Last week, during the Family Business Seminar organised by the Family Business Committee within the Malta Chamber, it was abundantly clear that the vast majority of family businesses do not have a written succession plan. Why is this so?
Well, like always in life there are a number of reasons for this, which I feel, based on my acquired experience through my constant interactions with family businesses, can be grouped under three main areas.
- Issues with the next generation: One of the main source of difficulties in succession planning is that the next generation is not up for the challenge, commitment and needed set of skills to lead the family business. There could be many reasons for this. Sometimes it is due to the fact that the 2nd or 3rd generation have been brought in an affluent lifestyle and hence have no real appreciation of the hardwork and sacrifices done by previous generation to generate the wealth they where born into. Such generation suffer from what i call “an entitlement virus” and its normally the result of a great deal of coddling in their upbringing. Sometimes it is also due to the fact that the previous generation did not plan a staggered approach to the family business, whereby younger generations can appreciate what goes into such a business from a young age and can thus get a direct experience of the work involved from the lowest levels of the organisation. In other instances it could be that the younger generation are simply not interested to be involved or own the family business, as their interests lay somewhere else.
- Issues with the present leading generation: I see many situations where the main cause of huge difficulty with a succession plan is related to the present leading generation who just cannot let go. They pay lip service to getting the next generation involved but in reality that want to keep calling all the shots, leaving little or no space for the next generation to change or try new things. They fear that by letting go, they will lose their importance and their main life raison d’etre. Such fear is normally greater for them, than their realisation that the risk of the family business facing difficulty in the future if they keep it centered around themselves. Such situations create a lot of pain, frustration and quarrels – which many times leads the family business to waste a substantial amount of energies on such matters, rather than planning its future.
- Constantly keeping succession planning on the back burner: I see many family business owners who still have an operator’s mindset. They are engulfed with the dealing of daily operational issues, which can be easily delegated to others within their organisations. They are what I call “run-on-the-spot-joggers”. They are very busy, going nowhere. They then constantly keep pushing on the back burner vital issues like strategic planning and also succession planning. Most of the operational issues they face is due to the fact that they never devote time to plan things and hence rather than dealing with issues in advance, they end up dealing with such issues when they have ballooned into a crisis. So they are constantly running around, almost like a fireman, trying to put out fires here and there, whilst they have no idea how all this effort can ensure that their family business remains in existence beyond their lifetime.
Leading a family business is no joke. It requires skill and commitment. However, I still see many family businesses suffering as they fail to understand that investing time to plan their future is more important that firefighting with the present. Succession planning is one of the victims of the lack of such awareness. However the ultimate victim is the family business itself and all stakeholders linked to that family business. As I keep repeating, succession planning is a journey and not an event. It cannot start early enough.
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Feel free to contact me on firstname.lastname@example.org to ask any questions.