A colleague recently asked me: “Is succession planning the biggest issue facing family businesses today?” After giving the question some thought, I responded that we must be clear on what we mean by Succession Planning.
If succession planning is defined as the journey to plan for leadership for the survival of the business as an economic enterprise competing at warp speed in a hyper-global-environment, the answer is yes. If Succession Planning is defined as the journey to plan an orderly transition of ownership from one generation to the next, capitalizing on the economic benefits for each generation, the answer is also yes.
Many founders and senior generation business owners, who have the intent of passing the business to the next generation, find it difficult to develop a plan and a process for the development of the next generation and the subsequent transition. There are lots of challenges and fears with making these decisions:
a) it is difficult to let go of control over the business;
b) it is a concern of “what will I do now”;
c) it is concern about the proficiency and skills of the next generation;
d) it is the fear there will not be enough money for a comfortable retirement;
e) or the difficulty of trying to be ‘fair and equal’ in selecting the next leader of the business;
f) it is the fear of divorce or dissension in the next generation.
Regardless of the concern, pretending it will all work out in the end for the leadership of the business, is not really an option. For the sake of the business and family unity, transition planning cannot be ignored. Mishandling the transition could ruin the family and the business. The expectations of family members need to be recognized and discussed.
In many situations, there is an assumption that others already know what we are planning. Some times family members are remarkably out of touch with each other. They fail to realize that they are not operating in isolation. These families take the greatest hits when change is necessary or a critical decision must be made. A failure to accept or hear questions posed for understanding often lead to a defensive posture. When that occurs the ability to move forward is definitely hindered and finger pointing or hostilities develop.
In these types of situations, it is important that family members seek first to hear and truly listen for understanding. Everyone must resist the urge to focus on thinking about what you want to say. Ask for clarification. Focus on the meaning of what is being said. Commit to how you will move forward as a family. That may require revisiting and reviewing the vision the family has developed for the future and the values that guide the business. All family members must understand and own the vision. The vision must be crafted with simplicity, but with potency. Then the message must be communicated frequently through all family members and stakeholders.
If the intent remains to build the family legacy it is critical for the senior generation to consciously and specifically help the next generation grow. The next generation needs to gain the expertise, experience, mentoring, tacit knowledge, passion and internal drive. For the business to continue to succeed, the family needs to communicate, communicate, communicate some more.
The transition of ownership and leadership in a family business requires work and commitment. A Chinese Proverb I often quote: “The best time to plant a tree was 20 years ago, the second best time is today.” The best time to begin planning for the transition of your business is today.
How is your family approaching succession planning in your small business?
About the author: Dr. Steven K. Moyer is principal of SKM Associates consulting with Family Businesses for growth, development and transitioning to the next generation and President of The Network of Family Businesses, www.netfamilybusiness.com an on-line business network for business families.
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