Succession for top management positions in any business isn’t an easy thing to manage. However, in family run businesses it’s not just the in-work relationships which might be threatened by poor succession choices – it’s also the family relationships which might come under threat. That means it’s doubly important for family run businesses to plan for succession.
There are a host of strategies which you can put into place to manage the succession in a family run business and these are often strategies which can be used in other types of business too.
Here are our tips for managing the succession of a family run business:
Make Sure That Someone is in Charge of the Process
It’s not good enough to hope that succession will take place with the heir-apparent stepping up to the plate and everything will run smoothly when they do. Succession planning requires someone to take charge of the process. That means finding someone who understands the ins and outs of leadership transitions and who is capable of managing the change that the business will inevitably undergo when the transfer takes place.
This person should be tasked with developing an in depth written plan for succession. This plan should be communicated when necessary by that person to all members of the team impacted by the succession – not just family members. They should also be able to explain what roles others will play in supporting the new leader in their role.
Make Sure That the Next Generation is Prepared
Leadership skills aren’t, as is commonly understood, innate. While some people may appear to be “born leaders” the truth is that leadership can be learned. In order for the succession plan to be effective; that means that the next generation needs to be prepared to assume the mantle of leadership. This isn’t something that you want to leave to chance.
Investing in a training and development plan that places the appropriate importance on the acquisition of leadership skills is a good way to ensure that the basics are in place. There should also be opportunity provided for the next generation leader to shadow the existing leader so that they understand the pressures and responsibilities of the role.
They should be fully familiar with the business plan and be able to articulate the business mission and vision in a way that inspires people within the business and attracts new talent to support future growth and development.
Develop a Culture of Innovation and Entrepreneurialism
There is a significant risk, particularly in family run businesses, that a new leader will only seek to sustain the business in its current form. Unfortunately, this isn’t likely to be a successful strategy – markets and customers change. Businesses which fail to adapt to these changes tend to find themselves rapidly failing.
The best businesses, of course, are ahead of the curve. They understand that changes will take place and they seek to identify such changes in advance so that they may position themselves at the head of the pack rather than end up chasing their competitors.
For a leader to be able to effectively position their business; they need to be able to innovate and to take entrepreneurial risks. This may not come naturally if a leader hasn’t been prepared effectively for the expectations that lay upon them.
The culture of your business should be adapted so that the next generation is shown how to take a balanced, informed approach to risk. That they are prepared to make decisions to take advantage of potential opportunities as long as they don’t leave the company over-exposed to harm.
In fact, the best family-run businesses do this naturally – it’s actually one of the areas in which family-run businesses can excel because they tend to be less bogged down in corporate culture and more invested in the culture of their familial environment.
Don’t Be Afraid to Consider External Talent
One of the biggest mistakes family businesses can make in succession planning is to focus totally on the people already within the business. This can reduce the overall potential of the business if there’s no outstanding candidate within the business and there’s no time for the existing leadership to develop someone into such a candidate.
At this point it’s a better idea to look outside of the business and find someone with the leadership skills, entrepreneurialism and innovative approach that you need to ensure the long-term security of the business. They can also bring a fresh perspective to the business when they join.
That’s not to say that this kind of appointment has to be permanent; a new leader might be hired with the specific intention of developing a potential leader from within the talent pool in the business over a period of months or years.
Family business environments can be very attractive to external talent too. They tend to be very human-focused compared to more corporate environments and offer the kind of flexibility and adaptability that more staid cultures cannot. That means you may find that there are exceptional people who don’t quite fit in the corporate world who would happily join and bring their talents to bear on your business.
Plan for Change Too
The final point we want to make is that a succession plan for a family run business is important but it’s only useful if it reflects the current realities of your business. You’ll want to revisit the succession plan with its owner on a semi-regular basis.
The plan should then be updated or even changed completely to reflect the current circumstances of your business and the people within it.
You’re aiming to deliver a succession plan that delivers the best outcomes for the business as a whole rather than for a specific individual. If you find that somebody may be hurt regarding the contents of the succession plan; you probably want to address that with them and explain your reasoning rather than let resentment fester and possibly lead to schisms between team members.