SUCCESSION - THE FINAL TEST OF GREATNESS
Few challenges demand more of a business owner than passing on the family business to the next generation. Family members' lifelong hopes, dreams, ambitions, relationships, even personal struggles with mortality - all impact managing succession. Yet managing succession is the task that it most critical to securing the future of private family businesses.
With numerous family business approaching the retirement or death of their founders or CEOs with no plans for succession or inadequate plans that will fail to produce the desired results. For those family businesses with a succession plan in place, many will fail because they mismanaged the succession planning process. It is no wonder that less than one third of family businesses survive into the second generation, and only about 13 percent make it into the third generation.
"43% of family-owned businesses don’t have a succession plan.
Yet roughly three quarters of the businesses plan to pass ownership to the next generation."
Family business owners know the stakes are high, with some of the issues being raised as follows:
WHAT IS SUCCESS?
Family Legacies defines "success" in the long run, if and when:
Both generations feel that the younger generation has made significant contributions to the business. Failing to meet this criteria is the family whose business never serves as a place where children can be validated as adults and appreciated by their parents.
They either passed the baton or made a good decision to sell the business, in which case they worked together to maximize value. This type of failure characterizes a business whose equity value is held down by a history of poor teamwork, poor leadership, or poor management of this family resource.
The process of getting there was personally rewarding to them, individually as well as collectively. Failure to meeting this criteria is one in which financial success has been achieved at the expense of the members' personal satisfaction, enjoyment of their relationships, or their moral values.
There were no serious personal casualties along the way. Failure is found in a family business that makes its owners and most of their children happy, but which contributes to one member's arrested development, chemical dependence, or other form of lifelong alienation.
MANAGING THE SUCCESSION PROCESS
The succession process calls for good management in five areas:
PREPARING THE CEO
PREPARING THE CEO
You, the business leader, will be letting go of part of your life that has been meaningful and rewarding. Succession is not complete until you give up control of the business and move on. A properly planned and executed retirement, however, can be a wonderful, creative adventure, with meaning and rewards of its own.
PREPARING THE BUSINESS
PREPARING THE BUSINESS
The business will eventually need to get along without you and it is your job, as CEO, to see that it can. Leaving behind a self-sustaining organisation is the epitome
of stewardship. As management expert Peter Drucker once observed, "The final test of greatness in a CEO is how well he choices a successor and whether he can step aside and let his successor run the company."
DEVELOPING THE SUCCESSOR(S)
As a parent, you have been developing your successors since they were born, instilling values and attitudes that prepare them for life. Now their development becomes more focused on preparing them for future roles in the business, including the top leadership position.
CEO'S PERSONAL CHALLENGE - PREPARING FOR A NEW LIFE
The attitude of the family business leader is the single most important factor in any succession. But preparing for succession often brings an owner face-to-face with unexpected emotions and daunting personal challenges. If you are the incumbent CEO, you must face the possibility of feeling rivalry with your successor. Seeing younger family members make their own mark on the business can be a bittersweet experience. It is tough to resist taking credit for their accomplishments or feeling like a failure if successors do so well that they seem to outshine you.
CREATING A SEPARATE IDENTITY
As the outgoing CEO, you must begin to separate your personal identity from the business. This is especially hard for owners who have spent their lives viewing the business as an extension of themselves. "Without me, this company isn't worth anything," a CEO may think proudly. Or an owner start to count the CEOs he knows who retired and died soon after because their life's work has gone. CEOs who lack other interests are the most likely to have trouble later when succession is complete.
Now, perhaps for the first time, you must begin to consider questions like. What is the value of this business, apart from me? What is my value apart from the business? How can I communicate what I do to a new generation of management? How can I pass on my skills? How do I transfer my business relationships?
THE CEO'S "LETTING-GO" CHECKLIST
Being able to answer yes to the following questions is essential to a successful succession process:
Am I committed to family succession? Is it a dream I deeply feel?
Will my spouse and I be financially secure after retirement?
Is there a strategic plan in place for the business?
Have I chosen a successor and set a firm date to retire?
Have my spouse and I completed our estate planning?
Do I believe there is life after retirement? And have I identified an absorbing new challenge or interest to pursue?
Am I will to let others take new business risks?
Am I comfortable with my successor's style of leadership and the fact that he or she will be introducing new systems into the business?
Is it my desire to leave a legacy for future generations?
Family Legacies has experience in coaching executives who recognise the value of having a sounding board or mirror to encourage personal reflection, to enable them to clarify options and determine the best mix of their own skills and experience to meet each new challenge.
The coaching process enables family business owners and their successors to adopt a totally objective perspective from a non-judgemental and impartial partner, creating a confidential space where a leader can discuss any issue that concerns them in an open and frank manner, with no fear of repercussions.
Family Legacies' executive coaching process enables CEOs to create a separate identity and prepare for a new life outside of their family business. Our coaching process also enhances successors' career development and their leadership capabilities, preparing them succession of the family business.