When it comes to succession planning, these are just some of the typical questions business owners face: “Am I getting too old to continue with my company?”; “Should I retire early and enjoy my success?”; “When is a good time to pass the business on to my children?”; “Can I take a chance on my kids continuing in my successful footsteps?”; and “Should I look outside my family for my successor?”
These are difficult questions to answer. Why do business owners need to consider succession planning? The most obvious reason is that no one lives forever. And even fewer of us want to work until the morning they put us in the ground! Most entrepreneurs know they’ve worked hard and struggled to succeed. Do you want the product of your efforts to dwindle or fall apart when you become too infirm to continue or when you die? Probably not. So the first consideration is your health.
A related factor in succession planning is that if plans for the business aren’t made before the owner voluntarily leaves, considerable and often acrimonious and destructive in-fighting can occur between the “heirs apparent”, whether they’re family or non-family members.
Planning ahead means you can select, train and coach your potential replacement.
That way, you can help ensure the viability and continuity of your company according to your preferred leadership style.
Despite the logic of these reasons, many entrepreneurs remain unwilling to plan for succession. The reasons they give are varied, but often include:
- A reluctance to give up control;
- An inability or unwillingness to see someone else in charge;
- The belief that “no one could possibly take over after me” and “if I give up control, the company will inevitably fail”; and
- The belief that no one in the family is prepared yet to take over from them.
Another major hurdle is to decide whether or not to keep control in the family. This is often a very sticky issue. It’s widely known that second-generation businesses are plagued with problems and don’t necessarily succeed. Often, the major factor here involves the poor selection of successors.
A parent who’s built a business, worked hard to make it a success, and believes that their offspring will be equally successful is often mistaken. The owner wants to see family taking over from them and often hopes, and may even believe, that choosing a family member will guarantee success. But business owners are often blind to their adult children’s lack of business skills.
Whether or not the candidates for the top job are family, the process for choosing your successor is basically the same: find the best person for the job. Although this can be difficult if you want family to take over, it’s even more difficult if the family member expects to be immediately appointed to the top spot. The situation is further complicated when sibling rivalry exists. At this point, issues such as “Mother/Father always favoured you over me” and other childish yet very painful realities start confusing the real issues.
Family or outsider: who will be chosen?
Be objective and honest in selecting, training and coaching a replacement.
- Firstly, identify just what the mission and goals of your company are. The current leader usually knows this down in their soul, but it needs to be objectively translated and written out since everything that occurs in corporate life is a function of vision and goals.
- Secondly, the business owner and a team of other key senior officers need to determine the exact role for the new replacement. Succession planning, as well as downsizing or expanding the business, all present unique opportunities to take a hard look at what the current leader will do in both the near and long term.
- Thirdly, given the responses to the first two factors, the task force of executives needs to clearly identify the exact knowledge bases, skills and abilities a successful replacement will have. They can start this process by examining just what factors have led to the success of the current chief executive. Having completed that analysis, the task force needs to objectively determine if the current set of traits, attitudes, skills, knowledge and abilities will be necessary and sufficient to carry the company into the future.
Armed with this critical data, these “factors for success”, the task force must next create specific questions, role plays and action scenarios to use during the interview process. And all candidates applying for the chief position must be interviewed by a series of current employees who have been trained to be objective in their questioning and evaluation.
After all candidates have gone through the interview process, the task force should then meet to evaluate the results of each round of interviews and select the candidate – whether family or not – who best embodies the qualifications needed to ensure the company’s future success.
Factors for Success
Selecting a successor who will drive your business forward is a difficult task. Use the following pointers to guide you in making the right decision:
- Create a document which clearly communicates the vision and goals of the company
- Determine the exact role of the new leader to fit with what is required to take the company forward
- Determine the abilities and skills sets required of the successor – start by evaluating factors that led to the success of the current chief executive