Leadership Across Generations: - IAM

Planning Tactics to Manage the Succession Process
These succession planning tactics show you the way to a successful
transition in your family business. Consider all of
them—they’re tested and proven to help you.
“If the succession process has stalled in your family business,
hiring an experienced family business succession coach
could be the solution,” explains family business expert Don
Schwerzler. Schwerzler, who has been studying and advising
family businesses for more than 40 years, is the founder of the
Family Business Institute. Here are some tips and advice on how
to avoid problems that can stall a successful transition.
• The sooner the succession planning process is started the better,
and you will have more options. Moreover, those options
(such as buying life insurance to fund the stock ownership
transfer) tend to be less expensive when the owner is 45
versus 65.
• A child may have the right to inherit the business, but the
right to manage the business must be earned. Urge your
children to work at least two years outside the family business
so they can learn different skills and experience making
mistakes.
• Establishing an outside advisory board to help manage the
transition allows family business professionals (from outside
of the family and from outside of the business) to help deal
with the tough issues. This advisory board is constructed
differently than a board of directors and can be a very costeffective
vehicle for bringing good advice and experience
from outside.
• Conducting formal family meetings can help solve problems
while they are small. Having experienced family business
consultants lead the first few family meetings can help
establish and keep the family focused on the rules, goals
and objectives.
• Develop-non business interests.
• Develop financial resources independent of the business.
The best succession plan might be to sell rather than transfer.
Sometimes, with family businesses, the focus is so much on succession
that the most logical alternative is completely overlooked.
If the family strategic plan and the business strategic plan have
been done, we see two situations where selling is the best
alternative:
• The business can’t evolve with the changing conditions or
environment. This inability to adapt might occur because it
can’t find the right people or because technology or environmental
factors necessitate capital investment or expenditure
beyond the ability of the family or business to raise capital.
• The business has not been able to find and develop a competent
successor.
It is not easy for a family in business together to objectively
face reality in either of these situations and there is the stigma of
“defeat” or “quitting” that is often associated with a decision to
abandon a goal. But the harsh reality is that in either of these situations,
failure is almost certain and will happen even if the family
decides to ignore reality and tries to continue with the business
EXECUTIVE SUITE
or transfer. Thus, failure becomes a matter of when—not if. In
either case, early and realistic recognition will let the family sell
the business rather than lose its investment and at least have the
proceeds to carry on their goals in other forms.
Evaluating a competent successor starts with the key elements
in the succession planning process where the family and
the business identify the culture, mission, and strategy, and whom
they need to lead them to fulfill the mission. This process will
naturally identify skills and competencies and these should have
been built into job descriptions and development plans for the
successor. The successor’s progress in meeting and developing
skills and competencies should therefore be extensively measured
and documented by many people throughout the organization on
a regular and continuous basis.
The successor’s progress in meeting and
developing skills and competencies should be
extensively measured and documented
by many people throughout the organization
on a regular and continuous basis.
Less objective and more difficult to measure, but critically
important, is how the potential successor handles leadership and
power. In a nutshell, can s/he take over the reigns of power and
provide leadership that will be accepted by the organization and
by the family. This is tricky to test and evaluate. If the outgoing
CEO shelters the potential successor and decrees the authority,
the successor isn’t tested against the “yes men” who are passive
and accommodating until after the outgoing authority is gone;
then they rise in opposition to thwart and block the previously
sheltered successor.
At the other extreme, the “shark tank” approach turns two
or more potential successors loose in the business and lets them
fight it out. Either approach can be devastating to the business
and neither offers any realistic prospect that a suitable successor
will survive. (The sheltered successor might well not toughen up
under pressure; sharks don’t necessarily make good leaders.)
A realistic outgoing CEO and family often seek the help of
outside advisors or an advisory board to ensure that the job rotation
and/or special assignments for the successor include situations
where s/he will have to seize or assert some authority to be
successful. Over time, the successor will have built a solid power
base from within rather than just being handed power.
Perhaps even more difficult to measure, but critically important,
is motivation. Does the potential successor really want to
assume control? The person might want the job, even really want
it passionately, but for reasons such as being the eldest, for the
power or prestige it might bring them, or for any number of other
reasons—but is it really what s/he wants to do?