Kent Lutz, director of the Goering Center for Family and Private Business, believes family-owned companies must plan for succession years before an executive retires. Lutz, an adjunct professor of entrepreneurship and finance at the University of Cincinnati, has headed a private investment company, was vice president of corporate real estate development for the Mead Corp. and worked as an investment banker. On Tuesday, the center takes a look at the state of the economy on a local and national level at 7:30 a.m. at the Quality Hotel & Suites, 4747 Montgomery Road, Norwood. Reservations: (513) 556-7185.
WHAT ARE SOME of the issues facing family-owned businesses?
One of the primary issues is the ability of the family to recognize the importance of putting a plan in place that will smoothly transition the ownership, management and control of that business from the founding generation to the next generation. There are a number of highly successful family firms in Cincinnati that are currently in the third and fourth generation. That's a rare thing but they're obviously doing a lot of things right.
WHAT DO OWNERS do that is just plain wrong?
I guess the main thing is lack of communication. That is at the core of most difficulties that occur, not just with family businesses but with life in general. A lack of communication between generations is the key factor. Unless they're talking to one another about what's important to them personally and what's important for the business, a lot of the planning that's required will never take place.
A LOT OF BABY BOOMERS are heading toward retirement. What can they do?
There's more opportunity for family businesses to get the help they need for proper planning. The Goering Center is a great example. Resources are out there. But it takes proaction on the part of family businesses to take the steps to begin the process. It's not easy. It may take years to complete. You have to work on your business. Not just in your business. The planning process is difficult. It's easy to run day-to-day and put the fires out as they arise and focus strictly on the bottom line. The planning process addresses inevitability. At some point we're going to be out of the picture and most of us don't necessarily deal with that very easily. One of the difficulties is that the senior generation may say yes, we'll put a plan in place, but unless there's a specific timetable, that plan may never get implemented. Putting a timetable on it requires accountability. That's what we encourage businesses to do. If you say I'm going to be removed from this business within five years, then you ought to be able to do that. Any step is better than none at all. In an ideal world, succession planning should begin when the founding generation is in their mid-50s. It may take a long period of time to groom the next generation. The sooner the better.
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