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Succession planning helps ensure the on-going success and sustainability of the family   business.

Succession Secrets - an Overview

So, what’s the secret? How does a business successfully identify its leadership successor(s)? How does anyone learn to take on a role that you created? How will you know if they’re going to be any good at it?

These are just the kind of questions that can make the process of succession feel daunting. The secret is: It doesn’t have to be.

The first secret to succession is that you can proactively address the need for a successor. Planning for succession increases trust, decreases potential conflict and provides a foundation for making decisions. Companies who have a solid plan for succession are seen as more effective, professional and stable.

The second secret is that you can create simple yet very effective succession plans. You can orchestrate the succession that best suits you, your business and your family. Without that simple plan you could be on track to jeopardize the future of the business, harm relationships in the family, and ultimately it could mean your own transition is delayed or – in the worst case – derailed.

The third secret is that you can make certain the plan is understood and acted upon by everyone who will rely on its success. It means you are able to move ahead with your own next stage of life and that you’ve proactively created the method to build the next stage for the person(s) who will take on leadership in the company.

How do I begin planning for a successor?

Succession planning is a vital part of ensuring the on-going success and sustainability of the family business. Experience shows us that poorly planned transition to new ownership and management is rarely successful. In fact, it is not uncommon for a newly transferred business to fail within two to three years because the leadership was poorly prepared to assume their new role.

If you are proactively thinking about the need for a successor you should ideally begin about 10 to 15 years before the desired succession date. In addition to creating financial and estate plans for the business and the family, thinking this far ahead can help you to build a business that is capable of succeeding even after you and other current owners and managers have moved on. Some key questions to consider might be:

  • What will the company look like in five years? What about 10 years?
  • What will your role be? How will it be different than today?
  • What is your greatest hope (and greatest concern) for the future?

How do I identify the right candidate(s)?

Developing and/or identifying the appropriate successor for a family-owned business can be both challenging and exciting. Some families will carefully groom an existing family member for this role and others will choose to hire their senior expertise from outside of the company – depending upon the needs of the business and the skills available within.

  • With the future of the business in mind, what leadership will it need down the road – maybe 10 years from now?
  •  What’s the right path for you? Is your eventual exit far enough away that you can help develop the successor, or do you need to find people with the relevant skills right now to fill that leadership position?
  •  How much do I already know about my future successor? What other information do I need?

Transferring responsibility to others is predicated on the belief that the company and the individual are capable and ready to assume more responsibility. If you’re not sure, now is the time to check that out. Create a strategic plan that will help guide the business forward. Engage reliable and robust resources to help you and the candidate ascertain their current skills and abilities and evaluate their potential for success. They might need additional training, skills development, or on-the-job experience; being prepared well before the transition begins is important. Failure is imminent if the individual is not forewarned and prepared to assume their expanded role.

Assuming the individual is deemed ready: The transition of responsibilities is an exercise done in stages, based on agreed-upon steps and expected outcomes. A leadership successor will perform best when they are overtly aware that the transition is a process and that there are agreed-upon levels of performance to achieve. It’s not meant to be a puzzle or secret. Being informed and prepared allows the successor to begin the process with a level of self-confidence that will grow under your mentorship and coaching.

This process of preparing for a change in role for the successor also means they can evaluate their own level of interest and commitment. It might mean they ultimately decide to opt out because they don’t like the new role or don’t want to take this next step. It might mean they can identify where they feel they require additional skills development in order to take on the role. Clearly, these are all good results if they are recognized as a part of the transition rather than discovered after a more permanent shift is made and recourse is much more taxing.

You may find this change in their role energizes a new vision and future for the company. If you encourage their development – part of your role as mentor and coach – you might find they are prepared to reach a future beyond what you could have imagined.

What does a succession plan include?

A well-conceived succession plan is a document that will grow and change over time. In fact, over the time you have allowed between when you identify the successor and the time that person fully assumes the role.

