If you watch television or read the business pages, you already know that little or no succession planning at family businesses can lead to devastating consequences: back-stabbing, lawsuits, deteriorating business performance, and rancor and rifts within the family.
This guide shows how to prevent this from happening to your family and your business. Here’s what we’ll cover:
Succession planning means carefully thinking through which next-gens will take over the company from the current leaders or founders, then developing a written plan that spells it out clearly. Important things to think about:
These two articles provide a great overview of the general concept of succession planning and the steps involved:
For a cautionary tale, watch HBO’s “Succession,” or read the real-life adventures of Viacom and LVMH. Everyday business families struggle with the same problems, and suffer from the same devastating results, as this seasoned veteran of family business consulting explains:
Consider also whether your next-gens need ownership competence training or some tough love to understand how to be better leaders
Have a plan in place well before you need it. You never know when a crisis will force a change in leadership.
Many people assume the first-born is the natural heir apparent, but this type of thinking is dangerous. Picking the wrong successor can doom future performance. These articles can help you consider all the angles.
The answer: Plenty!
Remember -- even the best-planned successions encounter turbulence.
Three perilous stages of family business transition – preparation, the transition itself, and the aftermath – must be handled the right way, or you might put your business at risk.
Learn as much as you can.
Assume that you don’t know everything and keep an open mind.
Above all, don’t step into the top role with an air of entitlement.
You’ll need not only a solid plan, but also some gentle persuasion that recognizes their mixed emotions.
The older generation and the next-gens should work out their differences early.
Too many succession plans don’t consider the impact of complex families and subconsciously discount people who are not blood relatives. This can be a mistake.
Have a strategy that optimizes the fresh insights that non-blood family members can bring to the business, and discourages treating them as “outsiders.”
Prevent unfairness and conflict, and deal with it if it happens.
Professionalizing salary systems is critical, especially when you have relatives and non-relatives in similar roles.
Be aware of the pitfalls of wealth, which can often insulate next-gens from the toil it took to build your family firm and the harsher climate of the outside world.
Make sure you pass along your connections, values and family legacy as well as your material wealth when you do the handoff.
Family business advisories have seen and heard it all. They can help you cut through emotions and develop a sound and rational plan. They’ll also help you with other challenges. Here are two things to think about:
Women advisors can be especially useful and bring a totally different perspective to the process than men.
But first, you need to overcome the fallacy that all of your problems can be solved within the business or the family.
Children shouldn’t feel pressured to enter the family business. Sometimes a stint somewhere else can be the best option.
If you decide to end the family’s reign in the business, make sure your values transfer to the new owner, as Cadbury did when they sold to Kraft.
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