Family business succession is a tricky process and can be a minefield for many family businesses. The problems that confront a family business at succession time can wreck family relationships and destroy the business.
Succession in a family business is a complex process - as described by our logo.
The logo for the Atlanta-based Family Business Institute is three interconnected circles, each representing a major “sphere of interest” in a family business - the family system, the management system and the ownership system.
To be successful, the family business succession management process should engage each of these three systems.
“When it comes to family business succession – whose job is it?” is a question posed by leading family business expert
“All too often, the succession management process in a family business is a process that lacks leadership and accountability – it is not part of anyone’s job description,” says Schwerzler.
Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and is the founder of the
Family Business Institute
and the web organization Family Business Experts.com both of which are headquartered in Atlanta GA.
“Live the question” is getting to be a popular notion and family businesses should ask themselves this question – Succession, whose job is it?” advices Schwerzler.
Traditionally, in many family businesses, the parent generation assumes the responsibility for managing the succession process.
However, for many family business owners, the responsibility for managing the family business succession process is a back-burner issue to "running the business".
They are so busy working “in” the business that they do not take time to work “on” the business – to create the infrastructure that will enable the family business to maximize growth and profitability of the business and to assure a smooth and successful transition from one generation to the next.
In other words, the succession process stalls – or in many cases, never gets started.
When this happens, the situation becomes frustrating and problematic for everyone involved – the parents, the Nexters, the managers and employees – even customers and vendors.
“When we get a call for help from a family business that is starting to deal with succession issues, the first step we take is to conduct a Family Business Assessment, a highly successful process we have perfected to identify the issues, to establish priorities - and a time table for getting things done,” notes Schwerzler.
Part of our strategy with the Assessment is to determine how best to engage the Nexters into the succession management process. In other words, the answer to the succession question “Whose job is it?” should be – the Nexters!
The problem for many families in business together is how best to have the Nexters take a proactive role in the succession process – especially if the parent generation is too busy with running the business to deal with the owner’s perceived “rigmarole” associated with the succession process – having to deal with the lawyers, the accountants, the financial planners, the valuation experts and the other professional service providers that may need to be engaged in the succession process. As one family business owner observed, “Schwerzler helped to “quarterback” our succession process – he helped us get it organized and helped us get it done!”
Just as the family business owner assigns managers to be responsible to conduct the basic business functions like marketing, sales, production, accounting and finance – a smart option could be to assign the responsibility for managing the succession process to the Nexters.
Does that mean the Nexters are supposed to just go off and do their own thing – no, of course not. They are charged with the “responsibility” for managing the family business succession process. Succession is always best done as a collaborative effort between/amongst generations. Succession is always best done as a process, not an event.
Another question for the Nexters to consider is “How best to prepare the family’s business for succession?” The focus for succession is generally “outward” re marshaling the resources to do the financial, tax and legal planning. We think the Nexters, as part of the succession management process, should invest time and effort into an “inward” assessment to better understand what needs to be done to improve the efficiencies and effectiveness of the business.
What new strategies need to be designed, discussed and implemented to improve the competitiveness of the business? New technology? New/better equipment? New markets? New products? New facilities?
Said another way, traditionally the family business succession process is focused on being “transitional” – we think succession time for a family business should be both “transitional” as well as “transformational” – and the Nexters can play a significant role in achieving that objective.
As Schwerzler is quick to point out, “Every family business is unique and complex it its own way – a strategy that works well for one family business will be a disaster for another family business. But everyone will agree that moving the succession process forward and getting it accomplished, simply makes good sense.”
If you are a “Nexter” in a family business and would like to discuss how you can be better engaged in the succession management process for your family business – use the Family Business Help Desk box to contact us, we can help!
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