Common Succession Planning – Legacy planning, as owners of family businesses know, is essential for the continued success of the business.
However, that doesn’t always mean that owners take the right steps to ensure a seamless transition of power within the organization – Common Succession Planning. As a family business advisor, a common occurrence I witness is that parents invite their adult children to join the family business with the intention of them taking the reins, however, when it’s time to pass the control over the adult children, the parents aren’t able to do it.
Why Won’t They Give Up Control? – Common Succession Planning
Also, many parents aren’t able to draw a distinction between family and business modes, so they find it difficult to trust their “babies” to be effective leaders, even though they believe them to be responsible adults.
- Aren’t ready to let go and give up control
- Don’t know what they will do after leaving the business
- Feel their children have a different vision for the company and they aren’t comfortable with it
- Did not set reasonable expectations and aren’t honest about their concerns and fears
A Case Study – Common Succession Planning
In the following example, we see this inability of a parent to differentiate between family and business modes and how this impacts the succession plan.
A business owner asked his daughter and her husband to join the family business. However, once the daughter and son-in-law joined the business, the Father didn’t trust them and ended up micromanaging the son-in-law and usurping his authority. The owner wasn’t able to respect boundaries and couldn’t get past seeing his daughter as his “little girl. This combined with the fact that he didn’t see the significance of trying to treat his son-in-law like his own son had an unhappy ending as the daughter and her husband ultimately left the business.
Avoid Succession Issues: Plan & Let Go – Common Succession Planning
One the main ways to avoid these issues is to put a succession plan in place that opens the lines of communication and guarantees everyone involved in the plan is on the same page. Expectations must be clearly stated and parents and children should continue discussions of the future, hold each other accountable, and regularly participate in the honest communication.
For a succession plan to be effective, owners must accept their role and begin the process of letting go and handing over more and more responsive to their kids. They must also be able to listen and accept constructive feedback from their children, rather than becoming defensive.
Legacy Planning Steps
When it comes to legacy planning, there are several major steps that need to be taken, including:
- Strive to open lines of communication and move toward conflict resolution
- Build a governance structure and hierarchy that outlines duties and responsibilities
- Guide decision-making by drafting a family mission statement
- Establish an informal advisory board to help with guiding the business
- Host family meetings and family management meetings on a monthly basis to address any issues or concerns
Conclusion – Common Succession Planning
Not putting a succession plan in place is inviting disaster, not only when there are struggles between parents and children, but between siblings and other family members as well. When values aren’t aligned, it leaves the business open to distrust, poor communication about critical issues, and the inability to address critical decisions. In the worst cases, this failure to plan can lead to litigation. The legal issues and fights that occur when a family business succession plan has not been drafted can tear families apart, which is absolutely not what a parent-owner had envisioned for his or her legacy. There are even business opportunities for financial planning that may interest some of you.
About Dr. Denise Federer:
Clinical psychologist and executive coach Dr. Denise P. Federer is the founder and principal of Federer Performance Management Group, LLC, a family business consulting firm. She brings more than 20 years experience as a clinician, researcher, speaker, author and consultant to her work as a performance coach.