Family Business Succession & Continuity

Observations

This is the Big One!  Succession, being the process of replacing one generation of owners, leaders and/or managers with another (usually younger) group is, in my experience, far and away the most common cause of Family Business conflict.

For the many family business owners, and business family leaders, whose whole sense of identity is tightly bound into their self-image as: “The One In Charge”, the prospective change in circumstances can be enormously confronting.

Although self-reflective leaders can understand, intellectually, that it’s time for them to sponsor next generation ascendancy, their emotional conviction often lags far behind that rational, cerebral conclusion.

Those leaders are Motivated (have the intent), but can’t get Activated (start things happening).  The lack of synchronicity between their heads and their hearts can tear them apart, and defeat the whole succession process, unless they find a way to satisfactorily resolve their personal issues, within a reasonable timeframe.  The goal is to achieve alignment between what they (intellectually) understand they need to do and what they (emotionally) feel they want to do.  Inevitably, there’s more than a little internal conflict going on, above and below the surface.

Friction also develops between leaders and their nearest and dearest – caused partly by their partner’s concerns over future financial security; partly by their fear of negative emotional consequences for the successee; and partly because they “married for life, but not for lunch” – the impending changes could seriously upset their currently well-ordered lifestyle arrangements.

While all this is happening around the successee, incoming successors (family and non-family employees) feel increasing pressure to take over.  They’ve done their time; they’re ready and entitled.  Now, every extra day the old man/lady remain in the driving seat feels like another day of the business going backwards, and another day of increasing fear and frustration.

The various players’ vastly different circumstances, needs and interests; their different expectations, and their contrasting personal capacities for change, create the sort of tensions that easily blossom into conflict.  Support cliques form within the business, and within the family, as the succession process wobbles, slows, and looks like it’s about to shut down.  What happens when the ship starts to sink?

There’s a notorious “rubber band effect” – where business leaders leave the business, only to return when they run out of money, and/or get bored with life after business.  This invariably undermines the new business leaders and managers, creates competitive confusion amongst employees and other stakeholders, and generates conflict.

Incoming successors feel the need to stamp their authority on the business – not least to reassure themselves that they really have succeeded to its leadership.  This may require them to “delaminate” the old leader from the ongoing leadership team.  Successors may do dangerous things, eg: enter into large new contracts; invest heavily in overly-sophisticated IT systems, or spend copious amounts of money on asset upgrades that really aren’t justified by business needs.

Crashing the family business is like crashing the family car: a point clearly made, but not a good one.  This causes conflict between successors and successees.

Finally, making staff changes, especially removing old retainers and professional advisers, is a common succession consequence.  The successor sweeps out their parents’ cronies (who may or may not be justifiably employed), to replace them with people who are less likely to be spies, and who may be more easily influenced.  In addition to the loss of corporate knowledge and experience, this may be in breach of promises made over the years by the outgoing leader.  Conflict results.

Succession should be a planned process carried out over several, if not many, years.  It should never be an event precipitated by a crisis, such as a heart attack.

Solution

  • Create and agree a written Business Succession Plan, and a Personal Transition Plan, to be implemented over an appropriate number of years, both as parts of a larger Strategy Plan. Use an inclusive process to ensure that everybody with a legitimate stake in the outcomes is engaged and supportive.
  • Communicate, communicate, communicate (appropriately), to all stakeholders throughout the succession process.
  • Recognise and respond to the outgoing leader’s “fear of the abyss”. Help them become sponsors (supporters, rather than key drivers) of the succession process.
  • Refinance any business debt secured by the owner’s personal assets (eg: home mortgages and director’s guarantees), before they step down. Consider this: if your home is on the line, you really need to trust your successors (advisers call it “blind trust and unbridled hope”), to avoid stressing, and interfering, whenever the business suffers so much as a hiccup.
  • Develop and adopt clear Business Plans, designed in part to help outgoing leaders feel confident their baby will be in safe and caring hands.

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