Webster’s defines Succession in this way, among others:
“The order in which, or the conditions under which, one person after another succeeds to a property, dignity, title or throne.”
Most of us have been involved in some type of succession process, either when we are planning our careers, seek or obtain a promotion at work or inherit property from relatives. So, most of us know what “succession” is when we see it, or it happens around us. The need for any succession process is often apparent but the actual implementation isn’t all that easy. This is especially true when one actually has to plan their own succession for the good of a family owned business.
It’s a given, and expected, that a family business successor will be qualified in ways other than merely being related, thru birth or marriage, to the business’ founder or owners. It’s also expected that the person(s) responsible for implementing the succession are qualified to make that happen. In real life family businesses, things are seldom this simple. Aside from the issue of whether the parties have the right skill sets qualifying them to succeed or implement the succession, there are often barriers in a family business succession arising from the inability of family members to communicate effectively. Apparently, all those childhood and parent issues come back to haunt the family at the wrong time. It is hard for parents, especially if they are the business’ founders to let go and to trust the next generation completely. Merely recognizing this is sometimes a problem in itself. Even if recognized, this doesn’t make a successful transaction more likely.
What’s the answer? The best family business management successions start early with lots of inter-generational communication exchanges. Each participant needs to be honest and considerate in expressing their views about the matter. They must be also respectful of one another’s views. Where major differences exist, those need to get worked out before finalizing a plan. Fundamental differences must be the subject of further discussions prior to completing the Plan. Non-essential items can wait until later. The successor needs management and technical skills to continue a profitable family business. Succession discussions should not wait until the successor is completely ready but rather begin several years prior. Where, in early stages of a succession, a successor needs added skills or training, they will have time to acquire them prior to the time the existing leader steps down.
Communication sounds easy but is difficult to do unless specific times are established for that. We’ve found some good times for this are: after the monthly meeting where the business financials are reviewed, at periodic board meetings, and designated discussion days, e.g., the second Tuesday of the month. To facilitate the communication the participants should prepare and exchange agendas. The agendas should identify the order of matters so the higher priority items get addressed first. We have often found it beneficial when a business appoints an “outside director” and has them attend some of the discussions. Obviously, the outside director should be knowledgeable about business, perhaps having been a successful banker, business attorney, accountant or business owner and executive. The agenda and the outside director ensures that forward progress is being made.
Succession planning is not easy. It takes time and hard work and involves an inward examination of one’s own skills and desires, determining of real life goals, suppression of hubris, figuring out what the right thing is for yourself, the family and the business.
From the Blog
Divorce: Tax Refunds and Stimulus Checks
A question often arises as to how to handle tax refunds and stimulus checks received while a married couple is going through the divorce process. These government funds generally come by way of direct deposit. The account which receives the deposit depends on the way the taxes were filed. Married Filing Jointly If the most recent tax return was “married, filing jointly,” … [Read More...]
Get in Touch
