As part of your succession plan, you've decided to hand over the reins to the next generation in your family business. While having an exit strategy and succession plan in place is key, planning out the succession process is even more critical to the future success of your business. Succession plans that involve the next generation of the family require a significant amount of relationship management.
It's important to manage expectations and demands among the various family members, and essential that you have their buy-in when it comes to the successor in the business. Considering the key management players (beyond just family) is also imperative, as you will need their commitment in order to secure a successful and fruitful transition for the next generation family business owner or manager.
Business Families Foundation (BFF), a Canada-based non-profit, charitable organisation focusing on assisting business families, suggests creating a business or mentorship roadmap for the next generation successor. It’s critical to map out the journey ahead, and facilitate a smooth transition. By establishing a roadmap or path, you're able to assist your successor in working through the various phases of the succession process.
BFF further suggests encouraging the successor to perhaps first seek successful and rewarding employment outside the family business. It’s thought that this will assist in building their self-awareness and confidence in business practice. It’s not without its risks however, as you may lose your chosen successor to an alternative organisation. Helping your successor to develop the required competencies and characteristics for their new leadership position is essential.
They need to be confident in their capabilities and astute in their business know-how in order to earn the respect of their peers and employees. Allowing the next generation to enter the business leadership role without offering them guidance in this area could potentially result in a melt-down of the existing managerial structures – no-one wants to be led by someone they don’t respect or believe in.
Help mentor and coach the next generation family member into a fitting and suitable candidate for organisational leadership. Stipulating the criteria for leadership and the characteristics required by the business is a good starting point. Allow the candidate to indentify their strengths and weaknesses against the criteria, and then facilitate growth within all areas with particular focus on areas where the candidate feels less competent or comfortable.
Having a personal development plan in place, alongside the succession strategy, will help develop the candidates confidence, and reduce any potential apprehension association with taking over the family business. Consider things like communication style, business approach and general day-to-day behaviour. Simple office etiquette can be enough to make-or-break a candidate. It’s fair to say that transition and succession in a family business is far from easy.
Often there are a number of generations present in the business, all with different perspectives on how the business should or shouldn’t be run and managed. Ensuring that there is buy-in across the various generations when it comes to your successor will help secure a more prosperous business future. Mentoring the next generation on company fundamentals is important.
You have assisted in building the business in line with a certain value set and with a particular vision in mind. It’s key that your successor understands this, and is able to embrace the company’s culture and values whole-heartedly. A disconnect in this regard can result in the business culture changing under new leadership, which has the potential knock-on effect of upsetting long-serving employees.
It may result in your business legacy being lost, in favour of your successors preferred traits, values, and vision. Don’t be too protective of the successor. Making mistakes and the occasional failure will only assist in making them a stronger, more proficient candidate.
Karen E Klein, a business and entrepreneurship writer for BloombergBusinessweek, suggests that it’s far better for the successor to fail whilst under the your guidance, than it is for them to fail when you aren’t around to help pick up the pieces and facilitate the resultant lesson.
Most importantly, don’t set unrealistic expectations for your family business next generation successor. Just as they are on a path of succession and you on an exit path, the business is on a journey to growth. Don’t demand overnight success and immediate proficiency from your candidate. Facilitate and encourage their growth into the future leadership position, and allow your business to reap the long-term rewards.