Planning for Family Succession

There are a considerable number of highly attractive reasons for passing your business on to a family member. Family-owned businesses are some of the most successful in the world accounting for a significant proportion of the Fortune 500’s richest organisations.

Similarly, maintaining family ownership and management can help to ensure that the original vision of the organisation continues through future generations. Handing down your business is not an easy, open and shut process, however. It takes forward-thinking and an excellent plan.

Avoiding Conflict

Far too many business owners find that their succession process leads to schisms within the organisation or within the family. The purpose of succession planning is to avoid, or at the very least mitigate, the possibility of these outcomes. This can be achieved in a variety of ways; many people choose to employ succession guidance companies, who will work with the business in question to find the most successful method of succession. Others, however, prefer to go it alone. This is, of course, a perfectly acceptable option, but one which should be approached with caution.

Meticulous planning is the key to family succession. When you are considering the course which your particular succession will take there are several key factors to be considered, regardless of whether you are employing a company or taking full responsibility yourself. Perhaps the most important of these is the choice of candidate.

Organisations’ motivations for succession vary; some have an owner who wishes to pass the business on to a specific relative, while others simply wish to keep the business in the family and care less about the individual in question. In either case, it is important to do all that you can to ensure that the potential candidate is as well-equipped for the job as possible. This can be a long process stretching back as far as the beginnings of their secondary education; for more information on this you may find it useful to read an article entitled ‘Starting Succession in Anticipation’.

Timetable

A further important consideration is the drawing up of a timetable for succession. Giving a guide as to the timings for the hand-over is often shown to improve the chances of success vastly. In the first instance it ensures that everybody involved knows exactly what needs to be achieved and by when, including the candidate and the incumbent owner or manager. However, perhaps more importantly, making this timetable available and known to the rest of the staff in the organisation ensures that the succession does not catch anyone by surprise, and that the successor can be eased into the job.

The timetable should include, therefore, a hand-over period in which the successor can shadow the current owner or manager, with the time spent by the latter in the actual day-to-day running of the business gradually being reduced. Aside from helping to familiarise the successor with the organisation, this can also put at ease any other members of staff who may have had reservations about the new individual’s lack of experience in the job.