An ABC of transmission of the business to the next generation

An ABC of next generation business transmission.

A lot has been written about succession and transferral of a family business to the next generation. It’s a long process that encompasses many aspects. To bring a little light heartedness to an otherwise serious topic, here’s the “succession alphabet”.

Adjunct Professor of Entrepreneurship and Family Enterprise, INSEAD

KPMG contributor


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After: As strange as it may seem, thinking of what you want to do after the transferral is important to make the transition in a smooth way. Will you pursue other projects? Head a professional association? Start a new venture? Act as an ambassador for the business? Have you carefully planned your financial security?

Board of Directors: It’s the Board’s responsibility to appoint the CEO. Outside Board members can help throughout this process by providing greater objectivity.

Communication: Communication is vital throughout the process. Communication means sharing your thoughts, but it’s also very much about listening.

Environment: You’re not alone. People around you can be useful resources during the process. Whether they are Board members, the head of an external company employing your offspring, human resource experts or other advisors, all can play a role in bringing more objectivity to the process.

Family meetings: Discussing as a family can allow you to understand your children’s (and other family members’) aspirations and design the future of the family business together.

Governance: The governance that the next generation of owners will require is probably quite different from the governance that you put in place. One of the phases of transition will be to adapt governance to the new ownership configuration: the Board of Directors, but also possibly a Family Council, or Family Charter…

More options: Have you considered all possible successors? Not only your own children, but also nephews and nieces? There are usually more options than you may think.

Non-Family Executives: Have you considered hiring a non-family CEO? Family ownership (and governance!) with a non-family CEO is a model with a proven track-record

Ownership: How will ownership be split? Some leaders are convinced that giving a majority share to those who will lead the business is essential, to enable them to make decisions and have a deciding vote/voice. But many multi-generational family firms have chosen another route: where all descendants are owners (and sometimes spouses too). One of the benefits is a larger pool of family talent.

Process: The fairness of the process through which the successors are appointed leads to better solutions and better-accepted ones. The components of Fair Process include: communication and voice to all, clarity, consistency, the ability to change and a culture of fairness (sincerity).

Questions: It is normal to have questions and to be faced with dilemmas. You can share them with peers in similar situations, or trusted advisors.

Rules: It is important to provide clarity on the rules that family members must respect in order to work in the business. Will they need outside experience first? Will their careers be managed like those of any other employee?

Trust: Trust your successors and explain how they can further earn it: through integrity, by clarifying their intentions, by having significant experience, by getting results. Do not hesitate to put them in positions of responsibility: a profit centre, a new subsidiary, a new line of business, one where they can see the results of their actions.

Wishes: Best wishes for a long but rewarding journey!

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