It’s been said that the next decade will be the biggest transfer of wealth from one generation to the next, upwards of 1 trillion dollars. The question remains, is the next generation ready?
While every situation is different, almost every business will come across the challenge of ensuring that leadership is in the right hands (e.g. succession planning). On April 11th, in partnership with the Association for Corporate Growth (Toronto Chapter) and TE Wealth, PKA shared a real-life case study and best practices to help a business transition successfully to the next generation.
When a family business has a growing number of family members who have an interest and desire to be involved in the business, a well-planned generational transfer of ownership becomes an important consideration. In the specific case study shared with participants, the family business in question desired to remain family-owned and family-run in contrast to having the business managed by non-family members or sold. Also, there was a desire for implementing improved governance, a growth strategy, organization structure, updating of the compensation practices for senior executives, leadership development for the next generation, and enhanced business/IT processes while retaining the successful culture of the organization. The implementation of these initiatives would enable the Company to be effectively led and managed, continue to grow in scale and profitability, ensure the future viability of family wealth and provide opportunity for future generations.
You may be asking what contributes to a successful generational transfer of ownership. In the context of the case study, some of the key components were as follows:
- A robust strategy co-created by the current and future generation and implemented by the next generation
- Development of leadership competencies for each position
- Selection of candidates for the leadership roles
- On-boarding executive coaching of “new” leaders
- Transition coaching for the retiring operating family members
- Organization redesign to complement the refreshed strategy
- Creation and execution of internal and external communication plans
In order to minimize resistance to change, families need to attend to both the hard and soft aspects of change. Strategy development and implementation, organization design, business process and IT upgrades, and enhanced compensation practices represent the hard change elements. Leadership assessment and development, retaining a successful culture, celebrating and finding a meaningful role for past leaders, consistent communication practices throughout the change process represent the soft elements of inter-generational transfer. Ironically, as we all know, it’s effective management of the so-called soft elements which ultimately accounts for a successful transition.
Transitioning of a business is complex and almost always takes more time than anticipated. Successful transition is not linear; dips, setbacks and anxious moments are to be expected. Working with a trusted advisor who can function as an “honest broker” and brings a tried-and-true succession methodology to the table is essential—you can’t “wing this stuff” and expect a successful outcome.
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