Family owned and operated for (insert impressive number of) years certainly has an appealing ring to it. Business owners who’ve worked hard to develop and maintain a healthy organization want to see that business continue to strive when turned over to the relative successor.
Unfortunately, like any organization, succession planning is not simple and transitions are not seamless. Approximately 30% of family businesses survive the second generation; only 12% remain viable through the third generation, and a mere 3% survive the fourth. These numbers are not optimistic.
A recent study done by Smith and Gesteland, a CPA and business consultancy firm, suggests a few best practices for family business succession that are equally applicable to all organizations looking to firm up their succession planning strategy.
The study included 20 different businesses that were on their second generation of family owners across a variety of industries and found the top two most important factors of a successful transition were communication and advance planning.
Simply put, advanced planning is just giving succession planning or future leadership development some thought before the transition, but in this case, the more the better. One year is not adequate time to prepare for a transition. We’re talking more like 10 to 12 years in advance. Once that successor is chosen, communicating that decision is essential.
Part of succession planning is discussing the succession, both with the successor and others in the company. It’s essential to have everyone on the same page for years out to ensure the successor has the proper training and time to prepare for the leadership role. Further, making the plan clear and discussing it keeps other potential successors from fighting for the role when the time to transition comes. Being open allows you to manage conflict or negativity from others who felt they might be next in line and ensure that when the time comes, the transition is smooth.
Other interesting takeaways from the study include:
Succession planning decisions need to be based on skills and putting the right person in the job whether it’s a family business, an association or a large corporation. Be prepared to accept the dark horse. Leaders don’t necessarily look like they used to, but then, I bet neither does your industry.
Looking for a game changer at your next event or a strategy unique to your organization?