The Ten Commandments of Succession Planning
The weekly publication, Hamodia, recently ran a series of articles by Jacob Engel of Yeda LLC titled "The Ten Commandments of Succession Planning."
In this issue that reviews Engel's series, we'll look at the first five of those suggestions.
#1 Plan Early
Handing off a business requires a serious amount of planning. Merely hoping it will work out can lead to disastrous results. You need a transition period and that period might span several years.
Spending time mapping out the succession planning process makes sense. It requires a delicate balance of the right professionals, sensitivity to family harmony and hearing the founder's thoughts and goals.
The correct process, while it might take time and be agonizing, is less painful that not planning at all.
#2 Rights and Wrongs
No child has a right to manage your business. That right needs to be earned and it is as important for the child to see themselves earning the right as it is for your other employees to see them being promoted for the right reasons.
You should be guided by the sentiment of hiring them because they are qualified not because they happen to have the right blood line.
Very often it is a good idea to let the child work outside the business for a few years to build the kind of experience you would expect from a normal hire.
When you do appoint the child to a position of authority, let the child exercise that authority without you getting involved and undermining their role. As Engel says, "Stand behind, not between."
It's also important to develop a common vision so that when you introduce a new leader, there can be clarity as to the direction of the business and what the goals are.
#3 The Advisory Board
An Advisory Board is a group of experienced professional and industry experts that is brought in, often to compensate for the fact that the regular board of directors is made up of family members and therefore lacks some objectivity.
The best size for such a board typically ranges from three to seven members. Some are brought in because of their industry expertise whereas some may be good arbitrators in delicate family situations, such as perhaps the family attorney.
#4 The Family Business Council
"The family that gets into business together fights together". And if they haven't yet, the potential is always there.
The Family Business Council is different to the board of directors, even though they may be made up of the same people. It is a forum for the family issues related to the business to be discussed as opposed to matters relating to the running of the business.
The Council is an environment where issues can be discussed to allow a consensus to be reached as opposed to letting matters percolate until they explode.
The Council can also include family members who may not be involved in the business or who may rank too low within the business to be included in the board of directors.
#5 Balance in Business
Many business owners have spent a great deal of time planning the future of their businesses but not too much time planning for the life that they want, that might come after the business.
There are some pretty simple questions to ask to determine whether there is a good work/life balance and an overriding one is "Is it hard for you to imagine what else you would do if you didn't have the business in your life?"
Most business owners don't think too much about what they will do after they exit the business. There is an often-mentioned connection between retirement and passing away if there is not enough to fill the void.
Start with questions such as:
- What activities could I engage in that would energize me like running the business does?
- What interests and skills do I have that I could apply to something other than running my business?
- Is there a hobby that I could be passionate about?
- How will I get the gratification that I have got from running the business?
Finding the correct balance is something very personal. Listen to those whose opinions you respect and then make your own life.
In the next article, we'll examine the last five steps.