A Succession plan is as important as having:

An Estate Plan

A Financial Plan

A Strategic Plan

Good succession/transition should encompass all four plans.  Every closely-held and family business company should have an exit strategy- What is yours?

Is your exit strategy written down or is it in your head?  Are you willing to sell your company and if not why not?

Could it be that your company is your legacy and that your dream is to perpetuate it through the generations?  But whose dream is it anyway because if it is not your next generations dream then your company may become a part of the statistics that say 92% of all companies in the USA are family owned and/or closely held but by the 2nd generation this drops to 34% and by the 3rd generation to 16%. BEWARE!!! Shirt sleeves to shirt sleeves in 3 generations could become your legacy!  If your successor does not have that fire in the belly, he/she is not going to succeed and he/she is certainly not going to successfully steward the company through to the next generation.

Once you establish who the successors are going to be then the next stage would be Leadership Development.  Successors acquire the needed leadership skills and experience and are acknowledged be employees and clients as the ones who will succeed.  The final stage would be the Transition.  This should be accomplished naturally to avoid ripples that could derail the succession.

Additional issues facing the success of any plan would be:

-       What will the ownership roles (if any) of the family members who are not active in the business?

-       If succession is split between two or more siblings and/or family members, what agreements should exist between shareholders that will allow for future changes e.g. Buy/Sell agreements?

-       Will minority ownership be allowed outside the family such as key employees, in-laws, public offerings?

-       Planning for transition to the next generation

-       Values and skills which the next generation will need in order to be prepared to accept the responsibility of caring for the family business.

-       What steps would be needed to help the next generation acquire those skills?

Suggestions for Successor Development

-       Assure yourself that family business entry is voluntary

-       Get meaningful, full-time outside work experience

-       Enter with a specific, needed, precedented job description and pay level

-       Prepare for a specific job that doesn’t exist yet

-       Be prepared to work harder than others I the company

-       Update you written personal development plan yearly

-       Review personal development plan with parents, siblings and key business advisors

-       Look for mentors inside and outside the business

-       Seek the presidency of an organization outside of work

-       Develop a peer group of young business presidents and family successors

-       Identify leadership models to emulate

-       Take jobs in a variety of functional jobs

-       Volunteer to make presentations to the board

-       Hire, evaluate and fire people as appropriate

-       Consider formal testing of current aptitudes, strengths and needs

-       Invest time in shared non-business interests with the family

-       Attempt to write down the company’s key strategic policies, management philosophies and cultural values

-       Remember that real authority comes from earning respect, not from power

-       Eventually identify your own future management team

-       Be a role model of listening skills, openness and change

Finally, what we encourage is “The Ethical Will.”  We use this tool to communicate the most sensitive issues of succession-issues that deal with retirement, death, legacies, family values and love.  These issues are passed on through the generations by an “Ethical Will.”

Advertisement