Not every family business makes it to the second generation of ownership, let alone the third. In fact, the odds aren’t in the favour of the majority at all.
So how do the lucky few make it successfully through the other side of succession?
When the business is purely the financial arm of the family then it’s difficult for the family members to invest much more in the business than what they need to for a simple profit.
It’s when you give the business a backbone of meaning with core values that you enable the family to see deeper purpose in their role in the business. A mission statement allows the family and employees to always be fundamentally working towards a commonly cherished goal that the business allows them to fulfill.
Not only is this a strong motivator to produce the best work, but also allows a strong culture to be built around core values in the business – ensuring that not just family members, but every employee wants to come to work every day, as they feel part of something unique and good. A culture built on values allows a business to be different to “just another job”, ensuring loyalty.
In order to make your family business as strong as possible, you have to start with your family. Personal relationships are an integral part of such a company, and it’s important to ensure that any issue that arises between family members is treated professionally and as well as possible – not only so no knock on effects are felt in the business, but also because sometimes we can learn a little something from professional conflict resolution steps on how to treat those closest to us better when our feelings are hurt.
When you handle your personal relationships with a little more professional curtesy then you’ll notice your communication will naturally increase – you can schedule in family meetings to keep everyone up to date with each other and about business matters, and polish those conflict resolution skills.
Good day-to-day communication can make a written out succession plan a mere formality, but still an important one. When there’s no formal succession plan then the event will hold too much mystery and far too many questions to smoothly change from one generation to the next.
Succession planning is also not just about finding the next CEO of the business – one generation is handing over to every level of the next, from managers to owners and costs including the older generation’s retirement and estate taxes need to be taken into account in the plan.
A family business that continuously plans for succession strategically, no matter how near or far in the future it is, is likely to make a seamless transfer that has the next generation’s complete buy in.
Whether your child’s skills are perfect for the business, or are better suited for a career outside of the family business, a strong base for the family and the business is built when people are encouraged to develop the talents that come naturally to them.
Taking this tact will also ward against the “successor’s curse”, where the next generation feels pushed into their parents’ roles and the employees don’t see skills, but rather just a last name. When the successor is allowed to develop into their own business person before taking over, then they have a chance at effective leadership.