Leadership Transition
Leadership Transition and Ownership Issues
Leadership Transition is the process of passing management and control of a business onto another person, to other persons, or to another generation.
Leadership Transition is not the same as Ownership Transition. It is both possible and quite common to pass over management responsibilities and accountabilities without passing over some, or all, ownership of the business.
Furthermore, Leadership Transition is often, especially in family businesses, more talked about than actually achieved. There may be a show of passing the baton over, but the reality is that the patriarch, or matriarch, continues to rule from their office, from home and sometimes even from the grave!
We say: "Don't hand over the reins until you're also ready to get off the horse". Because not getting off the horse is an almost certain recipe for disaster, especially where a parent throws a particularly long shadow that their children have always walked beneath. The next generation incumbent feels challenged or threatened by the responsibility of dealing with parental / family assets and is rendered quite incapable of either performing as they would or should, or of developing any real sense that they are in control of and responsible for their own destiny.
Developing a plan to support the process of Leadership Transition is called Succession Planning. This is covered in more detail in Family Business :: Succession Planning.
How much is enough?
One of the critical questions to ask yourself is: "How much is enough?". How much does the retiring leader need to be financially secure for the rest of their days, without having to place an impossible burden on the new leader?
Some family business proprietors seem to think it's a matter of honour to achieve a fully commercial return on the passing over of their business to their children, or to other relatives. It's as though they need this to prove to themselves, and perhaps to the rest of the world, how successful they have been in developing the business.
It doesn't seem to matter that the level of debt their child has to take on, often more from a sense of obligation than from real desire, turns the family business into a family prison, rather than a family treasure.
This happens when proprietors see themselves as owners of their family business, rather than as stewards of same who are simply holding and nurturing it for the benefits of future generations. We have observed that families with the former attitude, far from producing worldly wise sons and daughters to succeed them in the business, often develop a family ethic that turns the family business into just another asset that will be dealt with commercially and quite dispassionately as soon as they are out of the way.
The Transition Process
To help develop commitment to actual transition, we guide families through a process designed to provide engagement, reassurance and mutual respect:
- Confirmation of current situation and intentions – from everybody’s perspectives. This is to make sure that everybody is in the same “head space” and is pointed in the same direction before we start trying to work how to get them to where they want to go.
- Confirmation of individual needs and interests– from everybody’s perspectives. What does each key person want to see happening over the next 1 – 5 years? And beyond that?
- Activities and timeframes for the new leader to take over the running of the company. Consider:
- Roles and responsibilities – assumption of authority and accountability; continuing support from parents; In particular, how will the handover of decision-making authority work? Changing job descriptions and titles?
- Performance expectations for the new leader – is there a need for family, internal or professional training, coaching or mentoring? Is there a need to establish systems for continuing professional or commercial support?
- Ownership issues – matching intentions with expectations.
- Performance targets for the business - realistic expectations.
- Remuneration and returns – satisfactory arrangements for all parties.
- Liability issues – dealing with continuing, cancelled or transferred responsibilities for business operations, finance arrangements etc.
- Announcements to staff, suppliers and customers. Make this an event to celebrate!
- Mutual commitments and respect.
- Agreed go-forward plan.
Benefits of Solutionism
Solutionism helps families to turn Leadership Transition into a relatively comfortable, and comforting, fully managed process. By systematically working through the issues with a highly experienced facilitator, much of the mystery and angst is eliminated, which helps with the eventual "letting go".
