We have discussed numerous aspects of succession planning on this blog in the past two years. It’s crucial for business owners to plan for their companies’ future years or even decades in advance if they want the best possible outcome for themselves, their families, and their companies. A smooth transition between leaders is the goal, whether the owner intends to sell the business to an outside interest or transition its leadership to a family member or members. Too many business transitions fail because of a lack of planning and preparation. Given this, how should you be preparing your successor to take over when the time is right?
Perhaps the most important thing an owner can do for his successor is to strengthen and build his business so that it runs smoothly and profitably. If the business is failing, even a gifted successor will struggle to keep it open. If it’s running on all cylinders, a few mistakes early on in a transition will not bring it to a halt. To do this, the owner should do a careful examination of the company’s value, strengths and weaknesses. He must install appropriate value drivers in place to make it as anti-fragile as possible.
Is Family the Right Successor?
Even in a multi-generational business situation, company leadership must decide if transitioning the company to the next generation will be good for the business. The reverse is true as well. Regardless of family history or parental pride, if you try to shoehorn the wrong person into leading your company, both the company and that person will suffer. It’s a challenge, but before you start your exit planning, try to objectively weigh the pros and cons of leaving your company to a family member. Have hard conversations with your children and your company leadership and ask them what they want and what they think is best for them, and then factor that into your decision making process.
If you believe that a family transition is the best option, start that transition as early as possible. It’s best if children become familiar with the family business while they are young. Show them what you do, and expose them to different aspects of the business. This will help them decide if they have a place there and if their skills and abilities are a good match. It will also give them an awareness of the many different aspects of your company.
Training for the Future
Many CEOs assume that because they built their businesses up themselves and know how to run them that their children will too. This is incorrect. We have seen enormous changes in technology and business in the past decades. Investing in proper training for your successors, whether that’s hands-on training or university classes in business management, will pay off over time. It’s also wise to have them work in different departments or positions in your business, getting to know your employees, management, and all of the aspects of the business up close.
When they have some training under their belt, give them actual responsibilities in your company so they can demonstrate what they have learned, gain confidence, and make decisions. If they do show that they can handle responsibility, give them more. Decide ahead of time which milestones will indicate they have enough aptitude and experience to lead the company in your stead. It will help employees and managers to accept your child in a leadership role when they’ve proven they can handle it. Building mutual trust and respect between the current staff and company leadership is crucial for your successor to thrive in this role.
Also, if you have more than one family member involved in your business, make sure to choose only one successor for the CEO position. Dividing company leadership “fairly” between siblings sets up a dynamic that is ripe for conflict and rivalry. Choose the family member who is best for the position. Otherwise the company will suffer and your family will too.
Communication is Key in Preparing Your Successor
Business transitions are complicated, so your communication has to be clear and open. Secrets have no place in this process. There are many people who will be directly affected by your transition, and you need to communicate with all of them throughout the entire period of transition. Let them know what is coming and what you expect of them. This includes your family members (all of them!), your leadership team, and trusted employees.
When you take your time in preparing your successor and choose the right person for the job, you can leave feeling like your legacy is in good hands and the future looks promising. All of the above may seem like simple and straightforward advice, but, as we all know, anything involving families and family business can be challenging. Conflicts arise. Building a business is different than transitioning a business.
If you are unsure of what your next step should be or how you should handle problems that arise, call us at Prometis Partners. It’s our job to help business owners plan and communicate so their exit planning is ultimately as successful as possible. If you need help, contact us today.