  • A succession plan includes documentation of what skills and abilities are necessary to perform the task and compares those to the skills and abilities of the successor candidate.
  • The plan includes names and roles of the people who will be available to the successor as they learn and take on more responsibilities.
  • The plan includes specific steps to help the candidate learn new skills and abilities. They might include education achievements; work assignments; and relationships with specific mentors, guides, and coaches.
  • The plan includes specific times to evaluate how the process is going and whether or not the candidate remains on track to continue on this path toward succession.

It’s easy to forget that a transition means change for both you and the business. In the best light, it is an acknowledgement of your own growth and should be carried out with a level of pride and dignity. It is a logical shift from your role as key decision-maker to a mentor/coach.

However, few of us – unless forced to – can just stop doing. In order to be successful in this shift you will want to take some time to decide:

  • What will you do instead?
  • How will you fill your newly found “free” time?
  • How will you avoid using that time gap as an excuse to step back in?

Remember, you are creating a new role for yourself just as you are creating new roles for others in your business. Before you can start peeling away your responsibilities and giving them to others, take the time necessary to decide how you will change what you do.

The easiest way to begin transitioning your role is to think about it in stages. You don’t want to stop cold turkey – all today and none tomorrow. Instead, think of the transfer as a step-by-step process. Change your role in stages as others assume those responsibilities at that same pace. Use specific time periods for the transfers. Plan in advance when you’ll check in to see how the shift is working. The three columns below offer an example of how to define these steps.

  1. Current State - An outline of what the leader is currently doing – often a good opportunity to clarify the current role and manage expectations more effectively.
  2. Interim State - Fill this section out second – according to the vision of the future.
  3. Future State - Fill this section in last – after the leader has clarified his/her current and future roles with management team members and his/her successor.
    There may be several ‘Interim States’ as the leader works toward the desired future state.

When you finish identifying these three states, you have a workable plan with small steps that you and your team can revise and refine as you reach each interim state.

Be sure to take some time to think about your new job. The clarity with which you move forward also provides clarity for those who are becoming successors. Ask yourself:

  • What am I doing to create a life for myself outside the business?
  • How will I begin practicing my new role?
  • How will I manage being away from the business for longer periods of time?
  • How will I manage the shifting balance between my work and my family lives?

How will you know it’s working?

At first glance it’s easy – “I transition and they assume.” At second glance you might discover that a canyon lies between deciding to step away and having a successful shift in leadership. It is a significant change – for both you and the designee. You want to avoid:

  • Simply handing over complex responsibilities thinking you can walk away.
  • Piling more work onto a successor without freeing up their time to take on this new role.
  • Delegating responsibility and then taking it back when you don’t see it working out the way you expected.
  • Dribbling out tasks but not ultimate responsibility for goals, objectives and outcomes.
  • Delegating your work without a plan for what you’ll do with your time and talent.

As you’ve been carefully preparing for this phase you’ve already affirmed the individual is a good candidate – they have the capacity and capability. You’ve identified what roles and responsibilities will change and by when. The last step is to think about what will tell you – and them – that things are going well. Here are some things to think about:

  1. Create a dashboard that asks for the data that will help inform you about progress and how the business is performing.
  2. Schedule periodic development sessions drawing on your coach/mentor role to make it meaningful and helpful.
  3. Schedule specific performance reviews focused on assessing the candidates continued suitability for the new role and possibly re-defining interim steps.
  4. If there is a significant problem, identify where you might need to re-engage in order to get past a bumpy period. Carefully define what you will do, for how long, and what results you expect from your increased level of effort.
  5. Continue to build your own personal future outside of the business. What have you done to take on new tasks beyond your involvement with the company?

Where can you get more information?

If you would like more in-depth information on succession or would like help in any other aspect of running a family-owned or closely held business, please contact us.

Lisë Stewart is a Director in the Closely Held and Family Business Services Group within the Private Business Services Practice. Lisë has experience in organizational development, strategic planning and training, and human performance management.

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