In past articles, I’ve discussed the reluctance of many agribusiness founders to implement a succession plan, and the damage this can cause to the business and family relationships.
If you’re a consultant, lawyer, accountant, director or other decision-maker involved in trying to persuade a difficult owner to hand over the reins, you’ll know just how challenging this can be. Here are helpful tips to approach the situation.
Understanding the founder
Your first step is to address the founder’s emotions and insecurities about succession, as these are usually why the founder is resisting a succession plan.
One option is to help the founder develop a ‘support group’ of business founders who have carried out succession planning and understand what it entails. Conversations with these peers may help the founder understand that reluctance to let go is a common response.
At the same time, peers who have planned their succession properly are likely to transmit to the founder a sense of pride and accomplishment, setting an example worth following.
Interestingly, many founders who plan their succession do so after a close encounter with death, such as a heart attack or the death of a close friend. This experience often makes people more willing to come to terms with the consequences that their death could have on their family and business.
Make the family aware
Your second step is to help the family understand how painful it is for their founder to relinquish control of the business. Many families fail to appreciate this, as they see their founder as a symbol of strength and self-sufficiency.
The family who is sensitive to what the founder is going through is more likely to develop ways of supporting him or her through this difficult process. You can, for example, help the family reframe the founder’s “erratic” or “irrational” behaviour as a natural reaction to letting go.
A successor-to-be who is attentive to the founder’s emotional difficulties with succession is more likely to be firm yet supportive, rather than adversarial, and help the founder take the necessary steps.
The nuts and bolts
Ask the founder what would happen today should he or she die unexpectedly. Push for answers to the following:
- What will happen in the family?
- What will happen to the company?
- What will happen from the point of view of the ownership and estate taxes?
- How will the outside world (that is, banks, suppliers and clients) react?
Strengthen the founder’s sense of responsibility by emphasising that succession planning is a leader’s highest duty. At the same time, provide concrete ideas about what to do about the problem.
Itemise the basic tasks involved in succession planning:
- Formulating a viable vision of the future in which the founder is no longer in charge of the family business.
- Selecting and training a successor, as well as the future top management team.
- Designing a process through which power will be transferred from the current generation to the next.
- Developing an estate plan that specifies how ownership of the business will be allocated among the heirs.
- Designing and staffing structures for managing the change, including a family council, a management task force, and a board of directors.
- Educating the family on the responsibilities of their new roles.
The future of the founder
Help the founder to develop a clear vision of his or her future roles inside and outside the family business.
Founders who develop strong interests in activities other than management of the business have an easier time planning their succession. For some founders, this means pursuing new careers outside the family business.
It is also important for a founder to design his or her transitional role after handing over management. Clarifying this role will help to reduce uncertainty about the future and appease the founder’s fears of being totally disconnected from the company on retirement.
Needless to say, there is a very real risk during the transition that a departing founder may infringe on a successor’s autonomy. The boundaries around the founder’s involvement should therefore be drawn clearly and monitored.
The founding couple
To help the family overcome its resistance to succession planning, it is often helpful to bring together different subgroups to discuss the issue. The timing of these meetings is important.
The first step is for the founder and his/her spouse to agree on the need for succession planning and how to go about it. The couple should state their aspirations for themselves and the rest of the family, and provide a list of activities to realise their ambitions.
This is important, because unless they feel empowered to design and implement a succession plan, it’s unlikely that they will be able to exercise their leadership effectively and help others in the family and the business come to terms with the challenges posed by succession.
Sometimes, couples find it beneficial to seek marital counselling and advice on personal financial planning before they address succession planning.
Once these expectations have been explained and understood, a family council should be formed. This should comprise all family members involved in the future of the business, including the founder, spouse, children and other relatives.
The council should meet to iron out issues such as:
- Should the family perpetuate the business, and if so, why?
- How will family members in and outside of the business benefit from perpetuating the company?
- What are the family’s shared values?
- How should these values be represented in the company?
- How can the family support relatives who choose not to work in the business?
A family council should operate only as an advisory body to the company’s board of directors. That is, the family council’s function is to articulate the views of the family so that those on the board can make decisions and design policies that protect the values, needs and wishes of the owners.
For the family, the council provides a setting in which differences can be worked through without interfering in the day-to-day management of the business and without contaminating the family’s non-work-related relationships.
Members can articulate their expectations of one another and explore the roles they wish to play in the future.
Finally, a family council gives the next generation of leaders in the family an opportunity to become reacquainted with one another as adults. All too often, siblings unconsciously perpetuate early patterns of behaviour.
In family council meetings, siblings have an opportunity to rediscover one another by working on a common problem. The creation of the council can by itself contribute significantly to succession planning.
This series of articles has described the forces that interfere with succession planning. The founder, the family, the owners, the senior managers, and other stakeholders typically experience ambivalent feelings toward succession planning, causing the parties to procrastinate with developing a plan.
If they wait until the founder’s death, it is often too late to rescue the business, and the family invariably undergoes great stress.
The reality is that a first-generation family business is unlikely to implement succession planning unless the founder is willing. The founder thus retains the power to perpetuate or destroy the business right up to the very end.
A wise and objective consultant or outsider can help a family implement proper succession planning by adopting the following strategy:
Engaging the founder
- Help the founder to develop a network of peers in the same position.
- Seek to understand the founder’s reluctance to let go of the business.
- Sensitise the family to the emotional needs of the founder.
- Explain to the founder the steps involved in developing a succession plan, and help to set out a timetable.
- Help the founder to create a future role that will motivate him/her to let go of involvement in operational management.
Working with the family
- Help the founder and his spouse to develop a shared vision of the future.
- Help the founder and his/her spouse to seek marital counselling if needed.
- Encourage the establishment of family council in which members can discuss their expectations of the business and one another.
- Create a succession task force, building in incentives that reward serious involvement in the development of a succession plan.
- Encourage succession planning for senior management as well as for the founder.
- Help to create a board of appropriately staffed directors that can provide an independent perspective to safeguard the interests of the owners.
Trevor Dickinson is CEO of Family Legacies, a family business consulting company. Visit family-legacies.com.