Whenever one reads about Family Businesses, the very first topic one encounters is succession planning. It is likely to be so, because many family businesses seem to fail or encounter existential problems when they arrive at this stage. However, the so called one million dollar question is, does succession planning exist in a vacuum or does it need further support structures to be done well?
Hence, why I believe that before discussing succession planning per se, it is important that family businesses make sure that they have their house in order to when it comes to the following:-
- The future ownership of the business
- Purpose & Core Values
- Organisational Structure
- Corporate Governance & Decision Making
- Business Strategy – Strategic Planning & Mindset
- Information flow and systems supporting it
- Reporting – KPIs & Financial
If the above or a good chunk of the above are in a “mess” or nothing has ever been done to bring them in order, then a first step for any succession planning is take care of the above to make sure that next generation leaders enter a well oiled business, rather than a perpetuating mess.
I believe that any family business leader agrees that carefully identifying and properly developing the next generation of leaders is by far the most consequential decision for any family business. Yet, many family business leaders are quick to assume that some of their children or other relatives would be the next leaders. Many present family business leaders feel at a loss with regards as how to assess the capabilities of the next generation – most don’t know what they should focus on. What is even worse, many wait until the eleventh hour to ask the crucial questions.
Of course, some of the greatest family business leaders have planned things well, guided by a true care towards the future of both their firms and their families. The first step undertaken by such great family business leaders is understanding how they can help their next generation become the best possible versions of themselves – not a copy of present family business leader.
Unfortunately these great family business leaders are indeed very scarce. and hence it would be beneficial to identify the process that any family business needs to follow to stand a chance of surviving when the baton is passed onto the next generation.
- First, family business leaders need to embrace best practices for talent management, which inevitably require selectivity. Decisions should be based not on experience, or even current competencies or abilities but on the leadership potential of key family members. As I keep repeating leadership is a non-hierarchical role and is not linked with technical skills. Many family business leaders seem to forget this all the time. The process of identifying high potentials will always be delicate in family business, either because there are too few members (and we can be too lenient) or because, as the brood multiplies across generations, there are too many members (which tends to create conflicts.) However, deciding to implement rigorous assessment processes for the next generation will be the most consequential decision you make to position your firm for long-term success while projecting its values and mission. The earlier you start the process the better, but at the same time, it’s never too late to start.
- Once the high potentials have been identified, the second step is to understand how far each one could feasibly develop and along which very specific relevant dimensions. We are all unique not just in our current capabilities but also in our capacity for certain types of growth and development. For example, some high-potentials might be highly curious and insightful, thus more prone to develop a very high level of strategic orientation, hence needing opportunities to be involved in strategy planning and key projects. Others might be particularly engaged and determined, which will position them well for future team and change leadership; but, again, that seed will never bear fruit if you don’t give them the chance to actually manage people.
- Once you have identified the very personal, individual potential of each of your next generation’s most promising family members, the third and final step will be to candidly share this perspective with them, so as to check their motivation to fill various roles. Personal and family circumstances, as well as individual preferences and identity issues, will make some opt for a full-time top job in the business, while others might prefer the road to a more limited yet still essential part-time contribution.
The above three-step process of assessing the next generation’s potential, understanding how far each person can go in certain areas and discovering which roles they are prepared and eager to play will drastically help you strengthen your family business. It will also will help you attract, retain and develop the best leaders for the business from within and outside the family. Just as important, you will be giving your children, siblings, nieces, nephews or cousins the chance to live happier lives in which they become leaders and achieve impact and purpose in their own unique ways.
I would like to draw the attention of family businesses that earlier this year, Malta Enterprise, launched an inventive scheme called the “The Family Businesses Grant” which is intended to support family businesses to address issues related to succession planning and transitioning a family business from one generation to the next. The maximum grant over 3 years is of €15,000 and is intended to facilitate access to advisory services that are needed at this delicate juncture, with this grant intended to recover costs related to such advisory services. Feel free to contact me on firstname.lastname@example.org to learn more on this Family Business Grant.
May I also remind you of the upcoming webinar, specifically intended for Family Businesses, entitled “Family Businesses: Just Surviving or Thriving?”, which will deal with various elements outlined in this article. To register for this webinar please click HERE.