ATLANTA – Developing viable strategies and avoiding pitfalls when transitioning the leadership of family-owned businesses from one generation to the next was the focus of a Feb. 12 session at the International Production & Processing Expo (IPPE) held in Atlanta.
Under the heading of “Succession Planning in Family Business,” panelists representing meat and poultry processing companies and a technology and service supplier to the industry shared experiences as leaders of family-owned businesses during one of IPPE’s many educational programs. The discussion kicked off with participants and attendees defining succession, including an analogy from moderator, Drew Mendoza, from Chicago-based The Family Business Consulting Group Inc. He said, “Succession should be like a relay race where both parties are holding the baton at the same time.”
According to Mendoza, the planning strategy needs to encompass not only family harmony and continuity successfully, but it also needs consider the transition of both leadership of the enterprise as well as ownership of the enterprise across generations.
The panel included Larry Odom, the retired chairman of Odom’s Tennessee Pride Sausage, which was acquired by Conagra Brands Inc. in 2012. The third-generation company has been in business for nearly 70 years, and according to Odom, “We weren’t looking to sell.” Having an established leadership structure defined the company’s structure and organization when the acquisition opportunity arose. “They came looking for us which was kind of a nice sort of thing.” That ended the traditional family-ownership structure of Odom’s, which was started by Larry Odom’s grandfather in 1943 and was then owned equally by Larry’s father and uncle.
When it comes to making a business plan for future generations, Odom said, “There is not one plan that fits all.” For Odom’s the informal planning for succession planning began in the early 90s, when executives from the company were invited to participate in a panel discussion focused on family businesses as part of an event hosted by Belmont Univ.’s business school in Nashville.
“That’s where we got introduced to the idea that we really ought to be thinking about succession planning,” Odom said, and not having a plan in place was putting Odom’s in peril. At that time, Larry’s father was in his late 50s and his uncle was five years older than him. The decision was made to hire a consultant who was also affiliated with Belmont’s family business program, to help the company plan for leadership changes from one generation to the next. Larry’s father’s role had evolved through the years and he had become the face of Odom’s while Larry’s uncle worked behind the scenes, focusing on operations. The succession planning included identifying Larry as the next leader of the company. Ultimately, Larry’s side of the family assumed majority ownership of the business with the understanding that Larry would assume that leadership role.
“That was one of the things we had to do to make sure there was somebody that could make a definitive decision,” on behalf of the business, he said. Through the years, the succession plan evolved and was somewhat of a roadmap for Odom’s as the company grew and additional generations became involved.
Larry said there were 17 shareholders of the business and three family members that had worked in the company at the time of the acquisition. Back then, Larry was the only family member active in the business, with the other two family members serving on the board of directors.
Based on his experience, Odom said his advice for companies that don’t have a succession strategy in place would include starting that planning process as early as possible. He also said it is important to develop a strategy for communicating with shareholders who do not work in the company. “We did not do that well,” he said. “It was not formally done, and it was not regularly done.”