It is a continual process,
which integrates
education, planning, and
management for ensuring
continuity of the business
from generation to
generation and equally
challenging as well.
The commonly heard statements
made by Business Leaders in
the various business forums:
- “I built the business
from scratch and know it
better. How can I leave
it to someone else.”
- “We are doing
exceedingly well. Why
worry about those
issues”
- “I don’t work for money.
Business is my child; I
love it more than
anything else. I won’t
give up my role in my
business”.
- “My kids are not yet
ready to take over the
business. They are still
immature, so I have to
carry on”
- “I am not sure whether
my nephews will take
care of my family after
am gone. I don’t trust
them. I can’t hand over
the business to them.”
- “I am in the business
because my father wanted
me to join. Am not sure
what am I doing in
here.”
- “We are a big family.
There is intense rivalry
amongst us. Each of the
cousins is looking
forward to being the
CEO. Hope God helps us
out”
These are some of the common
statements, made by the CEOs
out of frustration, anger,
and ego, subconsciously or
consciously.
Each statement either
conveys that the business
leaders want to maintain the
status quo and don’t want to
explore the brighter
opportunities waiting at the
next simple step called
“SUCCESSION”
WHY DO BUSINESS LEADERS
AVOID SUCCESSION?
- Family business owners
find it easier to live
with indecisiveness with
the presumption of
keeping family disputes
away
-
Family business owners
find it extremely
difficult to think about
their mortality and the
possibilities in that
event
- Family business owner’s
spouses find discussing
death a real challenge
- Discussing a business
leader beyond the
existing one, can be
offensive to many family
members
- Founder Leaders just
don’t want to give up,
they would like to be in
the chair till the last
breath and die with
their boots on
- Tough decision-making
and creating more
internal issues can be
avoided, by hiding
Succession under the
carpet
It’s hard to accept mortality
and aging challenges by any
founding patriarch. But the
“Cemeteries are full of
indispensable people” –
that’s the harsh truth.
BENEFITS OF SUCCESSION PLANNING
- It is a process for
ensuring a significant
creation that can last
over the generations
- Creates entrepreneurship
within the family
- Younger generation gets
hands-on experience and
education while getting
groomed
- Family togetherness
leads to pursuing shared
goals and shared
decision making
- Business value is
enhanced which
encourages family
members to remain
bonded, work actively
and progressively with
more energy and
creativity
- Brings fresh
perspectives for
revitalizing the
strategy
- Eliminates
indecisiveness about the
business’s future
REASONS TO BEGIN THE
SUCCESSION PLANNING PROCESS
NOW
“It’s better to plan and
manage now, rather than
pay a higher price
later.”
- It’s the most important
task on the desk of the
CEO
-
Best method for an exit
strategy for the current
business leader
- Succession Planning
avoids conflicts arising
due to death, divorce,
disability,
disagreement, disaster,
and depression
Planning and managing
Succession is the greatest
challenge for any Family
Business. Many family
businesses fail to survive
because Succession which is
the greatest threat to any
family business is not
handled well. Succession can
be difficult, even if
planned. It is a very
slippery turf. All three
circles of the family
business get affected if
Succession is not planned
and managed well. Apart from
the family, the owners also
look for a good leader who
can manage and grow their
returns on investments.
Employees look for a good
leader for ensuring their
own careers blossom well in
the organization.
Succession is of the
business, for the
business, and by the
business (family members
in business).
Everyone needs to get
involved and follow a
structured process. However,
there is no template for
succession planning.
Succession is best when the
incumbent CEO takes it as
his or her prime
responsibility and executes
it thoughtfully and timely.
Ownership and Leadership
should be separate. Only the
meritorious should lead the
business.
The goal of a CEO is
to create an entity
that can sustain and
grow, even when he
is not there.
5 STEPS FOR FAMILY BUSINESS
SUCCESSION
- Preparing the CEO–
the business leader or
the incumbent CEO has to
be internally prepared
to relinquish his role
and move on to another
phase of his life.
