Every business that wants to be sustainable at some point in time must confront the task of succession planning. Larger established businesses have processes in place including depth charts at each position and a human resource group to help navigate the transition and monitor developments. But, what about the smaller, closely-held family business that has to go through this on their own? How do they address the question The Kinks threw out there almost 50 years ago?
The short answer is that this a process and I offer for your consideration seven steps I have used over the years to take a business from Current Management (CM) to Successor Management (SM):
The succession planning process is obviously non-recurring by design, so it tends to be inefficient. Laying out a framework in advance and establishing early on the goals and objectives of those who are leaving the business to others is paramount to having a plan work. We see too many situations where the gating factor is wealth management and steps to minimize estate and related taxes which at times ignores who will continue to run the business. Future shareholders are not necessarily the future managers of the business. In fact, the process may result in management realizing that it has to bring in a professional manager to assume the leadership role. A quick case study will help to make this point.
We were asked to consult in a family business where there were four sons and the father wanted to retire. Considerable time had been spent trying to determine which of the four sons would take over. The issue was exacerbated by the fact that each of the sons was a strong personality and had solid characteristics that were relevant to the business at hand. However, they were also young, strong willed and liked to work independently. After performing an assessment, all agreed that while each of the sons could contribute in some way, none was prepared to assume the leadership role. The solution was to bring in an industry veteran to help guide the business and to navigate the transition. Within five years, it became clear that one of the sons was the most qualified to lead and today, six years after that, he is having a successful stint as the CEO.
So, keep in mind, it is a process and the transitions that are the most successful usually have at their “root” the concept that objective assessment of capabilities trumps family stature. While some espouse that the key focus in a transition is to make sure that the oldest sibling is prepared to make it as the next leader, our experience has led us to believe that those who are the most qualified become the most effective in a succession plan.