Top Considerations in Planning for Long-term Success
Few aspects in life are as emotionally charged and rife with challenges as the process of succession planning for a family-owned company. The HBO series “Succession” does a great job capturing elements of the drama and challenges associated with succession planning in a family-run company but, of course, highly dramatized for optimal entertainment value.
While the Succession series takes liberties for entertainment, it does touch on some universal themes found in real-life family-owned companies. Here are a few parallels between the show and real-world succession planning challenges:
- Power Struggles: “Succession” portrays intense power struggles within the family as various members vie for control of the business. While highly dramatized, the reality is such that family dynamics can often lead to internal conflicts over leadership roles and ownership.
- Sibling Rivalry: The series showcases the rivalry and competition among siblings for the favor of the patriarch. Sibling rivalry can be a significant challenge in real family businesses, impacting decision-making, creating tensions, and disrupting family harmony.
- Successor Competence: The show raises questions about the competence and readiness of potential successors and does a great job juxtaposing scenarios that leave the viewer in doubt and suspense. The reality is that ensuring the chosen successor’s competence for the leadership role is a crucial consideration.
- Corporate Governance Issues: “Succession” highlights governance issues within the family-controlled company and the associated drama and consequences for non-compliance. Establishing clear governance structures and mechanisms is essential to avoid conflicts and ensure effective decision-making.
- External Influences: External factors, such as the involvement of non-family executives and external stakeholders, play a role both in the show and in real-life family-run businesses. Balancing the interests of family members and external professionals is a common challenge.
- Emotional Dynamics: The series delves into the emotional dynamics within the family, including complex relationships and personal struggles. In reality, we often see emotions significantly impacting succession planning, and addressing them early is often a key aspect of the process.
While “Succession” provides a dramatic portrayal of these challenges, it’s important to note that real-life succession planning can vary widely across family businesses. Not every family business experiences the extreme conflicts and Machiavellian maneuvers depicted in the show. However, the series serves as a reminder of the complexities in navigating generational transitions, power dynamics, and the delicate balance between family and business interests.
It’s crucial to approach real-life succession planning with careful consideration, open communication, and a commitment to addressing both business and family dynamics to ensure a smoother transition. The process of succession planning can also serve to identify new avenues for the business to grow.
Here are some top considerations for effectively planning the transfer of leadership and ownership from one generation to the next:
- Start Early:
– A lot of family businesses think and talk about succession planning but procrastinate due to the anticipation of potential conflict and the ensuing stress that can accompany that. Starting the succession planning sooner rather than later can help the family be prepared for the unexpected, such as serious illness. A clear plan that all family members can comprehend and get behind will go a long way to transitioning through difficult times.
– Assess your capacity for managing the process of succession planning. Do you have people qualified to manage the process? Are they prepared to interface objectively with family members, and do they have the resources and experience to develop a plan and see it through execution?
– If so, begin the succession planning process well in advance to allow for a smooth transition. If not, seek out professionals with experience in business continuity and succession planning. Early planning allows for the identification and development of potential successors.
- Protecting your Legacy: Succession planning is more than a process to determine the leader of your family business. It is also about establishing a foundation to protect the family’s legacy as leadership passes from one generation to the next.
- Communication and Transparency:
– Open and transparent communication among family members, stakeholders, and employees is essential.
– Clearly communicate the succession plan, including roles and responsibilities, to minimize confusion and resistance.
- Identify and Develop Talent:
– Identify and groom potential successors by providing them with necessary training and development opportunities.
– Assess the skills, experience, and leadership qualities of family members who may be interested in taking on key roles. Ensure that any gaps are addressed in advance with additional training and development.
- Objective Assessment:
– Use objective criteria to assess the capabilities of potential successors.
– Consider external assessments, such as hiring consultants, to provide an unbiased evaluation of potential candidates.
- Financial and Tax Planning:
– Work with financial advisors to ensure the business is financially prepared for the transition.
– Consider tax implications and explore strategies to minimize tax liabilities during the succession process.
- Legal and Governance Structure: Establish a clear governance structure that outlines decision-making processes within the family and the business. Consult with legal experts to ensure you have a well-drafted and legally sound succession plan.
- Contingency Planning:
– The COVID-19 pandemic served to illustrate the importance of being ready for the unexpected. Family business leaders engaging experts in business continuity planning benefited from being prepared to navigate unexpected changes such as rapidly shifting customer behavior, operational shutdowns, health and regulatory requirements. The succession planning process should include the development of contingency plans in case the chosen successor is unable or unwilling to take on the role.
– Identify backup plans and ensure that key personnel are familiar with these alternatives.
- Fairness and Equity:
– Address issues of fairness and equity among family members not involved in the business.
– Establish mechanisms to distribute non-business assets fairly among family members.
- Professional Advice: The business continuity and succession planning processes are complex and require sound, unbiased advice from experienced professionals to be effective. You need consultants who understand the family business dynamic but also have experience guiding an organization through identifying and developing leaders within and outside the company. Your advisors should be able to provide insights into managing family relationships, resolving conflicts, facilitating effective discussions, and communication skills that maintain objectivity. Additionally, expertise in talent management strategies, competency assessment, performance evaluation, and employment development programs is needed to ensure your succession plan can be effectively executed.
- Document the Plan:
– Clearly document the succession plan, including details on ownership transfer, leadership roles, and the timeline for the transition.
– Keep the plan flexible to accommodate changes in circumstances or unforeseen events.
- Employee and Stakeholder Communication: Communicate the succession plan to employees and other stakeholders to ensure a smooth transition without disrupting business operations.
- Family Harmony:
– Consider the emotional dynamics within the family and work towards maintaining harmony, which is crucial for the long-term success and well-being of both the business and the family.
– Establish processes for conflict resolution and family meetings to address concerns.
Successful succession planning involves a combination of strategic thinking, effective communication, conflict resolution, mediation, and careful consideration of both business and family dynamics. The ExeQfind Group offers that combination of experience and expertise. From developing consensus around a succession plan to securing the talent needed, we offer the expertise to preserve your legacy and take your family business through its next stage of evolution.
Sylvia MacArthur leverages extensive experience leading the succession planning process for family-run organizations. Sylvia’s experience and intuition have proven effective in both the planning process and securing the leadership needed to achieve success. She is skilled at aligning the right consultants to broker positive outcomes with client organizations in competency assessment, performance evaluation, and other areas of talent management.
Sylvia can be reached at: