Succession Planning for Family Businesses
If you watch television or read the business pages, you already know that little or no succession planning at family businesses can lead to devastating consequences: back-stabbing, lawsuits, deteriorating business performance, and rancor and rifts within the family.
This guide shows how to prevent this from happening to your family and your business. Here’s what we’ll cover:
- What is succession planning?
- Why do family businesses need a succession plan?
- How do I create a succession plan?
- When should I start thinking about a succession plan?
- How do I pick a successor?
- What can go wrong during succession?
- How can I get ready to take over the business?
- How can I convince the older generation that it’s time for the next generation to take over?
- What if my family is complicated, with in-laws, divorced spouses and adopted children?
- How does money fit into succession planning?
- How can I make sure the next generation doesn’t screw things up?
- Who can help me plan for succession and the leadership transition?
- What if my family doesn’t want to be part of the business?
What is succession planning?
Succession planning means carefully thinking through which next-gens will take over the company from the current leaders or founders, then developing a written plan that spells it out clearly. Important things to think about:
- Who will take over?
- Do we want to transfer to someone outside the family?
- Should I work with a consultant?
These two articles provide a great overview of the general concept of succession planning and the steps involved:
How to Plan for a Successful Succession
Family Business Succession Planning: 10 Golden Rules
Why do family businesses need a succession plan?
For a cautionary tale, watch HBO’s “Succession,” or read the real-life adventures of Viacom and LVMH. Everyday business families struggle with the same problems, and suffer from the same devastating results, as this seasoned veteran of family business consulting explains:
'Succession' Hits Close to Home at Family Firms
Consider also whether your next-gens need ownership competence training or some tough love to understand how to be better leaders
Why Don't You Educate Your Owners?
How do I create a succession plan?
- Begin regular conversations about it.
- Separate ownership succession from leadership succession.
- Consider the financial, tax and inheritance implications.
- Focus on the family and business separately.
Family Business Succession Planning: 10 Golden Rules
When should I start thinking about a succession plan?
Have a plan in place well before you need it. You never know when a crisis will force a change in leadership.
Succession Planning Should Start Earlier Than You Think
Your Family Needs An Emergency Succession Plan
How do I pick a successor?
Many people assume the first-born is the natural heir apparent, but this type of thinking is dangerous. Picking the wrong successor can doom future performance. These articles can help you consider all the angles.
Succession: Don't Assume Your First-Born is the Anointed One
Better Let Your Brother Do It: Men Are Still Preferred in CEO Successions
Playing the Succession Game to Ensure Family Business Continuity
What can go wrong during succession?
The answer: Plenty!
Remember -- even the best-planned successions encounter turbulence.
Three perilous stages of family business transition – preparation, the transition itself, and the aftermath – must be handled the right way, or you might put your business at risk.
Successful Successions are Never Smooth
How can I get ready to take over the business?
Learn as much as you can.
Assume that you don’t know everything and keep an open mind.
Above all, don’t step into the top role with an air of entitlement.
Advice for Family Business Successors: Be Humble and Curious
Developing responsible owners in family business
Let the Next Generation of Family Firm Leaders Chart Their Own Path
How can I convince the founder or older generation that it’s time for the next generation to take over?
You’ll need not only a solid plan, but also some gentle persuasion that recognizes their mixed emotions.
The older generation and the next-gens should work out their differences early.
Family Business Patriarchs and Matriarchs: When Is It Time to Move On?
The Family Business 'Generation Gap' Can Undermine Success
What if my family is complicated – with in-laws, ex-spouses and adopted children?
Too many succession plans don’t consider the impact of complex families and subconsciously discount people who are not blood relatives. This can be a mistake.
Have a strategy that optimizes the fresh insights that non-blood family members can bring to the business, and discourages treating them as “outsiders.”
Prevent unfairness and conflict, and deal with it if it happens.
It’s Complicated: Managing Succession in Cases of Divorce and Adoption
Will Your In-Laws Help or Hurt Your Family Business?
How does money fit into succession planning?
Professionalizing salary systems is critical, especially when you have relatives and non-relatives in similar roles.
Family Business Succession, Innovation, and Compensation: What You Need to Know
How can I make sure the next generation doesn’t screw things up?
Be aware of the pitfalls of wealth, which can often insulate next-gens from the toil it took to build your family firm and the harsher climate of the outside world.
Make sure you pass along your connections, values and family legacy as well as your material wealth when you do the handoff.
From Solo to Team: Helping Siblings Maintain Your Valuable Outside Relationships
Keep the Founder's Entrepreneurial Spirit Alive in Future Generations
Beyond Succession: Family Firms Need a Legacy Plan Too
Who can help me plan for succession and the leadership transition?
Family business advisories have seen and heard it all. They can help you cut through emotions and develop a sound and rational plan. They’ll also help you with other challenges. Here are two things to think about:
Women advisors can be especially useful and bring a totally different perspective to the process than men.
But first, you need to overcome the fallacy that all of your problems can be solved within the business or the family.
Female Advisors Can Help Family Businesses
What if my family doesn’t want to be part of the business?
Children shouldn’t feel pressured to enter the family business. Sometimes a stint somewhere else can be the best option.
If you decide to end the family’s reign in the business, make sure your values transfer to the new owner, as Cadbury did when they sold to Kraft.
When entrepreneurs raise entrepreneurs
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