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The succession experts at Russell Brennan Keane believe it is crucial to have a well-formulated plan in place early to avoid problems later. See recent article published in the Sunday Business Post below:-
Russell Brennan Keane has been involved in supporting and assisting family businesses for over the last 50 years. “We have supported small, medium and large family businesses through all stages of the business lifecycle, from entrepreneurs who have grown their family business to a stage where they decided to pass on within the family or sell; to second or third generation family businesses that wanted to continue their legacy and pass the business on but face more complex arrangements”, said Stephanie Duffy, business psychologist and facilitator at Russell Brennan Keane.
Russell Brennan Keane’s succession planning experts advise business owners to plan early and consider all the options and consequences involved for the future for all parties and for the business. However, tax and accountancy issues aside, Duffy said, “the non financial issues are generally the areas where the whole succession process can succeed or fail. These areas can be more difficult to address as they tend to be more personal and emotional. As a result it’s best to take a proactive approach, identify them in advance and get the right support and advice to address them”.
These softer issues include owner issues such as fear around letting go, loss of power and control, loss of identity and purpose. For many family business owners, the business is not just what they do but also it defines who they are. Many fear facing the unknown, while others genuinely believe the business won’t survive without them. They also worry about causing family conflict and disharmony.
Another consideration according to Duffy, is that some owners feel they are too young and energetic to consider winding down. If they haven’t a robust plan in place, they may fret about not having an obvious or right successor to pass the business to, or worse still they have a dilemma when it comes to choosing amongst their children.
Family business owners can have a lot of issues to deal with, especially if there isn’t an obvious successor. Perhaps the person with designs on becoming the successor might not be the right fit or may lack skills, knowledge, experience, motivation or drive. Maybe the successor that has been identified is motivated by the wrong reasons perhaps they may feel family pressure to take the role.
Duffy outlined that history and relationship issues can prove very divisive. “For example, there may be a history of family conflict, there could be rivalry amongst siblings or a lack of trust and support. Another issue that raises its head quite often is that the potential successor may not be accepted or seen as capable by other employees of the business.
A lot of problems can be second guessed and tackled early on to improve the outcome. Clear communication and thorough planning will engender trust in the process and will negate the effects of assumptions being made, or letting feelings of exclusion and resentment to fester.
Failure to identify a successor early enough to allow time to train and develop them is a big mistake,” said Duffy. However, she advocates that while succession should be put in place early on, family business owners should not enter into succession planning as a knee jerk reaction to a specific set of circumstances. “It’s generally a bad idea to rush through a succession plan on foot of a change in tax regime, because often not all aspects are of the plan are thought and addressed properly in this context, which can lead to resentment and conflict”.
Owners also need to be mindful about how to fairly compensate or include family members who don’t wish to have any direct involvement in the business and to establish the right ownership structures for the business.
Duffy’s skills as a mediator and facilitator are called for with many of the succession plans being put in place by Russell Brennan Keane. Her preferred approach is to facilitate family meetings involving the whole family, and then follow up with individual meetings with family members. However, she added, “ It depends on the family and the owner and where they are comfortable to start. I recommend getting the whole family together to set out the succession planning process from the outset to set clear goals as this can assist in bringing issues out in the open, it can also ensure that all family members have a clear understanding of what will be involved”.
Outlining the recipe for successful facilitation, Duffy said, “You need to be a skilled facilitator and mediator and be comfortable dealing with family and group dynamics, with different styles, with bringing issues and conflict out in the open in constructive ways and with assisting different parties in managing a process of change and transition. You need to be skilled in working with many different ‘systems’ for example, the family, the business, teams and individuals, and you need to be able to build trust with all parties and create a process that people can comfortably work with over a period of time.
“Sometimes, however I am brought in mid way through a cycle, if some of the planning and groundwork has already been completed. I also tend to be involved with successor coaching and development, and with assisting the current leader to transition roles and responsibilities over time. Other important issues that are not directly related to succession but critical for family businesses to address include developing good governance structures for the business such as processes for communication, decision making and problem solving, and establishing and developing Boards; developing policies on entry of family members into the business, pay and compensation and conflict resolution”.
In conclusion, Duffy said, “The key element of a successful succession plan hinges on the owners willingness to face the issues and start working early on a plan. It is a process that can take considerable time, however by starting the process you will help reduce the fears and anxiety associated with it.
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