Inside View: How to Succeed with Succession
How to succeed with succession
June 2017 – “They” (whoever “they” are) say that the only thing that’s constant is change. We face change continually. Home, family circumstances, career, country … and businesses change. Change of crops, markets, employees, technology and eventually, if they survive long enough, ownership. Transition to a new owner is often difficult enough. Succession to a new generation within the family has particular challenges, and especially, for some reason, to a third generation.
So what makes it work? Or not?
I’m no succession expert by any means. But from the family business transitions I’ve seen, I’ll offer a few observations. So, in no particular order, here we go.
INCREASING THE LIKELIHOOD OF SUCCESS
Timing. Do it earlier rather than later. Succession can be a hard discussion to have, since it’s very personal for all parties. It’s tempting to put it off. Families that have made the transition successfully seem to do so because they’re not afraid to deal with this elephant in the room.
Timing is also important since the process can take a long time. It won’t happen overnight, so provide sufficient time to properly work it through. And clearly, since the parent generation is not getting younger (who is!), important decisions need to get dealt with while people are still capable of properly doing so.
Seek professional help. Succession has many tax and legal implications, so seek professional guidance from those qualified to provide it, such as accountants and business lawyers. Make use of government agencies that often provide help for family businesses to plan and implement succession.
Respect. The parental generation should have faith in the ability of the new generation. Likewise, the “youngsters” should learn to appreciate all the good things the parent(s) in building the business. Mutual respect needs to be fostered. Parents need to enable the new generation to be “let loose” while ensuring they know they’re supported. If either is missing, maybe succession needs to be re-evaluated.
Personal development. Technical knowledge, business savvy, leadership, labour management abilities. Being a grower is much more than, well, being a grower. New generations increasingly need a diverse and competent skill-set, being confident, yet not “know-it-alls.” There is no substitute for experience.
Deal with emotions. Recognize that this will be an emotional time. You may need to also recognize that you’d benefit from someone (friend, respected industry associate, professional) to help you work through this journey.
Timing. Again. At some point, the parental generation has to accept there will be a time to move over and let the next generation take over. Too often this is a stumbling block. Too easily it causes a “falling out” between family members, which is particularly sad. Businesses can come and go, but family relationships can be extremely difficult, occasionally impossible, to repair. Do what you can to guard against this.
Parental income. The process can be especially challenging if those leaving don’t have a reliable source of income once they exit the business. This is another reason to address succession earlier rather than later.
Sibling power. Succession may be complicated if there are multiple siblings involved, in particular if some don’t want to be involved and want their “share” paid out.
Control and not adopting new technology or investing. “But we’ve done it this way for the past 25 years!” Maybe. But the world moves on, and the business has to move with it. Lack of faith in the new generation is often a result of “my way or the highway” thinking from older generation. If the business is to succeed, it needs to adapt and change. Be brave – let go.
Conclusion: Above all, remember that everyone and every business is different. What works for one business may not be the best for yours. The experience of others can help, but there are probably characteristics of you, your family and your business that make your situation unique. That’s not necessarily bad, it’s just different. Get planning.
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