial business has another set of tricky issues – very often the surviving spouse will be working with, and supervising, family members. If the widow did not work in the company before taking over after the death of the founder, family members who are long-time employees can be very resentful of the circumstances, especially if they feel as though they should have been given control of the business. Depending on the relationship outside of the business, the new leader can find it difficult to become the “boss” of some family members. On the other side of the coin those family members may find it very difficult to obey orders from the founder’s widow.
These family dynamics can lead to a number of business problems. The new leader can face decision paralysis because she isn’t confident in running the business and acting as the boss of family members. Another critical issue is that the surviving spouse needs to project an image of confidence and toughness, but inwardly is worried and highly stressed about running the business. A situation that is particularly painful, and has repercussions far beyond the walls of the business, is when an unhappy family member decides to commit fraud against the company.
Incomplete, or non-existent, succession planning can add to these problems because the widow is not adequately prepared to run the family business, and family members in longtime positions of authority may become resentful.
There are times when a surviving spouse takes over a business after the death of a founder and keeps the ship sailing smoothly. A quick web search will find many success stories. Of course that same search will find stories with not-so-happy endings. There have been actual cases of employees essentially “stealing” entire businesses after a founder’s widow takes control of the company. For a company finding itself facing problems with succession to the surviving spouse — whether the problem is with unhappy family members, employee fraud, or just day-to-day operations issues — the best solution is to bring in a crisis manager (CM). A crisis manager comes in as an objective outsider and brings both business expertise to the table and makes the tough decisions that need to be made. One key difference between a crisis manager and a business consultant or advisor is that the CM is a manager and not only advises on a strategic plan of action, but actually implements the plan.
Crisis managers are brought in for a specific purpose, such as to stabilize the business, sell the business, or to provide an immediate business viability assessment for the purpose of recommending the best course of action. For the company rattled by a rough transition to a surviving spouse, but with no underlying business issues, the CM can help calm the waters to stabilize the business for future success. If the widow is looking to sell the business’s assets, a crisis manager will prepare the company for sale, and may stay on board to manage the completion of the sale process. A third option may be to shut the business down either by choice or necessity. An experienced crisis manager will manage the wind down process to limit the widow’s exposure to liabilities and to maximize her recovery on assets.
For more information (or for a free consultation) contact:
Nat Wasserstein (845) 398-9825 or firstname.lastname@example.org