Transitioning a business from one generation to the next is no small task. Dips, setbacks and anxious moments are to be expected.
Before passing the baton, patriarchs need a sense of confidence that what they have built will be both sustained and grown.
There isn’t a “one size fits all” approach to effective succession planning of a family business. Understanding the ecosystem is key to aiding families in implementing a plan that fits their particular context. While business growth and sustainability are essential, the biggest concern expressed by patriarchs and matriarchs is avoiding unnecessary conflict that could tear a family apart.
by: Luzita Kennedy, Managing Partner and Gerald Pulvermacher, Senior Advisor
Patriarchs need to be confident that if they’re going to hand over the keys to the kingdom, new leaders need to have what it takes to maintain momentum.
One of the aspects that we often see business owners underestimate is the amount of time and effort succession planning takes to execute effectively. To some extent, there is a perception that it’s quick and easy. However, time and again, the discrepancy between a patriarchs’ perception and the unspoken thoughts and beliefs held by next-generation leaders prolongs the process. Mixed messaging and communication gaps arise from partially expressed thoughts, intentions, anxieties, or fears that provide ample opportunity for misunderstanding. Succession plans based on a faulty premise are on shaky ground and can have dramatic consequences. To avoid business continuity and family relationships being negatively impacted (Kennedy, L. and Pulvermacher, G., 2020), succession planning cannot be left to chance.
The most important aspects of succession planning are two sides of the same coin. The first side is fairness. We often encounter that patriarchs or matriarchs feel that fairness means equality. In reality, that’s not the case. An altruistic notion of equality has to take a backseat to what’s in the best interest of both the family and the business. Finding the right successor fit is crucial in any organization, but particularly for a family-owned or run business (CFEG Main. 2018). This process is a delicate balancing act, especially when a patriarch intends to preserve the heritage of the business and keep it going.
The other side of the coin is competency, which is what fairness needs to be predicated on. Naturally, patriarchs want to be fair and not alienate their children or other family members actively engaged in running the business. The next generation leaders may be very smart with MBAs, but that doesn’t mean all of them are good leaders. To preserve relationships without compromising business sustainability, an objective process that considers both technical competence and leadership capacity is needed. Recognizing and overcoming unconscious bias will mitigate potentially harmful situations where leaders advocate for their children because their judgement is clouded by the bonds they share.
Outgoing business owners hold a wealth of insight and experience. During the transition process, they must be willing and able to adapt their involvement, mapping out a suitable path for a graceful transfer of power and enabling their trusted successor to move the business forward. Gradually they may decide to take a less hands-on approach, instead contributing by being part of a senior advisory committee. In time and with growing confidence, the patriarch may further reduce their involvement with the business, enabling its new leadership to operate autonomously.
The process can indeed be cumbersome, but it doesn’t need to be. PulvermacherKennedy and Associates assist organizations by working alongside family members during the succession process in a sensitive manner. What makes our approach unique in the marketplace is we’re in the proverbial trenches with the families, as opposed to dictating implementation steps from a distance. We help business owners and next-generation leaders work through complicated dynamics, processes and operational issues to ensure that their plans are successfully implemented.
References
CFEG Main. 2018. CEO Succession In The Family Business | A Better Plan For Success. [online] [Accessed 7 January 2021].
Kennedy, L. and Pulvermacher, G., 2020. Succession Planning – Building Business Legacy While Maintaining Family Relationships | PKA. [online] [Accessed 7 January 2021].
