Is succession something you don’t talk about? In the general busy environment, does it have time to feature in your strategic thinking? It is a subject that people are often loath to broach, especially in family run businesses, as it can be an emotive subject. It can be a difficult subject to discuss but putting off decisions until tomorrow could prove too late. There are considerable dangers in not addressing this elephant in the room. Only 10% of businesses make it to the third generation! Whilst this article cannot cover everything, hopefully it will get you thinking.
Succession strategy is not just about retirement or handing over the business. It is about when you want to move on from your current position or agreeing what is the promotion process within the business. People want to know if there is a progression route. Who in your team has the potential and the skills to move on up? If someone leaves, who will fill their place? It is not just about recruiting your successor, but how you will support them through the transition.
One thing I have learnt is that it always takes longer than you think. A former CEO of General Electric, Reginald Jones, spent fifteen years planning his successor, which eventually was Jack Welch, who took GE to number 1 company in the world.
A leader’s lasting value is measured by succession.John C. Maxwell
Fail to Plan – Plan to Fail.
Succession planning is the process of identifying and developing potential future leaders and senior managers, as well as individuals, to fill business-critical roles. The aim is to be able to fill key roles effectively if a current post holder leaves the organisation. Succession planning programmes typically include practical, tailored work experience relevant for future roles. Preparation is everything. Facing the future early enough, setting goals and planning for their achievement can ensure that succession is painless.
A few years ago, we ran a succession planning seminar for the agricultural sector when over 60 people attended. There were some very interesting insights that came out of that day. One example of good succession planning on a farm in the Purbecks highlighted the importance of handing over responsibilities early and letting people develop whilst there is still someone around to mentor them. Don’t wait until you are gone to hand on vital information and skills!
Some Financial Considerations
This is an area that benefits from getting sound professional advice. In dividing assets, there is a case for being fair, not necessarily equal. The business issues are more important than the tax issues, but do not forget the tax issues!
- How will you handle family members not involved in the business or other stakeholders?
- Have you planned for inheritance tax?
- What assets can you gift at an early stage without putting yourself at risk?
- Have you considered capital gains tax implications?
- Is it time to consider a lifetime cashflow forecast to outline income and expenditure and make better decisions?
Succession planning doesn’t start with people. It starts with the requirements of the position.David Ulrich
Some Other Aspects to Consider
- Communication is vital so how will you communicate the strategy and who needs to be involved in its development?
- It may not be easy, but how soon do you need to start talking about it?
- How clear are you on the requirements of the position?
- What is your vision for yourself and how will your needs be met?
- What is your route planner for succession and what realistic milestones need to be set?
- How can you avoid making assumptions or having the wrong perception of what other individuals are thinking or want?
- If it involves your family, how can you ensure that your children run their own lives?
- Even if someone has been there the longest, are they the best person for the job? Remember no one has the absolute right to succession.
- How could an objective outside view help you in this?
Questions for the Business
- Who is involved in this succession?
- Are you looking for internal or external successors?
- What options are available – there may be more than you think?
- Which assets are involved and how will they be managed?
- What are the time scales and are they realistic?
- Are there opportunities with this succession and what are the risks?
- What skills training is required and how will that be implemented?
- How will contracts be drawn up?
- What is your exit strategy?
Questions for You Personally
- How clear are you of your aspirations and vision?
- What fears and beliefs may hinder you in the decision-making process?
- How assertive can you be in putting your case?
- What provisions or financial security do you have to make this next move?
- Have you sorted out adequate pensions and an appropriate will?
- How much time do you want to devote to this?
- Where do you want to live?
- What consideration have you given to fulfilling mind, body, and spirit – friends, hobbies and health care?
I have seen hard working people, who have never given themselves time to relax, feel lost when they finish work, as they have no hobbies or interests. Alternatively, when the head person, who has always kept information to themselves, suddenly dies, it has had a devastating impact on the business as no one ‘knows the ropes.’ Mentoring your successor can smooth the transition.
Succession may not be the most exciting topic to start the new year, but I would strongly recommend giving yourself time to think and talk about it. Good planning takes time, and it is not too early to start. It can be a very positive experience for you and the business. There are people out there who can provide expert objective advice. You do not have to do this alone.
Also published on Medium.