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Skip to content Succession planning is something that you may not have thought about during the recession years, as all of your time and energy was invested in the survival of your business. Identify a Successor within the Family One of the more difficult aspects of putting a succession plan in place will be confronting your own end game, which is never easy for a business owner. Identify the Skills and Abilities of your Successor As with any successor, identifying the individual skills and abilities of your children will be vital. Prepare a Development Plan In some cases your children may have been working in the family business for a number of years; however they will still have a lot to learn before they are ready for management and ownership.
Implement a mentor relationship. This may be a relationship between yourself and your successor or alternatively between a senior member of your team and your successor. Set objectives for both the mentor and the successor. These will need to be reviewed on a regular basis with feedback provided. You may find that the objectives will be amended as the training progresses. Transfer knowledge to the next generation. This will be a difficult step for the owner manager; however hands on experience will be vital for your successor. Outline your own retirement date and put policies in place for your involvement, if any, after you retire.
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Here are some tips to help family business owners plot the transition from one generation to the next. Knowing when to start succession planning is one of the biggest challenges. While elements like ailing health or offers to buy the business often trigger an exit strategy, there are arguments for starting to lay the groundwork now so the plan can be enacted the moment the business owner starts thinking about moving on. The long lead-in allows for a step-by-step approach with the incumbent owner working alongside the incoming executive to really examine and grasp the finer details of running the company.
For big business families with complex affairs, a family constitution is also a helpful tool. In addition to the structural elements, family business owners should also focus on the psychological or personal effects of the transition. One way outgoing owners can manage the handing over of control, says Reed , may be to set up a trust.
A trust is a legal relationship created when the ownership of certain assets are transferred to another person or company the trustee. The trustee then manages and administers those assets in the best interests of those involved. Using a trust and choosing a trustee may be just one part of the succession planning process. A solid advisory team can help develop and assess different strategies, weigh scenarios for selling and allocating assets, if this is the direction a family business owner is going, and support the former head of the business through the emotional elements.
The transmission of businesses from generation to generation
In the case of many family businesses, the succession planning team will include relatives. Perhaps the most critical element to keep in mind when setting up a succession plan is to see it not as static guidance but an evolving blueprint for transition, one that should be documented at every stage. Responses to our survey indicate that written succession policies and plans are relatively uncommon in family businesses. Only a small percentage of respondents stated that their companies have a written succession plan, although many said that they have a succession plan, but it is not written down in a formal document.
Figure 2. Family companies: do they have a written succession plan? Other factors that are generally considered desirable are work experience within the family business and a good understanding of it , followed by experience gained outside the company. Experience in working for other companies increases the self- esteem and self-confidence of the next generation, and gives them wider business experience and greater credibility with non-family employees.
Figure 3. Top 5 factors in deciding for leadership Source: Deloitte Preparing for leadership More than a third of our respondents have been preparing for succession to leadership since their childhood, and a similar percentage has been doing so since they started their working life. In total, about 44 per cent started preparing early. Figure 4. When did you start preparing to be a leader of your family business? According to our respondents, gaining external work experience to prove themselves is more important than obtaining a university degree. Some respondents have not prepared to become the next leader of their family business, perhaps because their parents or other relatives have not discussed it.
Obviously, the next generation should not be clones of their predecessors, and they are entitled to develop their own style of leadership for the business, possibly taking the firm in a completely new direction but without losing the values of the family firm.https://armalfihealthnan.cf
The senior generation must embrace the idea of letting go, since at a family level the relationship is changing from child-parent to adult-adult. In many cases, however, the senior generation remains involved in the family business after the next generation has taken over, and working with family members from a different generation, each with a different idea of how things should get done, can often bring problems and dilemmas for the new family business leader.
Figure 5. Will your leadership style be different from your predecessor? As the future leader I have to prove myself in order to retain valuable workers. This means that I have to work twice as hard. Previously each brother managed a separate silo, whereas as cousins we will get involved together.
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We have addressed this issue in the family, but it is difficult for the generation of my parents. If the next generation tries to imitate their seniors, they will probably fail.
How to transition a family business successfully - The Business Journals
For example, we had a management team meeting that included my father. After the meeting, I held the meeting again, but without my father present. Sometimes, the vision of the external managers differs from the family view: they are more focused on short-term goals which should be constantly aligned with the long-term vision of the family.
Governance provides a framework within which roles, policies, processes and controls for guiding decisions can be established and implemented. For family businesses, there often comes a point where neither tradition nor experience is sufficient for effective leadership. Growth in the business, a new open-mindedness about hiring non-family executives and issues around leadership all create a need for a more structured governance framework. More than half of our respondents think that they will change the current governance structures once they have taken over. Only about a quarter expect to keep governance arrangements unchanged.
Many family companies have grown, organically and through acquisitions, international expansion and innovation, and have become more complex organisations for which new governance structures are required. Family businesses may already have good governance structures in place, but the next generation seems to have picked up on a need to formalise governance arrangements.
The Whitnell Way
Board structure and non-family members Most of the companies in our sample are small-to-medium sized, with a board consisting of up to five members. For larger family companies it is becoming common to have a majority of non-family directors on the board. In family businesses, the size of the board may depend on which different family groups should be presented.
This need not be a problem, provided that it does not result in a board that is too small to be effective. Our survey indicates that only a very small minority of family businesses have no family members on the board, and that in almost 60 per cent the majority, or possibly the entire board, are family members. How many on the board are family members?
Among the companies of the 63 respondents whose directors include non-family members, the majority first made a non-family appointment to the board over 11 years ago see Figure 8. Figure 8. It is important for family businesses to be open to external influences that can help secure their future, and the next generation of leaders seems well aware of this. Many non-family executives have a personal network of contacts that may be used to benefit the company and its business.
It is sometimes difficult for them to get appointed to the board, and they need to develop a relationship of trust with the family; however experienced non-family executive directors can be an invaluable asset. This means that a substantial minority do not have a formal plan. More than half of our respondents stated that they will make changes to strategy when they become leader, whilst about a third intend to keep strategy unchanged.