Great vision without great people is irrelevant. – Jim Collins
It’s an often quoted statistic that the majority of family businesses don’t get passed on to the second generation, and the vast majority of second generation businesses don’t get passed on to the third. Finding a thriving fourth or fifth generation business equates to finding that rare unicorn.
The issue wasn’t that these businesses weren’t successful or that they simply got wiped off the map. The issue was more likely related to a lack of attention towards succession planning.
More than 8 out of 10 family businesses have no succession plan.
The critical need for sustainability and business continuity is talked about frequently, and succession plays a huge role in both. But succession gets super complicated super quickly in family businesses.
Not only must you manage the complexities of the business while finding the folks who can lead exceptionally well and model the culture you’ve created as they set a new path into the future – you must also manage all the intricacies of the family dynamic.
Perhaps you’ve asked yourself some variation of the following:
- Is there somebody in our family with the will and skill to run this business? And have they developed the leadership required to execute on the vision?
- If there are multiple family members interested in running the business but I can only choose one, how will that affect our family dynamic?
- Are the kids in the next generation even interested in the business?
- When do we look for a non-family executive to lead the business?
The underlying psychological elements in answering these questions complicate succession and are compounded by the challenges felt by owners.
Sometimes the current CEO of a family business is insecure. They worry that if they identify their potential successor, that will demonstrate that they are less committed to the business. But identifying a qualified successor and putting a succession plan in place is a statement of supreme confidence and commitment to the long-term health and sustainability of the business.
Successful succession planning in a family business requires a few basic building blocks:
- As a leader in your family and family business, check your ego, fears and insecurities. Instead think about the legacy you want to leave by creating a succession plan.
- Make sure that you have a good process to help you identify the most qualified successor. Sometimes successors are chosen because of family relationships and not because they’re the best person for the job. Having a good process can alleviate these concerns.
- Understand that your successor is going to do some things differently than you. Choose someone who can adapt to change and carry out the future needs of business needs.
- Identifying someone as a potential successor doesn’t mean you’re promising them a guarantee. They should demonstrate that they are the ideal candidate based on the leadership behaviors and skill required.
- Remember there is typically more than one role that will require a successor. Develop leadership at all levels of your business, and provide a framework and success measurements to establish next-gen leader readiness.
- Consider bringing in a third party to help facilitate the process. Somebody who doesn’t have the same level of emotional and financial investment that you do, means they can potentially see the situation more clearly. They can propose solutions and offer objective clarity and guidance.
The big question to ask yourself is:
- If you were to retire tomorrow do you trust the person that you’ve identified and hopefully developed to keep the business robust and high performing?
If the answer is no, you need to work on succession.
When it comes to effective leadership in family business, the leader’s job is to help develop and ignite the potential in the people behind them. They have a responsibility and opportunity to leave things better than they found them. One of the key processes to do that is succession. It allows family businesses to be competitive, sustainable, and successful far into the future.
Succession planning is really just making sure that you have the necessary talent to step into the key roles to ensure success down the road.
How are you creating a culture where each leader can optimize their purpose, passion, and competency in a way that prepares your business for the future?