- Preparing the
Business– the
CEO must ensure that he
passes on a healthy,
sustainable organization
- Developing the
Successor
–Mentoring the successor
by instilling the
business philosophy,
business culture, and
capability development
is the key role of the
outgoing CEO. Successors
always run the business
differently
- Preparing the Family
Members – family
members need to support
the succession decision
and the transition
- Preparing the
Ownership–
Education about
effective ownership,
teamwork, and good
governance is critical
for the family members,
especially the next
generation.
The real test of
the CEO is how well he
chooses his successor, aids
the transition, steps aside,
and allows his successor to
take charge of the business.
Three conditions must be
satisfied for any family
business to be successful
over the generations:
- Plan, Execute, and
Manage Succession
- Plan, Execute, and
Manage Succession
- Plan, Execute, and
Manage Succession
The above are the only
conditions to be followed
religiously for ensuring
business continuity.
Have a contingency plan in
case of failure and follow
the above-mentioned three
conditions again.
PLANNING BUSINESS
CONTINUITY FROM GENERATION
TO GENERATION
- Develop family
traditions, and value
systems in the younger
generation
- Develop capabilities
through education and
exposure
- Discuss, agree, and
finalize the family’s
mission statement
- Finalize the owner’s
estate plan
- Agree on a business goal
- Finalize the Strategic
action plan to achieve
the goal
- Select a suitable
successor
- Work out the successor’s
personal development
plan
- Have an active,
experienced, and
visionary Board of
Directors
- Prepare the incumbent
for retirement
- Prepare the family for
succession transition;
have a contingency plan
- Form a professional
executive committee to
run the business
WHAT SHOULD THE INCUMBENT
CEO “LET GO”?
The CEO should have addressed
the following issues to have
a smooth transition:
-
Commitment to Succession
- Strategic Action Plan
for the Business
- Financial Security
- Identification of a
Successor candidate
- Setting up a timeline to
retire
- Estate Planning
- Trust and delegation for
allowing the successor
to function
BUILDING SUCCESSOR’S
EXECUTIVE TEAM
- Select a
cross-functional,
experienced, and loyal
team who understands the
business philosophy and
is capable of executing
strategic action plans
- Hire professionals from
within the industry, to
add professionalism to
the work culture, and
minimize the learning
curve
- The team should support
the leader’s vision and
speed of thought through
the execution
STEPS FOR DEVELOPING
SUCCESSOR CANDIDATES IN A
FAMILY BUSINESS:
- Candidates should have
at least 3-5 years of
work experience outside
the family business
- Coaching and mentoring
by an experienced and
professional Business
Coach and or Life Coach,
outside the family
business
- Education through
university courses or
Executive education
through Management
Development Programs
(MDP)
- Exposure through
participation in various
entrepreneur forums such
as Young Professionals
Organization (YPO),
Entrepreneurs
Organization (EO), local
business forums
- Growing up the
organization ladder with
a hands-on,
learning-by-doing,
team-based approach
- Go through job rotations
within the organization
for multiskilling and
capability building
- Developing leadership
and team-building skills
- Active participation in
the monthly management
meetings, board
meetings, and grievance
handling
- Through an understanding
of financials, markets,
products, and strategic
action plan
BENEFITS OF SUCCESSION
PLANNING
- It is a process for
ensuring a significant
creation that can last
over the generations
- Creates entrepreneurship
within the family
- Younger generation gets
hands-on experience and
education while getting
groomed
- Family togetherness
leads to pursuing shared
goals and shared
decision making
- Business value is
enhanced which
encourages family
members to remain
bonded, work actively
and progressively with
more energy and
creativity
- Brings fresh
perspectives for
revitalizing the
strategy
- Eliminates
indecisiveness about the
business’s future
ADDVALUE is one of the
leading Family Business
Advisors assisting members
in family businesses to plan
and nurture their succession
under the guidance of expert
Family Business Consultants.