One of the most important transitions in family businesses is the ability to move from a parent/child relationship to an adult/adult relationship
If the kids never get out of the basement, they will never grow into the leaders the company will need when the senior generation exits. It is difficult to let things go, but by doing so, we make room for new-er and better things.
The most successful family businesses see succession as a critical part of their strategy. In fact, this is true of all businesses. Preparing the next generation of leaders is essential to a smooth and successful transition of ownership and leadership and the ongoing legacy of the business.
Leaders need to lead people, and this is different from managing their work. Leading is fundamentally about identifying where the business needs to go (developing a compelling vision for the future), strategizing how to get there and getting people to change in order to get there.
This is done by inspiring, persuading and motivating people to work together to reach important goals and by building coalitions to support needed change.
You don’t learn this overnight, and it isn’t something the successor gets bestowed upon by virtue of his position. Leadership must be earned. And earning it takes time.
MUST BE COMPELLED TO FOLLOW
Leading is a very personal activity where the leader connects with people and converts them, making use of compelling ideas and character appeal. Followers follow the leader because of loyalty, because they identify with the leader and because they identify with the leader’s cause.
Followers need compelling reasons to file in behind any leader for the long term or for difficult missions. Since family business is focused on the long term, leaders must be personally compelling, not just good at making plans and managing activities. As the saying goes, you lead people into battle; you don’t manage them into battle.
There have been many successful family businesses where the CEO simply would not yield the title and function to capable successors.
Sometimes, the CEO died in the saddle, leaving the company without strong leadership and an organized plan for succession. Results generally are a mess and leave the surviving spouse and family members trying to hold together the pieces, sometimes losing everything.
IDENTIFY, DEVELOP SUCCESSORS
The best advice is to start the transition before it is necessary and before you are ready. If you wait for the “magic moment,” it may never arrive.
Determine and agree upon the senior generation’s new role (chairman of the board, consultant, pursuing new ventures, taking a breather) as well as the development program for emerging leaders. Start as-signing special projects or assignments to the potential successor(s).
Don’t get caught in the “just like me” trap. The company is different than when you started it or took over the reins, and it now needs new leadership to reach a better future.
At some point, you will see a successor emerge or you will need to look elsewhere for the next generation of leadership. This is why it is so important to start early, giving the senior generation time to adjust the plan, if needed. When you feel the time is right, make the decision.
EMERGENCY SUCCESSION PLAN
Built into a good plan is an emergency succession plan.
People think they will always be healthy and there will be no issues to interrupt our ability to lead. But the facts indicate otherwise.
According to the Council for Disability Awareness, one in four people entering the workforce will be disabled before retirement and can expect to be off the job an average of 34.6 months. That’s almost three years.
And there is no discrimination between owners, leaders and the rest of the team.
These statistics are not because people commute long distances or spend weekends racing motorcycles.
Heart disease, back problems, cancer and other medical problems are more likely to cause disability than accidents.
Or something tragic happens to a loved ones that requires their time. Or the leader has an untimely death.
Life happens. An emergency succession plan names the new leader and advisers to contact for guidance and assistance and gives employees confidence in a time of uncertainty.
BUSINESS VALUE WILL INCREASE
Succession planning can reduce the impact of risks to an organization, whether the succession is planned, untimely or an emergency.
And lower risk tends to increase business value. Everyone wins.
Make time your ally by starting now, or it will become your enemy if you continue to procrastinate.
Tom Garrity is managing partner of Compass Point Consulting LLC in Hanover Township, Northampton County. He is a certified coach with Gazelles International and a certified exit planning adviser with the Exit Planning Institute. Compass Point provides growth and business transition consulting to small- and medium-sized businesses. He can be reached at 610-336-0514 or email@example.com.