SUCCESSION IN FAMILY BUSINESS: WHY AND HOW DIFFERENT
Succession planning is an important process, particularly for family businesses. While family businesses often outperform nonfamily businesses, succession planning can be more complicated due to the need to address issues of both ownership and leadership in the context of the family dynamic. This complexity and the sensitive nature of the issues that surround it requires strong alignment among stakeholders for success. Based on our experiences as consultants and mentors to many family businesses we share in this series of blogs not only why succession is different in family businesses but how it can be made a positive process that contributes to building business continuity and family harmony.
It is the twin obligation associated with achieving both business and family outcomes that makes succession in family businesses a more challenging assignment; one that cannot be copied from the practices of non-family organizations. Importantly it is a lengthier process and one that often has to begin with laying foundations that establish the necessary preconditions for successful successions.
In our work as knowledge-sharing consultants to families-in-business Moores Family Enterpriseintegrates that latest evidence-based ideas into practical and workable solutions for our family business clients. Drawing upon this evidence has led us to recommend succession planning approaches for family businesses that go way beyond merely the succession of ownership and management. Instead we recommend investment in social capital that comes from promoting conversations in families: conversations that explore common values and develop shared visions. These are the preconditions for successful successions. As such succession planning not only sets the ground rules, nurtures and develops successors, makes a selection of successor, and eventually hands over control by a phase in phase out but also ensures that next generation leaders have learned business (L1), learned our business (L2) and have learned to lead our business (L3) such that incumbents can let go (L4). To understand the complexity of this extended process for family business requires recognizing that succession involves a number of discrete steps for all and not just the incumbent and potential successor.
The steps in this process will be explained in subsequent blogs and entail:
The succession of authority
The succession of ownership.
The practical nature along with the evidence base for these will be explained in subsequent posts highlighting what families-in-business can do to optimise their transitions from one generation to the next.