Succession Planning – Begin The Journey Now and Here’s How
Mark J. Komen, President
Although we business owners tend to think we’re going to live forever, we know that’s not the case. Life changes, health changes, business changes…everything changes. Even we change, if we’d care to admit that. A standard practice in larger corporations, succession planning allows organizations to prepare for the time when their leaders, key managers and key staff move on to other opportunities or are impacted in other ways listed above. It’s just as important for the smaller business – especially the family business – to take a thorough look at how to replace leaders and key staff so the organization is prepared to thrive in the future.
This conversation naturally extends to the area of business exit. John Dini cites statistics from Financier Worldwide in his “Awake at 2 o’clock?” blog1 that “more than 70 percent of privately owned businesses in the US will change hands in the next 20 years…. [However], less than one-third of family-owned businesses survive the transition from first generation ownership to second.
So what’s important to consider here?
Allen Fishman, in his book 9 Elements of Family Business Success2 identifies 11 barriers a family business must address to position the organization for an effective transition:
- Lack of objectivity
- Poor communications
- Lack of needed passion
- Lack of a family member with the needed attributes
- Lack of needed vision of the Big Picture potential
- Lack of an empathetic personality match
- Failure to use objective evaluation resources
- Fear that if one candidate is chosen, others may leave
- Lack of a qualified and interested family member successor
Note that a number of these hurdles apply to non-family businesses as well. It is also apparent from this list that a lot of reflection, objective thought and planning must be given to these items and that moving forward requires a great amount of inertia and commitment.
What to do? Here are 7 parts to my succession planning program:
- Identify the responsibilities of the job
- Clearly lay out job goals and what’s needed to be effective in the position.
- Identify and address vendor and customer relationships as well as internal staff and infrastructure considerations.
- Assess the barriers to success
- What will the candidate need to overcome to succeed in the job? These may be legal, competitive, economic, financial, personality differences, management and leadership style issues, culture, etc.
- What future barriers are out there given pending trends in the company’s employee base, customer buying habits, industry and economic environments.
- Identify potential candidates
- Using specific criteria, give careful consideration to internal candidates but be open to considering candidates from the outside.
- For the family business, deciding between family members can be a daunting proposition so having a game plan here is critically important.
- Objectively assess candidate aptitudes, skills, and competencies and their willingness to grow
- I support using assessment tools to better understand and capitalize on a person’s communication, behavioral and thinking styles, as well as their use of management and leadership practices.
- Surfacing a candidate’s passion for the position and their temperament for leadership is a tricky endeavor.
- Give candidates opportunities to learn
- Training – business schools and online programs offer training in the financial, legal, operations, leadership, management, HR arenas but this content knowledge by itself is rarely enough.
- I am a big fan of in-situ development – on-the-job training to give future leaders the opportunities to deal with the real-world issues…and fail….and then learn from those failures.
- Some family businesses require family members to work somewhere else for a period of time before returning to the company. This mitigates “Not Invented Here” thinking and may entail bringing back something new (a best practice, tool, software, process…) to benefit to the company.
- Build a support team
- This may involve internal resources to help guide the transition and work out the necessary interactions between organizational functions.
- Don’t overlook employing outside coaches or consultants to act as resources.
- Know when to pivot
- Accept that your internal candidate may not have the necessary skills, competencies, passion or temperament to run the business and look outside.
- Some organizations hire an interim GM or COO to run the company and mentor the candidate while he/she grows into the new position – especially if illness or death takes out the owner or business leader – but is there enough time to get this right?
I worked with a business owner who was considering turning the reins over to his son. After getting into this process, it became apparent that the son didn’t really have the passion for the business and changed his mind about taking over the company. The silver lining was that the owner could chart his course forward with this knowledge.
Another organization used the process to inform creating a job description and criteria for an outside key executive hire.
Finding and grooming successors is crucial at any level of the organization but it’s especially necessary for those positions involving leading a business. As you can see, this takes time and sustained effort. Getting started tomorrow may not be soon enough.
- John Dini. www.awakeat2oclock.com, 6/22/18.
- Fishman, Allen E., 9 Elements of Family Business Success. McGraw-Hill, 2009.
©2018. Mark J. Komen. All rights reserved world-wide.