Succession planning in family businesses – what you should be considering
All businesses need to think about succession planning, identifying and developing employees into new leaders/managers who are well-placed to back-fill existing leaders when they leave or retire.
I recently joined a dinner at the House of Commons, attended by a number of MPs, business leaders and experts in family business from PricewaterhouseCoopers. The topic of succession planning in family businesses was discussed at length, and I want to share some of the topics and insights for you to consider when succession planning in your own family business.
It is never too early to start thinking about succession planning
Regardless of your age and how much longer you think you will remain in charge before handing over the reigns, start planning today – you never know what may happen tomorrow. Make sure you have plans in place that include contingencies if something goes wrong or drastically changes. Everyone in your family, as well as those in your business, should know their role and what is expected of them.
Give your future leaders the tools to succeed
Management in any business comes with responsibilities and challenges. In family businesses, the pressure to succeed may be even greater. Make sure the person or people you intend to hand the business over to have the knowledge, skills and experience to take it on. They either need to have gained the right experience elsewhere to successfully takeover, or you may need to provide them with the training and development they need.
Make sure you have both corporate and family governance in place
Corporate governance deals with the way a business is directed and controlled. Family governance is concerned with the governance of the family and its relationship with the board. Conflict in a family business is likely to happen at some point. A family governance structure should aim to address areas that could cause potential conflict such as:
- Management and ownership succession.
- The family must be alert to the potential for a conflict of interest. Family members may have a number of different roles, for example, owner, employee, director and trustee of a family trust.
- Family shareholders are likely to have differing income expectations. Is it recognised that some shareholders may be more reliant on dividends than others? Is the dividend policy fair?
- The relationship between the family and non-family executives needs to be considered.
- A feeling of exclusion amongst those not working in the business could occur. Is there adequate communication with them? Are they receiving enough information about the business?
These are just a few of the areas discussed and should give you some things to consider for your own business. Just remember, it is never too early to start planning, and the more well-prepared you are, the more seamless future succession will be.