Did you know that only 30% of family businesses successfully make it to a second generation? Most dissolve because of friction, avoidable misunderstandings, and mishandling of the transition. This low rate of success in transitioning to the next generation is why establishing a comprehensive and well thought out succession plan is critical for the long-term, multi-generational success of a family-run business.
The work required is certainly a bit daunting for those who are about to take on the task of crafting a succession plan for their family business. It is possible to be successful, however, with patience, hard work, and more than a little bit of collective soul-searching.
It likely goes without saying that family dynamics play a significant role in the decision making of succession planning. But it is important to acknowledge this reality at the beginning of the planning process so that all parties can work together, knowing it is an aspect of the process and the final plan.
Even outside of a business setting, meaningful conversations can be difficult to have with family members. Often times, intergenerational conflict and disparate values get in the way of truthful communication. Unfortunately, when issues remain unaddressed, they fester and create continued problems. Average, everyday familial conflict is multiplied when the stakes are heightened the way they are in the workplace where two worlds come together and each impacts the other. The good news is, family members can learn how to deliver feedback in a constructive manner, communicate, coordinate, and engage in those conversations we would all rather avoid. Because of the unique complexity of family business succession planning, it is recommended to work through this process not only with the family members and stakeholders, but also with professional outside support.
I recently wrote about the importance of articulating organizational values. Leaders should know their mission, who their audience is, and exactly how their employees’ unique passions and goals contribute to the overall mission of the organization. This is even more critical for a family business orchestrating a succession plan.
In the case of a family business, though, each individual is going to have their own concept of that value and the purpose of the organization. No matter how perfectly planned a succession plan might be, if a shared purpose does not exist, that 70% chance of failure becomes more of a threat.
The first step to a succession plan that works from generation to generation is investigating those individual ideas and unifying them into a singular, shared purpose. Ask each member of the family business what they think; how they see themselves fitting into the bigger picture of the company.
Using the data collected from these conversations, a shared purpose can be articulated --something that everyone can look to for guidance. Think of this shared purpose as a lighthouse -- a way to see the safest path through the storm. After this first critical step, all that follows will become that much easier.
Developing protocols for effective communication is the next critical step. Remember that communication skills can be taught, practiced, and improved upon. We often perceive these skills as innate – we’re either inherently good at it or we’re not. That may be true for some, but for many successful communication skills come from study and hard work.
If you are intimidated by the prospect of developing a plan for your family business, you are not alone. It requires understanding and successfully navigating family dynamics, dedicated work, and effective communication skills. Once a solid succession plan is established, it will improve your business performance as well as familial relationships.
Unsure how to get started, or simply want to bolster the plan you have in place? Feel free to contact me. I’d love to help.