The Essential Stages of Succession Planning
Every transition between the generations in a family enterprise must pass through distinct stages. If any stage is ignored or not managed well, the transition will either falter or be unsuccessful.
The stages are Preparation, Disengagement, Exploration, Choice and Implementation and the tasks in each stage are summarised below.
Preparation for succession
Invest in learning about what other families have done to achieve successful transitions.
Gather information about the latest thinking in relation to family enterprise governance; there is a lot of exciting work being done in this field.
Identify events that will help to trigger the transition process and seize them as an opportunity to start work. For example, retirement of leaders, celebration of an important anniversary, or the need to hire fresh business talent to cope with new challenges.
Avoid denial (“we’ve got plenty time to think about these things”) and over-eagerness (“we need an answer NOW”). In succession planning, it is wise to give yourself time to hurry slowly.
Disengagement
Be willing to consider that the way forward might involve changing the current set up. It is not always possible to move forward by replicating the past.
Invest in education of the key players to create acceptance and understanding of the possibility of change.
Involve in the discussion the key people who have a stake in the outcome and ensure that they agree that the work needs to be done. It is difficult to even hurry slowly when some of the participants are reluctant to engage.
Plan the next stages of the process to help manage the uncertainty that is inevitable when you are exploring different options for the future.
Make sure you have a timescale and budget for the work. There will be enough anxiety in these discussions without worrying about, ‘how long will this take and what will it cost?’
Exploration
Keep a focus on the future.
Raise everyone’s tolerance for living in a time of relative uncertainty. As already mentioned, having a budget and a timetable for the work helps
Identify and test the feasibility of all the alternatives for the future.
Avoid premature choice. Take your time and do the job thoroughly.
Choice
Avoid prolonging Exploration of the options if it is simply to avoid making a Choice.
Compromise on what is the best possible outcome in all the circumstances.
Mourn the alternative outcomes not being taken and that might have been preferred by some of the participants. Make sure that they’re going to support the way forward.
Implementation
Create an implementation plan covering what needs to be done in the enterprise, the family and the ownership to ensure that change happens in a technically efficient manner.
Create a timetable for the transition to help all the stakeholders stay on track.
Design an announcement strategy to ensure that other stakeholders know what is happening.
Work on letting go of the past and focus on new beginnings.
Who starts the conversation?
An inter-generational transition in ownership and leadership of a family enterprise entails the seniors letting go and the next generation being able and willing to step up to the mark. But who starts the process?
The seniors may be anxious about pushing the next generation into making decisions, while the next generation may be reluctant to be seen to be pushing the seniors out of the way.
Change cannot happen until those currently in power – usually the seniors – indicate that they are ready to start planning. It is preferable for their willingness to be made clear rather than vague signals being given that are open to interpretation or the sincerity of which may even be doubted.
If seniors must accept responsibility for starting the process of succession planning, it is equally important that the next generation are willing to enter the discussions. This includes having clear understanding of what they want for themselves, as opposed to accepting passively whatever they believe the seniors want. It can take a bit of time for this clarity to emerge, but it is time well spent since the next generation could be living with the outcomes of succession planning for the rest of their lives.
Resistance and denial
Resistance to change is fine. It is a personal gauge that protects individuals and an enterprise to avoid the threat of too much change happening too quickly. Change in a family enterprise – or at least planned change – is often relatively slow and the change strategies need to accept the reality that there is only so much change the key players are capable of coping with.
Denial is an enemy of change. For example, the leader who still believes in their immortality, the next generation who do not want to take responsibility while enjoying the fruits of the business, or the legacy enterprise that no-one can quite admit is in desperate need of restructuring, can all hold back any effort to make transitions.
In transitions it’s best to work with resistance and try to face down denial. One way to do that is to have well planned succession strategy that makes everyone feel less threatened about entering the process.
Rushing
After the inevitably of transition is accepted, feelings of uncertainty and anxiety can lead to a desire to find a solution as quickly as possible. This is an understandable mistake, but it’s still a mistake.
Even though it can make everyone feel calmer in the short term, it is foolish to jump to answers or believe that there is a so-called, best practice that will solve everything. Thinking about succession planning as needing to go through the stages I mentioned at the start of this post will counter any desire to try to do too much too quickly and avoid the whole succession process having to be revisited to resolve the outstanding questions that were not answered properly the first time.