The reality is that it isn’t as easy as it may sound to achieve continual generational succession. It requires a high level of planning and preparation, and is far from effortless to secure. Just as you have undoubtedly spent countless hours managing and growing your business, you need to spend equally considerable time ensuring a well thought out and widely accepted succession plan.
Pre-empting a strategy and plan for exiting the business is one of the most valuable exercises a family business owner can undertake, and is critical to creating sustainable success for the organisation. Steve Parrish, a business expert and contributor on Forbes.com, recently shared some insight on family business and the notion of creating or preserving a family legacy. He notes: “making a family business a family legacy takes planning and preparation.”
It’s important not to fall into the trap of lone leadership within a family business. Human tendency encourages one to retain sole ownership or control, particularly of projects in which one spearheaded much of the early set-up and development activity. If, however, you want to adequately equip and up-skill fellow family members to play an active role in the business post your exit, you need to take a more team-player approach.
“Sometimes what the owner perceives as a family legacy is really just a personal legacy. The value of the business is merely blue sky that vanishes when the owner is gone,” states Parrish.
Creating a work environment in which shared knowledge, goals, and a common vision is fostered is an important part of creating a team ethos. Training and development programmes can serve as valuable incentive schemes for employees interested in growing within the ranks of the family business. Creating a space where all members of the business can meet, collaborate, and engage can foster a positive sense of participation, and can instill the required skills for sustaining the business into the future.
One of the more interesting insights, shared by Parrish, concerned creating and driving interest in the business for various family members. He explains that if family members do not feel any degree of interest or affinity toward the business, then it’s unlikely that they will choose to become or remain involved.
“An owner needs to motivate the family to participate. Is there enough profit potential to attract and retain family members? Are the successors sufficiently comfortable about running the business in the owner’s absence? Have they been given the freedom to feel like they are part of the business’s success – not merely employees of the owner’s personal empire? If the business is to stay in the family, it’s important to move from an iron fist to a velvet glove management approach.” – Steve Parrish (2014)
Enterprise IG reiterates this, proposing that employee emotional buy-in and intellectual connection is paramount to securing long-term viability and success in business. It’s critical that family members understand the future goals and vision of the business, and are motivated and interested enough to feel that they can play an important role. Creating meaningful channels for engagement, reducing hierarchal barriers to participation, and creating collaborative type environments will assist in bringing family employees into an active and engaged role within the business.
Leading by example and creating a desirable work culture will go a long way in insuring that the next generation want to stay on. One cannot discuss succession and family business without emphasizing the importance of the actual plan. All too often, succession planning is left to the last minute, frequently with less than desirable outcomes. Parrish suggests: “even in a family business, there is a compelling reason to have a legally binding succession plan.”
Family business owners, wanting family-successors to assume leadership roles, owe it to the involved parties to prepare and execute a thorough documentation of the succession plan. It’s important that the documentation is discussed at-length with all affected parties. The value of continued, family-wide communication and engagement around issues of succession is evident. It’s critical that family business owners take a proactive approach to planning for the future.
By creating an environment that fosters shared vision and a sense of commitment to the business, it is more likely that your business will enjoy a long-standing family legacy.
For the full article on Forbes, read Steve Parrish’s ‘Six Steps For Making Your Business A Family Legacy’.