By Justin Biel, trends editor at Grow Wire
Will Parsley has always been immersed in the family business. He has vivid childhood memories of exploring the forklifts, lawn mowers and tractor-trailers in the warehouse of Carswell Distributing, the company his grandfather started in 1948.
Parsley is a member of the third generation to run Carswell Distributing, a wholesale distribution company that’s sold everything from heavy machinery to toys to consumer electronics in its 70-year history. With a focus on strategic succession planning, Carswell has survived dozens of market shifts while remaining family-run.
What is succession planning?
Succession planning is the process of developing a company's future leaders, whether they’re family members or not. A solid succession plan involves a process for coaching and developing successors to take on leadership roles, which assures conflict-free transitions of power with minimal disruptions to day-to-day operations.
Family businesses are the backbone of the American economy. Family-operated companies account for 64 percent of U.S. gross domestic product, according to the Conway Center for Family Business. They generate 62 percent of the country’s employment and 78 percent of all new job creation. They also tend to have more longevity, because stakeholders are more invested in long-term planning and have a shared sense of pride in the business, the Center adds.
Will Parsley can relate to this.
"[My family has] a commitment to making [the company] work," he said. "We’re running this business for our generation, and for the next."
Parsley (center) with his father Bill (Carswell's CEO and chairman, left) and brother Robert (VP and CFO, right)
However, research shows that only 12 percent of family businesses are viable into the third generation, and only 3 percent of companies make it to the fourth generation or beyond. Succession planning can increase your company’s chances of staying around.
The succession trajectory: college degree » outside job » entry-level role » MBA » leadership role
The succession plan for Carswell Distributing began before Parsley was born, when his grandfather approached his father--then an accountant at a Big 5 firm--about joining the company. Parsley’s father accepted, and a family business was born.
When it came time for Parsley and his siblings to join Carswell Distributing, they faced a more structured process.
Firstly, the siblings were encouraged to get college degrees and a few years’ experience at other companies before coming aboard. Then, they started in entry-level positions at Carswell, learning various facets of the business. Older family members required them to show proficiency in each area before taking on more responsibility.
This experience-based approach is commonly recommended by advisors, including George Stalk Jr., a senior advisor at Boston-based Banyan Global Family Business Advisors.
“We now see an emerging best practice in which families formally require any child who wants a job to (a) earn a university degree—and in some cases a graduate degree, (b) gain several years of relevant professional experience outside the family business, and (c) apply for open positions in competition with nonfamily applicants,” Stalk wrote in a 2012 article for the Harvard Business Review.
Parsley's relatives required him and his siblings to complete several prerequisites before taking leadership roles.
Learn about the nitty-gritty of drafting a succession plan—including considerations regarding company goals, valuation and taxes—in “Managing The Family Business,” a textbook by Swiss economist and management professor Thomas Zellweger.
How a succession plan plays out
Parsley followed a fairly typical succession trajectory: He began at Carswell after college, starting as a product manager before moving into a marketing role. Then, in place of a management training program, Parsley left to get his MBA and stepped into his first business development role upon his return.
Only after working at Carswell for a total of 15 years did he assume his current role as company president. Today, he runs the business with his brother, who is the company’s CFO, and his father, who is CEO and chairman.
After the power transfer
Parsley and his siblings are still transitioning into their current roles at the company, which means the roles of the second generation are changing. This complicates the company’s internal dynamic. To keep relationships strong, Parsley joins his brother and dad on a retreat every year, where they talk about both business and personal life.
"The retreat is focused on the business and where we're taking it, but it's also focused on the three of us,” Parsley said. “That’s the beauty of family business: It’s about more than just private equity.”
Outside relationships are key, too: Carswell has a 24-hour board retreat every six months, along with quarterly board meetings in which they review business progress and broader goals concerning family assets and holdings.
Parsley attributes a portion of his company's success to regular retreats and board meetings.
The family also uses educational resources like the Family Business Center at Wake Forest, which has given them understandings of the succession process and language, Parsley said.
Carswell Distributing is primed to grow even more, offering careers—and smooth transitions into them—to future generations. Parsley and his siblings discuss bringing the fourth generation into the leadership circle, but since Parsley’s oldest child is only nine years old, he said “most of the process at this point is just thinking and talking.”
“One of our missions is a return on investment," Parsley said. "But we're also focused on how to position this business as an opportunity for our family."
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