Succession planning is a process, not an event, and it equally affects your family, business, owners, and employees. So, what is succession planning? In the simplest explanation, it’s the process of identifying who will be ready to take over the business in a careful, well-planned way. Succession can be a lengthy process but with the right approach, it doesn’t have to lead to unnecessary difficulties. Here are some succession planning best practices to guide you.
Succession Planning Best Practices to Keep in Mind
Engage all stakeholders
You should involve all family members and stakeholders in discussions and decision making. Deciding on your own succession plan and then announcing it is a sure way to create family conflict. When you discuss the plan openly, you can identify who in the family wants to be involved directly and who is focused elsewhere.
It’s important to respect tradition and understand why decisions were made in the past. But don’t get stuck in conversations that start with “but that’s how we’ve always done things here.” Instead, think about how to set the next generation up for success.
Consider whether the next generation wants to be a part of the business. And if so, in what way? It’s important to be realistic. You may want your first-born to run the business, but do they have the business skills or even the interest to do it?
Don’t commit to succession decisions too early
Committing prematurely as either a senior or junior generation family member can put undue pressure on the successors and alienate talented family members. Deciding on a plan too early can lead to surprises down the road when committed members have changed their minds or other family members prove to be better candidates.
Instead, develop a plan and process that can evolve over time — one that takes into account new information as it becomes available and course corrects as needed. Make succession planning a regular discussion in the business and family. You don’t want to set anything in stone before everyone is ready, but it’s never too early to plan.
Avoid holding the reins too tightly
The hardest parts of succession can be letting go. Remember, the goal is to pass the business on to the next generation so that the legacy you’ve built can continue on. With that in mind, it’s important to allow your successor to have a say and investment in the business as soon as a plan is decided. This starts with training your successor! Create a plan to share skills and knowledge over a year or two of training before handing over the reins completely.
It’s important to be ready to let the business go. Founders should be mentally and emotionally prepared to walk away from the business completely when it’s time for a successor to take the reins.
Don’t forget to actually create the succession plan document
Since it’s family, people can often feel like not everything needs to be written down, but it is important to clearly define your expectations. What requirements does a successor need to have? Who’s in charge of what? What’s important for the success of the company?
Create a document that identifies ownership/management successors, defines active roles for family members, and outlines any support that successors need from family members.
Finally, establish a schedule for executing the plan.
Look outside the company for advice
Many people have walked this path before you. It’s helpful to talk with other family businesses to understand how they managed their transition process. You can also seek out your local Family Business Center. They’ll have valuable resources and can connect you with other family businesses. If you live in the San Francisco Bay Area, that’s us, the USF Gellert Family Business Center! We connect our members with lawyers, accountants, financial advisors, and evaluation experts.
Planning for Multigenerational Success
Remember, succession is a process, and it can be difficult for businesses and families. But following these succession planning best practices can make it easier. Approaching succession with a detailed plan and a willingness to take everyone’s input into account is the key to multigenerational success.