When the dynasty includes a family business, the succession process can become
further complicated. According to Mayer, the concurrent goals of doing what is
best for a family business and what is best for the second generation often
diverge. In Jim Liautaud’s case, the entrepreneur assumed he was acting in the
best interests of both his family and his business when he crafted a succession
plan that did not offer his children an opportunity to follow in his footsteps.
“Statistics prove the chances of the chosen son—or any son—of an aggressive,
successful entrepreneur is not likely to match his talents,” Liautaud says. “I
told [my children] they could hire pros to run the businesses—or sell them and
use the money to invest on their own.”Confidence Games
Liautaud made this fateful decision—which would ultimately lead to considerable
family discord—despite knowing that his son Jimmy John had potential. “I did
recognize early that he was a born leader, very bright and very driven to do the
right thing since he was 2 or 3,” Liautaud admits. “He lucked out in the DNA
pool.” | The first generation of wealth creators almost always harbors doubts about the
second generation’s competence. |
Despite his son’s obvious potential, Liautaud chose to ignore a succession
option that might have brought Jimmy John and his other children great
fulfillment. Indeed, Jimmy John’s disappointment over his father’s succession
plans fueled an “I’ll show him” attitude. Armed with a loan of $23,871 from his
father (which he paid back within three years), he started his own business
while still in college. At age 40, Jimmy John is a huge success. His eponymous
sandwich shop empire has 300 locations.As Liautaud’s children became older and professionally successful, he saw them
in a different light. “When I reached 60, I had changed my mind,” he says. “My
children became adults and experienced pros who really wanted to run the
businesses.” Liautaud eventually sold his first business to his children, and then retreated.
He asked his oldest son, Greg, to run the company, and assigned all four
children equal ownership shares. He gave Jimmy John a 51 percent voting control,
based on his strengths as an entrepreneur. “I play no role at all, own no equity
and am not on their board, nor am I privy to the board detail,” Jim says. Jimmy
John says the children work well together. Despite some residual communication issues in the Liautaud family, both father
and son feel a mutual respect and love for each other. The communication
difficulties are being unraveled with the help of a family consultant. According
to Liautaud, distancing himself from his children as they run the business has
provided some relief for the entire family. Revered Bystanders
Once a succession plan is in place and the entrepreneur begins the transition to
his new, less authoritative role, other deeply personal issues often come to the
fore. He may worry about how the transition will affect his marriage, whether he
has prepared his children for their new responsibilities and how he will find
productive ways to use his time and energy. A new role as a “revered bystander”
often frustrates ambitious, type-A personalities who see their own business
success as a validation of their existence.
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