A common story line in a lot of TV serial dramas involves family businesses. And one of the most common plot points tends to center on the fact that the designated heir to the CEO — usually a son or daughter — doesn’t want the job. How can that be? The business has been in the family since my father’s father started it 75 years ago and that child has been groomed for the position.
We know that this is an issue that more than one Minnesota business founder and owner has run into. One of the big reasons this happens is because of too much presumption and not enough planning early on. Indeed, protecting the long-term integrity of a business is something that needs to be taken seriously right from the outset. What does it take to do it properly?
Those with experience in this area of planning understand that many factors deserve consideration. Perhaps the most important thing required is a pragmatic understanding of the shades of difference in each of the family relationships. Just because there’s a son or daughter doesn’t mean they have the fire in the belly that might be required to keep a business on a successful track.
In addition to that, experts suggest approaching succession planning from the standpoint of what’s good for the business, not necessarily what’s desired for the family. Working with an attorney with depth of specific experience in this regard can help with the assessment and execution.
The process starts with selection of a successor. Criteria should be based on assessing whether any employees have the right skills for leadership. The sooner this can be done, the better because you just can’t be sure when a change might be required.
Whoever is identified in the first step should then begin a job rotation that exposes them to the critical functions of the company. They don’t have to do each job well, but do need to appreciate the importance of the roles.
It’s a good idea to have a timeframe in mind for when the change in leadership will occur. Adjustments can be made if necessary, but having a deadline in place is likely to make the eventual hand off smoother.
Plan well for succession and the risk of disappointment will be greatly reduced.