Effective succession planning is usually a multiyear process that requires careful analysis, clear goal setting, and close coordination between a company’s internal teams and external service providers. That’s why boomers who own their own companies need to start thinking about their business’ future even if they aren’t thinking about retirement just yet. That’s doubly true if passing your company on to a family member is an option that you’re considering.
Here are four questions that business owners should ask themselves as they’re trying to decide if a family member is their best possible replacement.
Is my family member qualified to lead?
There is no stepping-stone job in an organization that totally prepares a person to become owner or CEO. The exponential jump in responsibility can overwhelm even seasoned executives who have succeeded in other c-suite positions. Experience, exceptional leadership skills, authenticity, and a clear vision are all non-negotiables. Family relationships and feelings shouldn’t override any of these essentials.
Perhaps your preferred heir doesn’t have CEO chops yet but would still be an ideal steward for the business. In that case, your succession plan could involve transferring ownership with the stipulation that your heir creates a family board of directors who will hire a third-party CEO. In time, the board might decide that your heir has grown into the big job.
Does my family member really love the business?
The complex bonds between family members who are also working together can create a unique and very powerful positive momentum that makes family businesses special.
But those feelings can also be so powerful that they make the next generation feel like their career path has been chosen for them. Have an honest heart-to-heart with potential heirs before you settle on a succession plan. Any family member who is just going through the motions to make mom and dad happy isn’t going to have the passion for the business that a successful owner or CEO needs to have. And if their lack of enthusiasm continues to build once they control the company, they might start exploring sale options that you wouldn’t have approved.
What is your family member’s vision for the business?
The person who replaces you as owner or CEO should be committed to carrying on the values that you used when founding, leading, and growing the business. But they’ll also need the courage and clarity to put their own stamp on the company. Where do they see the company in 3-to-5 years? In 10 years? And, just as importantly, what is their step-by-step plan to get the company to this new peak?
How will the rest of your family react?
Again, family can be complicated. Family businesses, even more so. Unless you only have one clear heir, anyone you pass by is going to feel overlooked. And while a certain amount of conflict is a given in most families, if bad blood goes public it could be very bad for your family business.
As awkward as it might be, calling a family meeting to explain your succession plan and the reasoning behind it might be the best course of action. Even if your family members don’t all agree with your decision, hearing your reasoning in your own voice could help them to accept and respect your wishes.
And if the grumbling doesn’t die down, you’d better take a good hard look at the key documents that are going to make this succession plan official – including your financial plan.
Schedule a time to talk about your goals for an effective family succession and how to make sure this important transition improves your Return on Life.