Why Avoid The Difficult Conversation

Succession planning: the elephant in the room. A Boston Consulting Group study found a 14-percentage point difference in revenue growth and a 28-percentage point difference in market capitalization growth between family enterprises that had a succession plan and those that did not. Poorly planned and poorly executed succession plans are among the biggest value destroying events for family enterprises.

Why is it so difficult to talk about succession planning in the family enterprise when studies show an enormous amount of value is destroyed by unplanned transitions? 

In many families, the intersection of emotions, family politics, and the needs of the enterprise can feel like ground ripe for conflict. The enterprise’s needs related to leadership based on merit and economic capability may be viewed as being on opposite ends of the spectrum as family desires or abilities. While lawyers and accountants make sure the ‘i’s’ are dotted and the ‘t’s’ are crossed for an ownership agreement and tax filings, the family must be willing to have the critical discussions and participate in the hard work of dialogue for who will lead the family enterprise and how the process will occur.

Five important questions can help families as they begin the transition planning process:

1.    How will the family values be maintained moving forward?

2.    Will the family select a successor to lead the business from within the family or outside the family? 

3.    What development process needs to be implemented?

4.    Who will assist the family and keep the family focused on this journey?

5.    What will be the departing leader’s role?

These questions are not all inclusive, but they will help the family begin to have the important conversations. 

Honestly discussing the critical issues facing families and family enterprises in transition helps foster the objectivity and focus needed for long-term success.  Successfully navigating the transition of leadership can often be the key piece in solidifying the opportunity to create a multi-generational value and family business legacy. 

  

For more thoughts on how to involve your family in these conversations, give us a call. We would be happy to support you on this journey.