As of 2019, PwC’s Family Business survey found that only 18% of family-owned businesses have a succession plan. The study can be found here: 2019 PwC Family Business Survey
It seems there are a number of reasons given for this; economic uncertainty for one. How about those of you who plan to pass the business off to the next generation? The problem is, that doesn’t always work out. This takes making a plan, executing and implementing the plan, and communicating the plan. There are a lot of things to work out. Totally doable if you start now. For example:
- Which family member will step up?
- How is the choice to be made?
- Will he, or she, be ready?
- How will other family members handle the decision?
It isn’t easy making this type of decision. Hopefully, your business is not only addressing each of these questions directly, but is actively working to develop a strategic exit strategy for you, the CEO, and an onboarding strategy for that next leader- your loved one.
If not, I’d encourage you to contact a coach, exit strategist, and/or your financial planner to begin at once. So often outside “life events” happen to drive these types of decisions in the midst of extremely stressful situations. You are in a much better place to make informed decisions, without emotional regrets, when those conversations are conducted with a clear set of objectives.
If you need more motivation to bring those people on board to help you get started, read this HBR article, “Siblings and Succession in Family Business”. This is an excellent cautionary tale.
I’d like to urge you to add these recommendations to your toolbox once you begin to work on your succession plan. These steps will provide a framework for conversations that will get you started:
#1 - Acknowledge the risk in subjecting family relationships to business. Many people feel that creating a working partnership with someone they love is a safe bet. BUT, there is so much more to family governance than familial love. As with any working relationship that intersects with a personal relationship, we advise transparency, clarity, investing the time to develop a strong relationship with difficult, uncomfortable conversations.
#2 - Examine alignment among family members examining goals, values, purpose and mission. A LACK OF SHARED VALUES: Get to your WHY. Misaligned values, goals, and vision set the stage for an organization to get stuck in the past.
#3 - Closely determine if there is an UNEQUAL COMMITMENT to the company. Example- sweat equity v. cash investments.
#4 - Discover if the definition for success is the same for you, the current CEO, the future CEO and the Board. Trying to navigate through a LACK OF ALIGNMENT: this condition leads to instability and an inability to respond decisively to market fluctuations, as well as to changing circumstances within the family.
Here is an HBR article that may provide additional motivation for you to get started, “Avoid the Traps That Can Destroy Family Businesses”. There’s that old adage, “you don’t know what you don’t know”. By knowing some of the traps, as well as some of the steps to get it right- you can navigate successfully.
#5 - Every family has them- PERSONALITY CLASHES: Bring on self-awareness, and work to expand it daily. Family businesses reflect the workings of the family systems. As a result, the management team, the employees, the customers all take on aspects of the family system. If something is wrong at home, it will show up in the office. Be intentional and super clear when differences surface.
#6 - Welcome conflict as an opportunity to discover, innovate, and learn more about one another. What do I mean by that? I mean that just because you are related, doesn’t mean that you always have the most accurate views of yourself or of your family members. So, dive into analysis mode. Include each of the following for every person involved.
- Values, goals, expression of both
- Mission, purpose
- Blind Spots
- Gaps in knowledge
Yes, this takes time. Of course, it does. Why do this? Well, have you ever had someone say something to you that was so disturbing that you’ve never forgotten it? Words, once spoken, can never be unheard. Words matter. Taking the time to create this type of data allows each person to recognize what everyone brings to the table.
Let’s say that you decide this is a waste of time. You decided that you had something to say and you were going to say and be damned! So, you unload. Maybe you yell. But, a lot of you won’t. You will look this family member in the eye and cite historical “knowledge” and offer a critique of the person’s abilities and your view on what ancestors may or may not have thought of the “goings on” around this table. What do you get in return?
#7 - A lack of psychological safety. A FAILURE OF TRUST within your family business and among your team (possibly). These types of “conversations” generally produce emotional overload, without a sense of resolution or direction for the future. Unresolved conflicts, with harsh words spoken out loud, result in a sense of woundedness that carries over into the personal lives of each family member for generations to come. For example:
- Reputation community, work, family life
- Former co-workers
- Ethics- or a lack thereof
- Meaning of money...financial history
These steps allow you to make progress towards setting up a succession plan that allows that next CEO, your loved one, to gain the learning and experiences that he, or she, needs to succeed as CEO. That’s what you want, isn’t it? To set that person up to succeed- for generations to come.
Wendy is the founder of Ascend To Sell. She coaches business owners on the psychology of transitions, specifically, mergers, acquisitions, family succession. The power of Wendy’s experience comes in the integration of psychology, coaching and as a former business owner who successfully sold her business.