Succession Planning: Does Your Family Business Have a Plan?
Leadership transitions within any organization can present significant challenges. In family-owned businesses, the presence of family can add an extra layer of complexity, which is why succession planning holds a high level of importance in these businesses. By proactively establishing a succession plan, family-owned businesses can better prepare future leaders for their roles and ensure their organization’s continued success.
Adopting New Perspectives in Succession Planning
When creating a succession plan, it’s ideal to embrace new perspectives that will help guide the family to the tasks they must tackle together. The process of succession planning is a broad effort to envision the future and take the necessary steps to realize that vision. Here are a few perspectives to take into consideration while navigating through the succession planning process:
- Succession is a journey that takes a family from a position of comfort into the unknown. Family businesses generally have two options when it comes to succession planning: wait until an unexpected event occurs or leave the planning to others. Succession is not just a plan, but rather an outcome of activities taken by each generation as they redefine their roles and responsibilities.
- Ownership is not a prize or a reward; it’s a complex responsibility. As the next generation transitions into leadership, the emerging family owners must understand what it will mean to be owner and what the nature of that role will entail. Succession involves setting up a system of roles, decisions and benefits in which all members of the family must participate.
- Succession must balance the family and the business. Succession happens gradually with the passing of ownership, authority, influence and control from one generation to the next. In order to align intention with execution, leadership needs to re-envision both family and business roles, as well as business practices.
Establishing a Foundation
As you begin the succession planning process, it is essential to engage in discussions concerning the business’s purpose, vision, structure, capacity and leadership. Neglecting these crucial topics could hinder the continued success of a family business. Here are some essential questions that you should consider from both a business and family perspective prior to beginning the formalized process of succession planning:
Consider these questions in business:
- Do we want to sustain, renew or reconsider the businesses we are in?
- Who will be in charge and how will ownership be distributed?
- How can we best involve non-owner family members as stewards?
- How will decisions be made?
Consider these questions in the family:
- What do we want to do as a family?
- How much do we want to save for the future and reinvest in our business, and how much do we use to enjoy our lives?
- How can family members work for or within the business in a way that is fair to others?
- How do we engage the next generation of leaders?
During the process of succession planning, leaders need to be honest in their self-assessments and be willing to make difficult choices, especially as it relates to transitioning leadership and who will assume the role. An example of a hard decision could be bringing in external leadership. In this scenario, the current generation of leadership could recognize that the next generation lacks the leadership experience required to assume control of the business. As a temporary solution to this issue, the business could bring in outside leadership. This is an example of a difficult decision, as well as an example of a family being honest in their evaluation of what is needed for continued success of the business.
Keep in mind that succession is not a linear journey from one generation to the next, rather it will continue to evolve through a few generations. If you have any questions on succession planning for your family business, please contact BSSF.