What do you need to think about when talking about succession?
29th September 2016
Family business owners are well known for their long-termism and their role as stewards. Many owners manage their business as a ‘heritage on loan’, working to build something better for future generations. To put the business on sound footing for the future, there must be a clear vision for the future of the business. Naturally it becomes crucial for owners to think about and plan how they want transition to happen in the business. But it is important to acknowledge that planning succession is a long process that requires a lot of thinking and adaptation to the constantly changing needs of the family and the business.
In family business we often say that no family member is born knowing how to be a responsible owner and no two business families are the same. But whilst there is no ‘one size fits all’ model on how to go about planning succession, there are some common issues that are crucial to any family business in achieving enduring success across generations.
Engaging the next generation
Ensuring younger family members are engaged in the business from an early age is key for a smooth succession. Recent research published by our sister organisation, the Institute for Family Business Research Foundation, sheds new light on the hopes and concerns of all generations when it comes to the future. The report highlights the needs of many next generation members to be provided with safe spaces to learn and communicate, within and outside the business. This may involve creating experiential opportunities for future owners to work in the firm, educational programmes about ownership and finance, social and emotional engagement through family meetings, or perhaps through the family’s philanthropic activities. This is fundamental to ensure voices are heard and talents and passions are developed and properly deployed.
Support the current generation
Succession planning should not be only about the next generation. When thinking about the whens and hows of handing the reins of the business over to the next generation, the current one needs just as much support as the next does. Tailored support for the current owners is essential for ongoing positive family relationships.
Get the governance right
Family businesses are unique because business structures intertwine with family ones, and a great part of the latter revolves around feelings and emotions. Having a clear governance structure that defines roles and responsibilities in a family business, aligning family and business needs, helps prevent frictions. Power in family firms is shared among the board, current owners and the wider family in a way that is often complex. As long as everyone understands who does what and why, conflicts and misunderstandings can more easily be avoided and a smooth management of the business ensured.
Communication is key
Once governance structures are in place, ensuring this structure is known and understood by the whole family and the business requires a smooth and effective communication flow between all stakeholders across generations. Open communication helps to achieve clarity of roles and responsibilities, of the vision and goals of the business and family members, of the hopes and dreams of individuals and of how to effectively navigate and connect the talents of individuals with the needs of the business.
To find out more about family business challenges or the work we do to support family business, please contact William at email@example.com