The succession process has been fraught with issues and complications since biblical times. It’s been the subject matter of stories and dramas for as long as we’ve had the recorded word, and will undoubtedly continue to do so. When a business is also involved, the stakes ramp up enormously because, as well as personal and family concerns, the lives, careers and welfare of many employees, other stakeholders and their dependants are also riding on getting the process right.
With this in mind, I offer the following ‘10 Essential Wisdoms for Successful Succession’.
- Do make succession a controlled process rather than an event. The actual succession moment (the baton pass) should occur at the end of a credible and appropriate transition process that gradually transfers leadership and management responsibility, authority and accountability from one generation or group, to another. Clarity (of objectives); Certainty (of The Plan); Commitment (to actions) all need to be established through the process.
- Do be professional, not protectionist. Insist on having objectivity, independence and impartiality in every aspect of the process – for the sake of your own honour and integrity; for the sake of your business, and for the sakes of those whose lives depend on its survival.
- Do recognise that there are always other options beyond the planned / obvious / loudest / emotionally expedient. Search and think inside and outside the square. It’s only after identifying and exploring all reasonably viable options you can be confident you’ve selected a good enough choice for the tasks ahead. (Note: this leaves some wriggle room for instinct and emotion in decision making, but only after such choices have passed the “are they good enough?” sniff test. A family business doesn’t have to be 100% objective and cerebral – that would deny it its soul).
- Do appoint someone to be a long term steward, rather than an owner, of the business, its people and its values. Stewardship is a critically different mindset to ownership, since stewards are required to nurture and pass on an enhanced asset, whereas owners can do whatever they like with their asset to indulge themselves. A candidate’s motives for seeking the top job should therefore place business continuity and protection of the family’s legacy above personal gain.
- Do respond to the old leader’s fear of the abyss. When the business has been someone’s life, not being in the business feels like their death. Letting go is like suffering an amputation, or as one successee put it: “it feel as attractive as the prospect of being disembowelled with a blunt spoon”. In many families the founder has the same strength of emotional tie to their business they have for their children (sometimes even more), so to them letting go feels like drowning their baby.
Stepping aside, out, or away from the familiarity of the business, where they’re known, respected and (sometimes) needed is like stepping into the void. Help to ease their move by encouraging them to create another rock to want to go to when the time is right. Misquoting Dale Carnegie “help them to want to do what you want them to do”.
- Do work out how much is enough? How much money does the old leader need to be financially secure for the rest of their days? Let the balance go if it will help the succession plan, foster harmony in the business and the family, and be a blessing, rather than a curse, on the successor.
For reasons that always smell of ego-mania dressed up as encouragement a surprising number of parents demand full tote odds from their children for their businesses when they take over. The claim its, “to strengthen their resolve by having skin in the game”, but from the outside it feels more like greed and personal insecurities playing out in what looks like a “last hurrah” by the departing leader.
This often buries the incoming successor in debt, creates intolerable pressures at home where spouses and partners curse the successor’s parents through all their waking hours, and ultimately makes no commercial sense at all, even when the successor really really really wanted to be in the business.
- Don’t just search for or try to create a clone of the current leader – the successor should stand on the old leader’s shoulders, not just fill their shoes. If the Circle of Life is working (and to that add digital disruption), each new generation should have very different ideas to their parents’ They can be entirely complementary and compatible, AND different, AND a powerful catalyst for business renewal.
A successor should aim to suck all the smarts out of the incumbent’s head (assuming that’s where they keep them) to add them to their own growing store of information, knowledge, experience and wisdom. They should then apply the combined wisdom of two generations of thinkers in their business dealings. Two heads, and all that ….
- Don’t demand a 60 year old’s behaviours and values from 30 year old candidates. Exchange safe horizons for vigorous, focused and credible, long range visions for the business and the family.
- Don’t ‘hand over the reins without getting off the horse’. It’s grossly unfair and disempowering, not to mention unrealistic, to demand responsibility and accountability without first handing over adequate authority and ownership to be able to complete the required tasks.
- Don’t surrender your business and family timing and other objectives purely for tax minimisation /enhanced wealth benefits. Weigh the practical and human gains for the family and the business against personal or corporate financial pains. When you work your way through a serious analysis of the pros and cons of a critical family business decision the technically correct choice often turns out to be an unsuitable choice, under the circumstances. Just keep quiet about this with your lawyers and accountants – they’ll have apoplexy if they find you sacrificing $$$$s just to achieve family happiness.
If you’re feeling pityful you could try telling them the Government hasn’t yet worked out how to tax happiness, so there’s a tax-free return for you and the family in the deal. It may just save their sanity!