You may be experiencing this scenario. You are the owner of your family business and have been at the helm for many years. Currently, there is no succession plan in place, it has gradually become low on the priority list over time as other more pressing issues have repeatedly taken over. This has you feeling unsettled and thinking. What if I want to take an extended vacation, retire, or I got sick and couldn’t fulfill my responsibilities? The company depends on me to survive. How can I ensure that my family and the business are taken care of, but who has the time and where would I start? These are the unanswered questions that cycle through owners’ thoughts.
A 2021 study of global family businesses found family business owners are recognizing the importance of succession planning in growing numbers, 30% have a plan in place, up from only 15% in 2018 (PWC 2021, p. 23).
The global pandemic incurred significant challenges for family businesses. This included loss of staff due to illness, supply chain and resource delays, health and safety costs and procedures, and loss of revenue in many industries. Having a succession planning process in place reduces stress on employees, stabilizes the company financially during challenging times, and allows the company to pool resources to develop innovative ways to adapt to change.
“Handling a succession involves a lot of moving parts and if not done correctly it can result in conflict, a loss of assets or revenue, and damaged relationships.”Wendy Dickinson
5 Critical Steps to Passing Down Your Business
- Do your research
Previous generation company successions are not an automatic roadmap for future successions. They can be a foundation for gathering data to evaluate what worked, and what did not, but it is crucial to include new data. Consider current market trends, conduct financial analysis, evaluate human resource talent (family and other employees), and assess digital adaptability and innovation in the research.
- The strengths, weaknesses, opportunities, and threats to the company (SWOT).
- Revisit the company vision, mission, and values – is the company strategically aligned with its vision, or do modifications need to be made?
- What does the succession leadership role need to have in regards to skills, personality, experience?
- What is the timeline for the planned succession? Is this feasible, and what are the options for stages of succession?
- Who are the key and necessary people involved in preparing for the succession (family and non-family members)? How do they feel about the planned change? What do they want to contribute, and what role do they want to play?
- Evaluate potential successors
Consider family and other employees. A family member may or may not be the ideal person for the role, consider all options with an open mind. Does the role need to be restructured in regards to responsibilities? In a family business this can be a difficult endeavor, especially in situations where a family member may not be the best suited for the role or does not want to be given the extra responsibility. Keep focussed on the business needs, which will also make this step easier.
- Evaluate the leadership support system to assist in the transition
It can take years to develop a successor, ready to take on the leadership role of a legacy. The training and development of a successor is a key part of a successful transition. Consider the existing leadership, board of governors, management, and consultants to support the training and development of the future company leader.
- Create a Plan
It is never too early to start putting a plan in place for succession. It may seem like there is no one who can follow in your footsteps (or the opposite, how to choose between people), but a little attention, creativity, research, and objectivity will help you discover viable options.
Are you feeling a huge responsibility in succession planning, that also feels isolating? It may help to seek out a neutral third party to assist, and support you through the process.
After developing an initial plan, successful and routine annual strategic planning reviews inherently address the succession plan. Make this part of your annual planning process. Having a plan reduces stress of the unknown, helps in managing emergency situations, market changes, and builds healthy internal company communication practices.
- Transition to new leadership
The new leader steps into place, documents are signed, and a celebration is held for the outgoing and incoming company leaders. If the previous 4 steps have been completed, it is a smooth transition. With best practices in place for leadership transition, the family, employees, and overall company can move forward, continuing to build multigenerational success.
Family business succession can be a smooth process that allows the company to adapt and be agile in response to changing market and global conditions. Having a well-researched plan which is communicated, and revisited annually, will prepare the company for transitioning the family business, and ensure the legacy continues in the decades to come.
Do you need the assistance of an experienced business coach to support you in developing a succession plan for YOUR business?