Something I’ve realised over the years is that the passing of a family business from one generation to the next can be a catalyst for either the success or downturn of the company. While studies have shown that family-run businesses perform exceedingly well, even more so when the family works well together, help is usually needed to make the transition from the current generation to the next. Wary of the myth of the third-generation decline, heads of the family often hesitate to hand over the reins. However, with family business succession planning, the longevity of the company’s legacy can become immeasurable.
I love working in family-owned business succession planning. Taking the knowledge, wisdom, and experience of the older generation and turning it into a valuable mentoring opportunity for the younger generation is very fulfilling. And it’s equally inspiring to see the next generation’s new ideas, creativity, and idealism.
Having worked with many family businesses, here are some of the valuable lessons I have learned.
Conflict is a good thing if it’s handled appropriately
When it comes to conflict, respectfully exploring it and thoroughly investigating it is essential if anything is to change. Change often means progress. However, not everyone will be on board for this. When you take a risk, the comfort of the status quo is challenged, and it can be a turbulent experience. The current generation needs to embrace the potential the next generation can bring. They may have reservations and doubts and some very intense conversations about it, but it has to be done mindful of their interpersonal relationships. Of course, this all happens behind closed doors. Public displays of any kind of animosity will surely affect your share price!
You can fill in the missing skills with family business and succession
Online content has taken over the marketing department for many companies. This is just one of several niches that didn’t exist when the company was first established but need to be filled. The next generation not only brings a fresh set of eyes but also a host of contemporary qualifications such as digital marketing skills, software development, and sustainability management.
Regarding the next generation’s talents, it’s essential to consider their personality, beyond their skills. For example, I had a client whose next-generation leader lacked soft skills because he was more process-oriented. The solution was to hire an external CEO to work with him to build the family business for ten years. The task was to work symbiotically – the CEO would introduce the company to new business opportunities, and the family member would implement the processes. That way, they could build the business as far as they wanted it to go, after which the family member could take over the CEO role, which only needed a maintenance role at that point.
Family businesses are adapting as traditional family models change
In the past, owners of businesses passed them on to their children. However, family structures have changed dramatically, and there are more blended families and non-traditional family models. I have found that a family business can still be run like one and have the same values but no longer relies on blood relationships. The patriarchal approach is also starting to fade. More next-generation women have the opportunity to move into the executive suite. Daughters are taking on leadership roles, whereas in previous generations, they only had the chance to work in subsidiary roles in the family business.
The involvement of outsiders is necessary for succession in family business
When it comes to making decisions, it can be helpful to have an outsider’s perspective. A third party can bring new insights and ideas to the table and help ensure that new solutions are preserved amidst family and personal relationships. As a succession coach, I am usually asked for help by the new generation. It’s beneficial to have someone working objectively with a family business who is not burdened with their baggage or emotions. I can see through the noise and help them find a path for the future of the family business by assisting them in deciding on the best person to lead them there and what we need to put in place to make everyone successful.
Succession planning can also strengthen family ties
Succession planning is a lifelong process for a family and should be a fluid and open conversation that happens regularly. As a succession coach and facilitator, it is incredibly satisfying when not only a business thrives, but more importantly, a family does as well. Part of my work is helping families have conversations around three topics: family values and vision, business and family governance, as well as strategy and execution. This is often a new learning process for families, as virtually none of them have experienced anything like this before. Therefore, the conversation must be proactive, ongoing, and enriching for all involved. The process of identifying, addressing, and resolving matters before they become “family issues” must be entrenched.
Succession planning is critical for any family business that wants to remain viable for future generations. With a solid plan, the transition from one generation to the next can be easier, avoiding problems such as financial instability or conflict within the family.
Are you ready to take your family business to the next level?
As CEO of Successful Succession, Stephen Shortt has extensive experience helping businesses create and implement succession plans worldwide. He knows firsthand the challenges associated with succession planning, having grown up in a family of entrepreneurs. With his deep understanding of this topic, he can help companies set clear goals and implement a successful succession plan. Contact him today for actionable insights into preserving the legacy of your family business.