The Family Business: Succession Panning for Growth & Continuity

 (Part 3 of 3)

By Analyst Business Solutions

Every dynasty needs a strong and capable successor, this was common wisdom held by our ancient Kings and Chiefs. Successful family businesses that can be compared to dynasties have mastered this concept to the dot and its application is part of strategic planning.  In business, it is essential to make decisions about who will succeed who in each role in the company.  Most business owners in their operating prime do not consider succession element as part of the complex management equation, this is because it exerts the least pressure at that time but can be the make or break issue when the time has come.

Only about 30% of family businesses survive the transition from first- to second-generation ownership, and of those that do, only about half make it to the third generation, according to researchers at Baylor University’s Institute for Family Business. One of the reasons floated for this failure rate is lack of proper planning for succession.

PLAN FOR GROWING THE COMPANY

Family business most often thinks of Strategic planning as Succession planning, the two are very different and often complement each other. In simple words we can look at the two as, Strategic planning is to determine where you want company to be in the near and far future and Succession planning is who you want to take you there when the time comes. Paul Karofsky, director of Northeastern University's Center for Family Business in Dedham, Massachusetts, contends that before a family business focuses its attention on the issue of succession, it should concentrate on developing a strategic plan for growing the company. It is common knowledge that if you know where you want to go, it is easier to identify and groom who can take you there.

Entrepreneurs often view Strategic planning with skepticism. It implies change and communication, two concepts they are not generally known for initiating or accepting easily. So the professionalization of the business is a great starting point.  This can be achieved though openness in decision making and by hiring non family managers to prompt a re-examination of the marketplace and the goals of the family and company. When these goals are identified and aligned to support growth, then panning on persons to grow the business now and in the future can easily come in the picture.

BUILDING THE SUCCESSION PLAN  

The earlier you start the better, if you have not yet considered it better late than never. To build an excellent succession plan or refine your current one using the best advice and information you can get.  

Set Corporate Succession Priorities  

For every succession or promotion in the firm, what is the company’s interest or priority? Now that you know where you want to be and you have created some level of professional values in the business, align your succession plan with these corporate values and strategies. These priorities will guide how your plan will support your leadership development and mentoring programs, drive diversity goals, and strengthen rewards and recognition.  

Identify Key Competencies  

Competency models for key positions are the backbone of any succession planning initiative. Learn from the best by reviewing how top companies identify and communicate key competencies and design tools to complement their models and try to do the same for your business, key positions in your family business often also holds the key to growth and a possible successor to the top job so you will need them occupied by the right people at all times.  

Design the Succession Plan  

The practice is you will now design and write a detailed succession plan that is open to necessary changes and growth and allow fair competition.

IMPLEMENTING THE SUCCESSION PLAN  

The most interesting and most common trend with is Succession planning issue is that if at all it’s there it’s never implemented or reviewed consistently and yet that’s where its strength lies. So how do you go about with the implementation of this plan?

Create and Review Corporate Bench Strength  

In football not all players are always in the pitch, some are on the bench awaiting in-case of anything, same theory is now so common with top performing companies to have a corporate bench. The initial task is creating the bench, if vital positions like Head of operations, CFO, CEO are included in your plan, you will need to have a lay or two below them occupied by potential candidates, review their bench strengths by assigning responsibility, designing employee ranking systems, creating 360-degree performance evaluations, and building monitoring and measurement tools to guide them a process that should be consistent and transparent so that at all times that position steers growth and its occupied by individuals with the companies interests at heart.  

Roll Out Employee Development and Succession Planning  

Rolling out employee development and succession planning systems is critical. Keys to success include identifying needs and individual candidates, communication of these needs, identifying roll-out transitions, and developing support systems to guide implementation. The roll-out of this strategy can be in two ways if the idea of selling the business is ruled out.  

Retaining both Ownership and Management in the family.

For family business the common practice is always having a family member occupy the top most position or positions. To make the system sound and successful it is only wise that these members are introduced to the business earlier and at the operational level so they learn the dynamics of the business slowly but surely and they also get exposed to and grow through  this rigorous succession planning exercise to:

·         Allow them bring out the best in them,

·         Gain the appreciation and respect associated with competence from the other family members and non family employees.

·         Prepare them to be loyal to both the business and family.

To reach this state successfully the process should have started in advance in the family setting and to overcome the obstacles associated with it, it is best done through a four-phase process below;

• Initiation — A period of time during which the children learn about the family business, which should begin from the time the children are born, but can occur later.
• Selection — The process of choosing who will be the company’s leader or in an influential position in the next generation, which is often the most difficult step.
• Education — Training or education of the successor by a trainer (not necessarily the founder/owner) who is logical, committed to the task, credible and action-oriented, using a program that is mission-aligned, results-oriented, reality-driven, learner-centered and risk-sensitive.
• Transition — The actual transfer of power to the successor, which can be gradual or abrupt, but should always be timely and final.

Retaining Family ownership but not Management

Where the Succession plan calls for the family to retain ownership of the business, but pass management responsibility to a non-family member, much of the above process applies. Family members should be included in the formulation and updating of the business strategic plans. The criteria of selection and grooming of the successor will need to be agreeable to the family members. This is suitable in an instance where all family members take different career routs not related to the required capabilities to run the business.

Measure the Performance of the Plan and Improve the Plan

No succession planning system is complete without provisions for measuring the performance of the plan and making continuous improvements to suite the business as it grows.