Guccio Gucci founded he Gucci Empire in the early 1900’s in Florence, Italy. The Italian luxury fashion house is globally known for product lines including handbags, footwear, accessories, makeup, fragrances, and home décor.
While widely recognized for industry-leading fashion, the story of family disputes and power struggles has become a footnote in their history. Revisiting the almost collapse of an iconic brand provides clarity to family-owned businesses on what not to do.
When Guccio died in 1953, the business was left to his eldest son, Aldo, who grew the brand internationally. Under his leadership, Gucci became a premier brand.
Problems began to arise once the third generation took control. The unilateral vision that defined the company through the previous two generations crumbled. By the late 60’s a family feud was brewing. A power struggle between Aldo’s sons led to business separate business ventures under the Gucci name, prompting a legal war within the family.
By the early 90’s, Gucci had a negative net worth of over $17 million.
Of all the potential dangers to a family-owned business, one of the most debilitating can come from inside the family. The Gucci family is a widely publicized case, but struggles highlight the importance of succession planning even in small business.
Succession planning is a critical component of running a family business; however, according to PricewatershouseCoopers, only two out of three family-owned businesses have some type of succession plan in place.
While most owners recognize the importance of having a robust succession plan in place, many have not started the process for the following reasons:
- Lack of time
- Too early to start planning
- Do not know where to start
- Overwhelmed by the planning complexities
- Conflict with family members or employees
When you run a family business, planning for your eventual exit must start early. Once you realize you are tired of the day-to-day grind and are ready to transition, it’s too late for an effective transition.
Positioning a business for the future transition establishes trust and communication among family members. Separating work and family will always be a challenge.
Families should be identifying and deliberately preparing for leadership and management successors. This is a core fundamental for effective risk management and governance. To properly address the succession of leadership and management, here are three common scenarios and what you must consider in each.
Scenario 1: Leadership has been identified and prepared
You have prepared for your eventual exit and retirement and have created a straightforward approach. The deliberate steps taken have prepared the successor the required education and experience in business acumen, leadership, decision-making, and sustainability. The preparation has the business well-positioned to turn the reigns over when the time arrives.
While this is the most ideal situation, steps must be followed throughout the process to ensure the smooth transition. Communication of the succession plan to all stakeholders with an appropriate timeline is critical to create trust and promote employee engagement.
Scenario 2: Leadership has been identified but not ready to take over
A smooth transition relies heavily on ensuring the person identified is properly prepared. While you may have identified your ideal person within the family, interim leadership may be needed. In this case, you may have to identify a non-family member to temporarily lead the company while your chosen successor gets up to speed.
Scenario 3: No heir is willing or able to fill the role
Lacking an identified heir creates difficult decisions about the future of a family business. Options become limited during this time, ranging from finding the right candidate or outright selling of the business.
Selling a business is a viable option securing your financial future, but the decision depends on the family’s goals as well as the overall future of the business and employees.
Guccio Gucci or his son, Aldo, probably never envisioned the company they worked so hard to build, would end up in an extreme mess. Their failure to plan caused them to fall into scenario 2, where neither heir was ready to take over resulting both going in different directions for the company.
The succession of ownership and leadership requires a long-term strategy. Like in the game of chess, you should think far beyond the next move. By preparing well in advance, identifying clear goals, and preparing for the next leadership generation, families protect their financial future and legacy to ensure business operations and employees have a place to call home.
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