Each statement either conveys that the business leaders want to maintain the status quo and don’t want to explore the brighter opportunities waiting at the next simple step called “SUCCESSION”

WHY DO BUSINESS LEADERS AVOID SUCCESSION?

• Family business owners find it easier to live with indecisiveness with the presumption of keeping family disputes away
• Family business owners find it extremely difficult to think about their mortality and the possibilities in that event
• Family business owner’s spouses find discussing death a real challenge
• Discussing a business leader beyond the existing one, can be offensive to many family members
• Founder Leaders just don’t want to give up, they would like to be in the chair till the last breath and die with their boots on
• Tough decision-making and creating more internal issues can be avoided, by hiding Succession under the carpet

It’s hard to accept mortality and aging challenges by any founding patriarch. But the “Cemeteries are full of indispensable people” – that’s the harsh truth.

BENEFITS OF SUCCESSION PLANNING

1. It is a process for ensuring a significant creation that can last over the generations
2. Creates entrepreneurship within the family
3. Younger generation gets hands-on experience and education while getting groomed
4. Family togetherness leads to pursuing shared goals and shared decision making
5. Business value is enhanced which encourages family members to remain bonded, work actively and progressively with more energy and creativity
6. Brings fresh perspectives for revitalizing the strategy
7. Eliminates indecisiveness about the business’s future

REASONS TO BEGIN THE SUCCESSION PLANNING PROCESS NOW

“It’s better to plan and manage now, rather than pay a higher price later.”

1. It’s the most important task on the desk of the CEO
2. Best method for an exit strategy for the current business leader
3. Succession Planning avoids conflicts arising due to death, divorce, disability, disagreement, disaster, and depression

Planning and managing Succession is the greatest challenge for any Family Business. Many family businesses fail to survive because Succession which is the greatest threat to any family business is not handled well. Succession can be difficult, even if planned. It is a very slippery turf. All three circles of the family business get affected if Succession is not planned and managed well. Apart from the family, the owners also look for a good leader who can manage and grow their returns on investments. Employees look for a good leader for ensuring their own careers blossom well in the organization.

Succession is of the business, for the business, and by the business (family members in business).

Everyone needs to get involved and follow a structured process. However, there is no template for succession planning.

Succession is best when the incumbent CEO takes it as his or her prime responsibility and executes it thoughtfully and timely. Ownership and Leadership should be separate. Only the meritorious should lead the business.

The goal of a CEO is to create an entity that can sustain and grow, even when he is not there.

5 STEPS FOR FAMILY BUSINESS SUCCESSION

1. Preparing the CEO– the business leader or the incumbent CEO has to be internally prepared to relinquish his role and move on to another phase of his life.
2. Preparing the Business– the CEO must ensure that he passes on a healthy, sustainable organization
3. Developing the Successor –Mentoring the successor by instilling the business philosophy, business culture, and capability development is the key role of the outgoing CEO. Successors always run the business differently
4. Preparing the Family Members – family members need to support the succession decision and the transition
5. Preparing the Ownership– Education about effective ownership, teamwork, and good governance is critical for the family members, especially the next generation.

The real test of the CEO is how well he chooses his successor, aids the transition, steps aside, and allows his successor to take charge of the business.

Three conditions must be satisfied for any family business to be successful over the generations:

1. Plan, Execute, and Manage Succession
2. Plan, Execute, and Manage Succession
3. Plan, Execute, and Manage Succession

The above are the only conditions to be followed religiously for ensuring business continuity.

Have a contingency plan in case of failure and follow the above-mentioned three conditions again.

PLANNING BUSINESS CONTINUITY FROM GENERATION TO GENERATION

1. Develop family traditions, and value systems in the younger generation
2. Develop capabilities through education and exposure
3. Discuss, agree, and finalize the family’s mission statement
4. Finalize the owner’s estate plan
5. Agree on a business goal
6. Finalize the Strategic action plan to achieve the goal
7. Select a suitable successor
8. Work out the successor’s personal development plan
9. Have an active, experienced, and visionary Board of Directors
10. Prepare the incumbent for retirement
11. Prepare the family for succession transition; have a contingency plan
12. Form a professional executive committee to run the business

WHAT SHOULD THE INCUMBENT CEO “LET GO”?

The CEO should have addressed the following issues to have a smooth transition:

1. Commitment to Succession
2. Strategic Action Plan for the Business
3. Financial Security
4. Identification of a Successor candidate
5. Setting up a timeline to retire
6. Estate Planning
7. Trust and delegation for allowing the successor to function

BUILDING SUCCESSOR’S EXECUTIVE TEAM

1. Select a cross-functional, experienced, and loyal team who understands the business philosophy and is capable of executing strategic action plans
2. Hire professionals from within the industry, to add professionalism to the work culture, and minimize the learning curve
3. The team should support the leader’s vision and speed of thought through the execution

STEPS FOR DEVELOPING SUCCESSOR CANDIDATES IN A FAMILY BUSINESS:

1. Candidates should have at least 3-5 years of work experience outside the family business
2. Coaching and mentoring by an experienced and professional Business Coach and or Life Coach, outside the family business
3. Education through university courses or Executive education through Management Development Programs (MDP)
4. Exposure through participation in various entrepreneur forums such as Young Professionals Organization (YPO), Entrepreneurs Organization (EO), local business forums
5. Growing up the organization ladder with a hands-on, learning-by-doing, team-based approach
6. Go through job rotations within the organization for multiskilling and capability building
7. Developing leadership and team-building skills
8. Active participation in the monthly management meetings, board meetings, and grievance handling
9. Through an understanding of financials, markets, products, and strategic action plan

BENEFITS OF SUCCESSION PLANNING

1. It is a process for ensuring a significant creation that can last over the generations
2. Creates entrepreneurship within the family
3. Younger generation gets hands-on experience and education while getting groomed
4. Family togetherness leads to pursuing shared goals and shared decision making
5. Business value is enhanced which encourages family members to remain bonded, work actively and progressively with more energy and creativity
6. Brings fresh perspectives for revitalizing the strategy
7. Eliminates indecisiveness about the business’s future

ADDVALUE is one of the leading Family Business Advisors assisting members in family businesses to plan and nurture their succession under the guidance of expert Family Business Consultants.