Succession Planning and Transition Management

It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Charles Darwin

Succession Planning and Transition Management – Overview

In the family business context “Succession” means the transition of one or more of ownership, leadership and/or management of the family’s business interests – from one generation to the next.

There must be some form of ownership continuity for the process to be called “succession”, although that can include converting one business into another form of investment through a sale.

Succession should be seen as a natural and inevitable part of every family and business lifecycle, and not as a one-off event. However, because it’s often either denied, ignored, suppressed or botched, it probably creates more tension amongst individuals, families and their associated businesses than all other causes put together.

Succession therefore justifies very special care and attention – whether in planning and managing the process; responding to the consequences of failing to plan and manage the process properly; or when having to deal with the unexpected.

Back to top

Succession Planning

We help to plan and manage the practical aspects of the process: agreeing objectives; settling major tasks, resources, milestones and timeframes; allocating individual responsibilities in the process – so individuals, families and businesses come out the other side in better shape than they went in. This requires careful planning up front to turn what usually looks like a massive challenge into a catalyst for renewal and positive change, in both the business and the family.

The many technical issues that need to be dealt with during the process (the “legals”) are handled by lawyers, accountants, finance experts and financial planners. We happily collaborate with existing advisers, or recommend alternative, trusted, family-wise experts to help with that part of the work.

The ultimate goal of the Succession Planning Process is to ensure that, at the eventual handover:

  1. The old leader is ready and wanting to move into a new role/new life.
  2. The new leader is ready and able to take over the top job.
  3. The family and the business are happy about and willingly support the transition.
  4. All other interested parties are appropriately informed, comfortable with, and supportive of the change.

Back to top

Timing Issues

Succession is not a question of “if”, it’s a question of “when”. Everyone ages and eventually has to move on.

The standard wisdom is that: “Succession should be a planned and managed process, not an event” – if the family and the business want to maximise the benefits and minimise the risks and dangers.

We recommend providing at least five years to actively groom a successor to take over from an incumbent business leader. A sensibly long period is needed to give the successor enough time and opportunity to suck most of what the current leader knows out of his or her head; to make the right contacts; to gain the necessary skills and to get a good feel for what’s required to lead the business.

Leaders who’ve spent their entire lives working in the business also need a decent length of time to get used to the idea, and the feeling, of not being in, or at least not leading the business. They need to use this time wisely to generate or refine a genuine desire to move on into another space when the time comes to pass the baton.

We regard anything less than 12 months as a crisis. Two years is a challenge. Between two and five years it’s a movable feast that will be influenced by many factors.

Back to top

The Need for a Plan

Less than 12% of family businesses have formal written succession plans and less than 24% have an identified successor for their next leader. A medical crisis can place the family and the business in an extremely difficult situation: imagine a situation where the leader has had a medical crisis (or worse) and the family is preoccupied with their recovery – both the family and the business have lost their leaders – leaving both rudderless and vulnerable. If there’s nobody else able to step into the breach, both entities could be in serious trouble – trouble that could have been avoided, or at least minimised, through responsible planning.

The grooming process that forms such an important part of succession planning is an opportunity for parents to have a second go at educating and guiding their children – assuming they intend to pass leadership of the business on within the family.

Although some parents (especially driven entrepreneurs) need a lot of help to be able to train, coach and mentor their own adult children, most can make a good fist of transferring much of their knowledge and understanding of the business, and some of their ‘street smarts’ to their successors.

The goal should be to have their successors: “stand on their shoulders, not in their shoes“.

Back to top

Succession Project Plan

There are many issues to consider before, during and after the succession process itself. Some are subjective, some objective, and all are profoundly influenced by the needs and style of the individuals, the family and the business.

Our programs work like a normal business project – with identifiable targets, milestones, timelines, resource allocation, responsibilities and accountabilities. They also include relevant measurement processes and tools and a comprehensive communication strategy.

Succession Planning and Transition Management 4 stage process

Back to top

Succession Project Monitoring

As the process chart shows, Succession Project Plans follow a critical path, where each stage follows logically from its predecessors and where subsequent stages are heavily dependent on the successful completion of earlier stages. There are many moving parts, and even the best plans can produce unexpected surprises. Consequently, effective monitoring and rapid responses to both the expected and unexpected are the order of each day.

We establish a process for monitoring the whole program on a regular basis, especially the progress and emotional states of the primary personnel – the succession candidate and the retiring leader. If either or both need extra support, we’re there to provide or find it.

Back to top

Transition Management

Unmet expectations and broken promises destroy trust and generate conflict. Some family businesses get themselves into enormous strife when the existing leader breaks their commitment to hand over leadership, and/or ownership, at a promised point in time.

Delegating responsibility without providing corresponding authority is another frequent cause of trouble. So: “Don’t hand over the reins until you’re ready to get off the horse!“.

Handing over control, or partial control, too quickly, while the leader’s heart trails far behind their head – is another recipe for almost certain disaster. The current leader needs to get their heads and their hearts in sync, so they’re ready to move away from the business emotionally, as well as intellectually.

And what happens when a business owner is determined to place another family member in the leader’s role, irrespective of their lack of suitability, skills or even desire for the position?

Although at one level the owners of a private company can elect to do more or less whatever they like when it comes to leadership decisions, they do have moral obligations to employees and other stakeholders, and legal obligations they should be aware of, in addition to their family aspirations.

Back to top

How can we help?

We help to turn family business succession into a positive experience for individuals, their families and their businesses. Our process provides structure and clarity and our advisers, facilitators and experts are there to guide everyone, firmly and gently, through each stage.

At the end of a good succession process you should most certainly be enjoying a happier family and a stronger, more successful business.

Back to top