Let's start with one very important thought that everyone leading a family business should consider:
"Transferring ownership of a small family business requires strategic vision!"
- Jeff Rogers, CPMBC
To be a Visionary Leader, especially in a small or family business, has value, and to be a head in the clouds dreamer may not have as much weight. It allows art and science to enter the equation personally, professionally, and organizationally. There is a lot to this, and it is not easy, so most do not do it!
I wanted you first to understand the benefits of Vision in your world.
This concept informs us that when Vision is out of the weeds, they dare to reflect, are aware of their strengths, have the integrity to engage authentically, and have enough courage to stand alone if required, to harvest the results of the Vision.
My big idea here is that Vision is critical for success, sustainability, and the transfer of family business ownership. You will go nowhere without clearly envisioning where you want to go. That simple. Distraction abounds around us – focus on Vision.
Like anything, everything has a process. Succession requires excellent strategic planning, disciplined implementation, sound reporting management, and great care. Add to this family, and matters become more complicated. Everyone must focus on the ball and, most importantly, care about the outcome. The transfer of family business ownership has many more components than traditional business. There are several high-priority items to consider and manage while developing a sound family business succession plan.
Change is often difficult for any enterprise, and internal and external forces can complicate family enterprises. Succession is complex at the G3 level as outside parties of influence become magnified and more diverse.
30% of family businesses survive the transition from first to second-generation ownership. 12% survive the transition from second to third generation. Only 13% of family businesses remain in the family for over 60 years.
And 47% of family business owners expecting to retire in five years DO NOT have a successor.
- Score.org, Mar 2, 2023
The statistics tell the story that the transfer of ownership is complex. The mantra is to be prepared and work to earn succession success. Many struggle with change, family and non-family members alike. Success is found by assembling all stakeholders and getting them on the same page. Collaborating and driving the mission together will enhance teamwork. Unified by a shared strategic vision, there is a far more significant percentage for success. Trust is required and must be earned by all. Missteps here can lead to failure.
Earning commitment is necessary for succession to work. The entire team must be on board. This can be a difficult time for many family organizations. Not every team member will make this journey. They may begin the motions, but ultimately, they may not be committed to the organization's next phase. That is okay; there are no square pegs in round holes on this one.
Here is a valuable process to consider in family business succession.
|
1. |
Formulate and share a viable vision of the future in which the founder is no longer in charge of the organization. |
|
2. |
Select and train the founder's successor as well as the future top management team. |
|
3. |
Design a process for power to be transferred from the current generation of management to the next. |
|
4. |
Develop an estate plan that specifies how family assets and ownership of the enterprise will be allocated among the founder's heirs. |
|
5. |
Design and staff the structure required to manage the change, including a family council, a management task force, and a board of directors. |
|
6. |
Educate the family to understand the rights and responsibilities that come with the various roles they may assume. |
If the planning process outlined is insufficient, additional considerations for success exist. Below are a few to consider to get the ball rolling.
Similar to most processes, there are phases to be aware of. Here are the basics to reference what stage you may be considering or are currently in. It is not easy to get yourself geared up for the change and succession that will take place, and the entire team must get on board and be willing to make succession a reality.
|
1. |
Pre-succession phase Preparation takes place Planning & grooming occur |
|
2. |
Engaged Phase Change occurs: old truths lose validity. People seek new truths, and commitment develops |
|
3. |
Post-succession phase Balance of transition happens Has an effect on how people react Organization performs |
Developing Sustainability and Strategic Vision for your family business entails constructing a picture of your desired future; having a vision is having the ability to think about, imagine, or plan for the desired future.
As mentioned, the process dictates success. Building the correct team to assist the process is the key to success—trust matters. Build a team you trust and a team that has you as the priority!