Succession Planning and Leadership Transition
Leadership Transition provides one of the most difficult challenges for any business. Sometimes called Succession Planning, it happens when the next generation of management, or family, is shaping up to take over the running, and usually the ownership, of the business.
Most of our work in this area is with family businesses, but experience suggests that many non-family, private businesses face exactly the same generic problems that seem to repeat themselves, in various forms, from business to business.
The potentially explosive mix of commercial and personal issues generates more trouble inside more businesses than almost anything else and, as a consequence, the task is all-too-often put in the "too hard" basket. Sadly, this leaves a legacy of conflict and potential disaster for both the business and its various stakeholders (whether or not that includes family).
It's saddening to see the mess some proprietors leave behind them. Their successors have to clean it up, and the inevitable resentment (not to mention the possibility of family conflict and financial damage), can savagely dent the respect and gratitude that should otherwise be the old proprietor's due for having built the business in the first place.
When proprietors simply refuse to get their affairs in order by developing a succession plan, as a last resort we sometimes have to ask them the question: "Who do you think will attend your funeral, and what do you think they'll be saying about you as a business person?" Sometimes you just have to be cruel to be kind!
As business proprietors get older, the critical realities are:
- Succession is not a question of: "if", it's a question of: "when".
- Succession should always be a process, not an event.
Interestingly, banks regard Succession Plans, especially in a family business, as a key indicator of stability and professionalism. The lack of a Succession Plan, especially in a business with a charismatic and controlling proprietor, provides sufficient reason for many banks to place the business "on watch" as they become increasingly nervous about their financial exposure - both to the business and to the family.
Leadership Transition and Ownership Issues
Heads of businesses, especially but not only family businesses, often find it hard to transition themselves out of their longstanding leadership positions for a number of reasons, including:
- They are used to wielding, and being recognised for wielding, absolute power (in a benevolent way) and see any diminution in their authority as a challenge to their personal status, worth and reason for existing.
- They fear "what lies for them beyond the business", because their lives have enjoyed such a strong, or even exclusive focus, on it.
- They can't see anybody else in the business, in the family, or outside either or both, who can know, love, suffer and achieve for the business as much as they did/do.
- They want to protect their valued employees, or family, from the actual or perceived vicissitudes of command.
- They want to protect, or enhance, their own financial position and retirement prospects.
Meanwhile, their fellow directors and managers, sons and daughters, relatives and non-family managers working in the business wait in the wings to be called to centre stage, getting increasingly frustrated that the head of the business is the only one who thinks they're still getting curtain calls!
The Succession Planning Process
We take a Solutioneering approach to Succession Planning, using the CONSEPS model. This mobilises our facilitation, problem solving, commercial, financial, business advisory and mediation capabilities. Our Solutionists work closely with the directors, owners, business executives and family members (if any), within a clearly defined structure and with a process tailored to the specific needs of the particular business, family, and/or ownership group.
Our process is designed to produce a new leader who can stand on the shoulders, of the old, rather than simply fill their shoes. The new leader must be accepted by company employees and stakeholders, and the market place at large, as the best choice for the job.
In the case of a family business where there is no intention to allow control or ownership to pass outside the family, the process helps to select the best candidate(s) available and identifies whether: (a) they are up to the job at all and (b) what training, coaching and support they need to be able to take over and run the company properly in the long term.
The main process stages are as follows (per the standard CONSEPS Model):
Stages 1 & 2 = Analysis (here and now). Stages 3 & 4 = Synthesis (options and plans):
- Information Gathering - identify key stakeholder, business, economic and personal interests, issues and needs. Establish required candidate profile(s). Gather information re potential candidates including their character, capacity, quality, style, interests, needs and expectations.
- Situation Analysis - evaluate information gathered in Stage 1, including comparative congruence and the strengths and weaknesses of situations and individuals. Assess the strategic implications of changing market conditions, and changing political and economic environments.
- Option Generation - generate a range of possible options for leadership transition, in the context of responsible business development. This facilitated brainstorming process is based on the information gained through Stages 1 & 2. These options should identify candidates and targets. Assess, select and refine options into "best fit" plans to complement the company's broader Strategic and Business Plans over designated timeframes. Help to negotiate / mediate acceptance of options amongst disappointed personnel.
- Solutions - implement the plan as a fully-worked, written, leadership transition plan. Implementation includes: gaining full acceptance of the decision from all interested parties; training, coaching and mentoring for nominated individual(s); continuous performance assessment; acknowledgement of error and contingency plans. The plan should become part of the business' Strategy Plans and Business Plans. If we are working with a family business, the plan may also be enshrined in a broader Family Agreement / Family Constitution.
To help ensure the success of the Plan we may also accept nomination as the independent "kicker" who is given contractual authority to enforce the terms of the Plan.
Succession Planning - A Four Stage Process
Here and Now (Analysis) |
The Future (Synthesis) |
||
1. Analysis |
2. Evaluation |
3. Options |
4. Implementation |
|
|
|
|
Ten Essential Wisdoms for Successful Succession
- Do make succession a controlled process, rather than an event.
- Do be professional, not protectionist. Provide objectivity, independence and impartiality for the sake of your business and for those whose lives depend on it.
- Do recognise that there are always other options. Search and think inside and outside the square.
- Do appoint someone to be a long term steward, rather than an owner of the business, its people and its values. Their motives for seeking the role should place business continuity far above personal gain.
- Do acknowledge the old leader's probable fear of the abyss. When the business has been his or her life for a long time, moving out of it is like stepping into the void. Help to ease their move by helping them to deal with their fears, pain and doubts.
- Do work out how much is enough? How much money does the leader really need in order to be financially secure for the rest of his or her days? Let the balance go if it will help the succession plan , avoid saddling future generations with impossible debts and create sustainable harmony in the business and / or in the family.
- Don't just look for, or try to create, a clone of the current leader - the successor should stand on the old leader's shoulders, not just fill their shoes.
- Don't demand 60 year old behaviours and values from 30 year old candidates. Exchange safe horizons for credible, 20+ year visions for growth and prosperity.
- Don't "hand over the reins without getting off the horse". Don't demand responsibility without giving ownership, even though the latter may be transferred in stages.
- Don't surrender your business and family timing objectives purely for tax/wealth benefits. Carefully weigh personal and family gains against financial pains.
Benefits of Succession Planning
As Solutionists, professional mediators AND business advisers we bring a different set of competencies into the Succession Planning process, compared to the conventional services typically offered by lawyers, accountants and financial planners. In our experience this invariably produces better and more complete outcomes for everybody involved in the process.
Before addressing the legal and accounting issues (for which we use the businesses' own advisers, or other specialists we can comfortably recommend), we deal with and try to resolve the personal, relationship and potential conflict issues that are always simmering below the surface - assuming they're not already in full view!
We believe that in most businesses, and in almost all family businesses, these issues are usually not addressed adequately, or at all, through the conventional advisory process. The result is enormous angst in the key players (ie: proprietors and senior executives) at the very time when they most need a clear head to make major decisions and deal with the major changes they are about to undergo.
Solutioneering avoids these process and personal deficiencies by working more collaboratively and more profoundly with the people themselves. As a result, we can usually help to produce better overall outcomes for both the people most intimately involved, for the business and for its various stakeholders.