Sucession Planning

In the family business context “Succession” means the transition of one or more of ownership, leadership and/or management of the family’s business interests – from one generation to the next.

There must be some form of ownership continuity for the process to be called “succession”, although that can include converting one business into another form of investment through a sale.

Succession should be seen as a natural and inevitable part of every family and business lifecycle, and not as a one-off event. However, because it’s often either denied, ignored, suppressed or botched, it probably creates more tension amongst individuals, families and their associated businesses than all other causes put together.

Succession therefore justifies very special care and attention – whether in planning and managing the process; responding to the consequences of failing to plan and manage the process properly; or when having to deal with the unexpected.

What Is Involved

We help to plan and manage the practical aspects of the process: agreeing objectives; settling major tasks, resources, milestones and timeframes; allocating individual responsibilities in the process – so individuals, families and businesses come out the other side in better shape than they went in. This requires careful planning up front to turn what usually looks like a massive challenge into a catalyst for renewal and positive change, in both the business and the family.
The many technical issues that need to be dealt with during the process (the “legals”) are handled by lawyers, accountants, finance experts and financial planners. We happily collaborate with existing advisers, or recommend alternative, trusted, family-wise experts to help with that part of the work.

The ultimate goal of the Succession Planning Process is to ensure that, at the eventual handover:
The old leader is ready and wanting to move into a new role/new life.
The new leader is ready and able to take over the top job.
The family and the business are happy about and willingly support the transition.
All other interested parties are appropriately informed, comfortable with, and supportive of the change.

Timing Issues

Succession is not a question of “if”, it’s a question of “when”. Everyone ages and eventually has to move on.
The standard wisdom is that: “Succession should be a planned and managed process, not an event” – if the family and the business want to maximise the benefits and minimise the risks and dangers.

We recommend providing at least five years to actively groom a successor to take over from an incumbent business leader. A sensibly long period is needed to give the successor enough time and opportunity to suck most of what the current leader knows out of his or her head; to make the right contacts; to gain the necessary skills and to get a good feel for what’s required to lead the business.

Leaders who’ve spent their entire lives working in the business also need a decent length of time to get used to the idea, and the feeling, of not being in, or at least not leading the business. They need to use this time wisely to generate or refine a genuine desire to move on into another space when the time comes to pass the baton.

We regard anything less than 12 months as a crisis. Two years is a challenge. Between two and five years it’s a movable feast that will be influenced by many factors.

Note: Succession planning is a small part of the Family Business Strategies best practice process. It can be done independently, but may not provide as holistic or robust a solution as might have been found otherwise.

 

 

Although we are based in Auckland, we go wherever our clients ask us to!

Give us a call on 0800 765 837 or email rosemarie@fbsnz.co.nz to work out if Family Business Strategies is able to assist your business family or family business.