The Next Generation Of CEOs

Many of the B.E. 100s must prepare now to enterthe next millennium with new leadership

older, and another 34 will mark their 20th birthday by the turn of the century. And although the companies have gone through radical permutations over the years, many of the BE 100s CEOs are well into their 60s. If they haven’t already started, now is the time for many of these BE 100s mainstays to prepare succession plans. This group includes: John H. Johnson of Johnson Publishing Co. Inc.; Herman J. Russell of H.J. Russell & Co.; Edward G. Gardner of Soft Sheen Products Inc.; and Byron E. Lewis of Uniworld Group Inc.

To their credit, many of these corporate chiefs have given their offsprings significant operational roles, although most have yet to relinquish the top spot. Many others have yet to develop any type of concrete succession plan or identify, runners for the next leg of the race.

So what’s at stake for these companies? At the very least, without meticulous planning, many of these founders may see the unraveling of a lifetime of hard work. Or they may be forced to sell their company–some to majority concerns. Only 30% of such companies survive a generational transition, and roughly 10% make it from the first generation to the third. (One BE 100s company, C.H. James & Co., a Charleston, West Virginia, food distributor has been in operation for four generations.)

But the results can be impressive when the process is well-planned. With $26 million in gross revenues, the 25-year-old Inner City continues to maintain a solid position as one of the nation’s largest black-owned businesses. And for the elder Sutton, handing over the keys to Inner City was just the first phase of the succession process. Now he’s preparing to charge his offspring with management of the family’s investment portfolio-including AT&T and Coca-Cola stock–worth in excess of $50 million.

Many families have structured plans in two ways to preserve generational enterprises while avoiding conflicts within the business, notes James I. Herbert, who runs the Urban Enterprise Initiative at Georgia’s Kennesaw State University. “One way is the monarchy approach in which the child is groomed for the family business from day one,” explains Herbert, a family business expert for 25 years. “But most owners hope that their children will come aboard, and really do not orchestrate the training of the offspring for the business.” Another option is dividing a diversified business into smaller pieces so several successors can be selected. Herbert says there are several planks of the succession plan that need to be put in place.

First, family members should work together to craft a mission statement that details the goals and philosophy of the business. Then a participation plan should be created that assigns roles within the enterprise based on specific job descriptions and pay levels. Most important, entrepreneurs should make sure that an offspring’s participation in the business is a voluntary process. After deciding who should take over the business, increase their day-to-day responsibilities as a way of gauging whether they’re capable of sitting in the big chair.

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