Effective Succession Planning for Family Business
Effective Succession Planning
The family has worked hard to develop the family business into a viable entity after many years of sweat equity, long hours and hands on management. Finally, the family leaders have decided it’s time to move away from the day-to-day operations and bring in the next generation to run the business or hire an outside CEO. The energy is high and the desire to make the transition a success is extremely motivating. However, how do you take the operational side of the business out of your head and focus on the strategic side? This is probably the biggest hurdle in leaving the day-to-day operations for any family member that truly believes in the business and wants to see it grow to new levels of profitability.
So, how does such a strong, dependable leader shift gears?
Change Your Mindset
The first step is the most difficult: change the way you think about the business. Instead of seeing the business as your single solitary focus, allow your mind to envision another capable person in the key leadership role. Ask yourself with each task, “Am I being strategic or operational?” If operational, how do I shift this task to a new leader? If strategic, what am I doing right now to move the business vision to realization? Shifting the key family business leader from the operational to the strategic mindset enables a quicker transition of leadership.
Of course, no one quite does it like you; however, someone else can do it. Starting and maintaining a family run business is not an easy task to do alone or with a large family. Imagine how much easier it could be to grow the business if your focus is on strategy and let another talented individual implement the strategy. This is the key to successfully shifting the mindset and visualizing the ability to accomplish more, grow the business and even have a “family” life outside the business. All this is possible when a new operational leader is at the helm.
Hire the Right Gun
You are going to set the strategy so now hire the right leader to handle the day-to-day operations. This individual must embrace the family history, culture and values of the business you’ve built and have run. They need to bring their creative business tools to enact the family vision and work closely with the family to instill the family values and culture under their leadership. Even if the new leader is a family member or someone that has worked closely with the business, they are now the face of the business and need the full support of the family. Together with the company board, approve the company-wide goals for implementation by the leadership team. Establish tools to monitor the implementation of goals and achievements. Evaluate the leader’s performance against expectations while giving them the bandwidth to implement the strategies. Hold them accountable for results and company targets. However, stay away from the day-to-day operations and remain at the strategic level.
Establish the Family Council
Imagine having 5-7 bosses watching your every move as the company leader. Particularly when 3-4 are family members heavily invested in the outcomes of the company. This is not a position to place your new operational leader. To reach a balance of oversight and direction, establish a Council of the Family representing all the family stakeholders in the business. Let the Council function as a place to discuss company goals, accomplishments, strategy and direction. Select one member of the Council to work with the operational leader – one voice, one direction and one communicator. This will allow the company not to get entwined with family politics, rogue family members or ownership issues. This keeps the operations moving forward without interruption from well intended diverse perspectives of the family.
Ramp up the Board
In the good old days, the company board was a function of the family meeting only when needed and informally at best. With a new operational leader, the company board needs to function as the catalyst for setting the company strategic direction and ensuring it is implemented. It’s time to revamp the board by bringing on outside, non-family board members; formalizing the board’s function and establishing a set of Bylaws that allow the board to lead the organization. Find industry leaders that think strategically, have a well rounded business experience and time to serve the company. Set agendas that use the minds around the table to tackle the complex issues facing the company. A well functioning board spreads the strategic leadership beyond the family and holds the company leadership accountable.
Addressing the strategic mindset as the family business owner will truly impact the ability to move in new directions, increase profitability and ultimately bring great value to the family asset… the family business.