We are often asked to resolve succession issues within multi generational family business. In many ways issues that exist with family businesses can also appear within long established professional firms.
There are often many complicated inter related issues that causes problems at this critical time in the long-term success of the business or partnership.
We have found over the years that these issues can be summarized under one of four areas.
In this fourth and last article in the series the question of timing is put in the spotlight. This probably is the one issue that causes the largest amount of stress.
When is the right time?
Leave it too long and the next generation can become de-motivated and frustrated.
Or make the transition too early and the company can be put under pressure that may even put its very survival into question.
So, timing is critical but there can be no hard and fast rules. Its certainly not a time for abdication. It must ultimately be down to judgment. However, succession should be a process and not an event. So as with most things it needs careful planning and communicating the plan to all the stakeholders involved.
The fear that the successor is not yet ready and needs to gain experience can lead to delaying so long that the next generation has to wait for their turn they then block the following generation, the Prince Charles conundrum. Indeed, how can someone gain your experience without doing the hard yards. This mindset can put the successor in a no win situation. I have been told “They are not ready they still need to ripen,” but this thinking can just lead to them just becoming old, wrinkled and sour!
Interestingly what we think as forty years experience gained in the cut and thrust of business can actually be one to five years experience that is just repeated over and over again. It’s often our experience that becomes the boundaries of our thinking. Thinking outside of the preverbal box is really thinking beyond our experience.
Until we can truly understand our experience, how and why we make a decision or take an action, we are destined to remain in harness. It makes us indispensable, needed. Maybe just what we want!
Surely, the most important part of creating an enduring legacy is to pass on our understanding not just our knowledge. Knowledge without understanding is worthless.
There are many questions we need to ask both ourselves. Here are a few.
• How can I get to the position where the business is not reliant on one person?
Consider making the business ready for sale, so that the business runs without me and is an investment not just a job. Otherwise, you may be passing on the Poison Chalice (see separate article). Readying a business for sale is normally a three year project- minimum. As already mentioned, succession is a process not an event we need to plan. As this is so important I thought I would mention it again!
• Why am I really staying on?
Is it really I just want something to do and hate the thought of retiring. Or could it be that the business is truly dependent on me. Check to make sure that the reasons are true.
• Who is the best person to take over?
In reality may not be someone in the family. Often these decisions are based of emotional not fact. The incumbent may not be the best person to decide. Once again it may need the opinion of an external independent advisor to help with selection.
In most cases we have found that it’s the incumbent that is not ready to leave rather than the successor not being ready to take over.
Many years ago, someone wise said to me “Time maketh the man” which is really about giving someone the opportunity to step up to show they are the person for the job. First they have to be prepared to step up. It’s not easy and there are no excuses. They may need a safe environment, with tight boundaries, so they can spread their wings and learn to fly. At the point of flying they must be left to step out of the nest, we can’t protect them. Yes, they may need help, guidance, mentoring or coaching but surely it is never too early to be investing in the future. This should all be included in the plan, the process.
In 1988, Jeffrey Sonnenfeld in his book The Hero’s Farewell, identified four attitudes that prevail at the time of succession. We certainly see these traits over and over again
Do not leave office until they are decisively forced out through death or an internal coup. Normally there is no plan for succession and in the end the incumbent can get out of touch and even put the business at risk. The successor has an uphill struggle.
Are forced out of office, but plot their return. They quickly come back out of recruitment to save the company. Sometimes there is a plan for succession but there is no commitment behind the plan and key areas of understanding are not passed on. The successor is set up to fail.
Rule for limited term of office, retire and switch to other interests. Everyone working to a fixed date can work well as long as succession is planned. Care needs be taken to ensure there is no abdication which can result in not passing on understanding. The successor has a clean break and can work to fixed time scales.
Leave office gracefully and frequently and serve as post- retirement mentors. Definitely a succession plan and it’s a process not an event to pass on the understanding so the successor has the best chance of success.
Which one will you be?