'Does your family have a succession plan?' This is one of the most common themes of research in respect of family businesses, and one of the most constant findings from these studies is that a sizeable number – getting close to a majority based on some reports – do not.
For those that do, the question of whether it has been written down and communicated to the rest of the family usually reveals very few have taken that additional step. With barely more than one in 10 family businesses making it to a third generation of ownership, it is worth thinking about how a family business can get succession right.
Think about it
The first crucial step to getting succession right is actually taking the time to think about succession and what it means for the family and whether it is something that the family wants – it should not be assumed that a family business should continue just because it has existed and endured. Part of the challenge internally should be ensuring that the next generation wants to be involved and take on the business.
Taking the time to plan successfully consists of two elements:
- Deliberately marking time out of the calendar to consider – with independent support, which can be trusted non-executive, non-family directors, independent advisers or other people experienced in the family business world – what a plan should look like and to document this.
- Taking time to discuss the plan with the whole family, not just the members of family involved in the business or that are going to be involved in the business. There should be wide support and transparency about the plans to make it a successful succession.
The plan should be a living plan that is considered, revised and adapted as time goes by, and as circumstances may change. It would be a mistake to consider it a one-off exercise with a plan left in a drawer to be found and implemented at a later date.
The planning can take years to ensure the transition will be successful. In one of the more recent high-profile examples, it was reported that Marta Ortega Perez – who is taking over the family business most well-known for owning Zara – was prepared for more than a decade to take on the leadership role.
Other critical factors in managing a successful succession include:
- Bringing the family into the business early, if that is the plan.
This will give them time to learn about the business, the people that make up the business, the values and the culture and give them the chance to understand what makes the business on their own terms.
