What is Succession Planning?
Succession Planning is the process of identifying the people and process changes that are needed to transition the business from old owners or managers when they leave, retire or die.
The Ideal Scenario
In an ideal world, the reins will be taken over smoothly, and your business will continue to grow and prosper. If you’re very lucky, you’ll be around to see another generation confidently carry on. Who could ask for more?
The reality of family business succession, however, often falls far short of this “ideal” mark. Human nature and random events can make the process fraught with stress and conflict. Planning well ahead is the key to maintaining harmonious family relationships and minimising potential blows from the hand of fate.
Succession planning should be an organised, ongoing process involving all parties in information gathering, research and evaluation. There must always be room for frank, constructive discussion. Of course, the greater the number of family members involved in your business, the higher the likelihood these discussions may become heated. Ultimately, however, everyone will be glad of your foresight.
Business Issues to Consider
Important business issues that you should consider are:
- Begin the planning process as soon as possible. All family members need to be made aware of the importance of this matter.
- Family members who are active within the business, and if applicable, non-family managers, may wish to form a committee to examine the issue.
- What will be done in the event of a crisis such as your death or disablement? Can the business continue operating?
If the answer to the above question is “No”, what training, supervision and resources need to be put in place in the immediate future to ensure the business is sustained?
- What financial matters need to be addressed, such as insurance, tax planning, wills etc?
- What positions must be filled as the company grows? Who might suit these roles and how can they be groomed?
- Identify and establish relationships with good business advisers – no matter how qualified you may be as a group, often an outside perspective helps.
Personal Issues to Consider
Important personal issues that you should consider are:
- Thinking about succession can be demanding. You may have to confront the realities of aging, mortality and loss of control and power.
- You may be forced to deal with concerns over favouritism. These days it is recognised that responsibility is not an inherent right and must be earned. However, when more than one member of the next generation holds a senior position, strength and diplomacy will be called for.
- You should seek professional advice as soon as possible regarding your retirement strategy; the tax implications, superannuation planning etc. There are many different ways to transfer ownership of the business and you should examine which options would be best for both you and your family.
Finally, putting your succession plan into action may require conscious effort on your part. Once your successor/s have been selected, their preparation and the transition of responsibilities should be gradual but consistent. After all, transitions will be taking place in your business ownership, management, and your family – it’s worth doing well.