Thursday, February 27, 2020

Succession Planning Too Often Forgotten

A critical issue for family enterprises transitioning from one generation to the next is preparing the rising generation of leaders, including both family and non-family leaders. As the search for talent remains a top challenge for many employers, the need for building committed and capable leaders from within is more important than ever. 

Succession planning, however, should not be confused with replacement planning. Replacement planning is a form of risk management. Replacement planning answers the question of who will fill an immediate, unexpected void. Succession planning, on the other hand, is a proactive approach to ensure continuity of enterprise leadership that is committed to cultivating talent from within.

Succession planning cannot be limited to the rising generation of family members. It is essential to create a pipeline of leaders throughout the enterprise that support the family ownership, understand and endorse the family mission and values, and have the interpersonal skills to lead.

The senior generation must drive this development. Succession planning is a critical driver of strategic planning. It is not just about building the enterprise bench of people ready for new responsibilities. It is also an opportunity to nurture a culture that is committed to the values and vision of the family. The strategic development of talent creates a win-win environment for the enterprise and the workforce. It is an environment where there truly is long term opportunity for employees, and employees see a path of personal growth, development, and advancement.

Good succession planning is a process. There should be clearly defined roles regarding who is responsible and accountable for the process. What’s more, the senior generation needs to demonstrate in both word and deed support for the process and accountability for expected outcomes. 

Moving an enterprise forward requires the right people, doing the right things, in the right place, at the right time. Like strategic thinking and planning, succession planning starts with where the staff’s abilities are now, considers where they need to be, and determines how the enterprise will help them get there.

Wednesday, February 5, 2020

Good Governance Leads To Better Family Business Outcomes

Family governance structures alone won’t make a business successful, but a business won’t grow and be successful long term without the right governance structures.  Long-term success takes the same commitment to innovation and excellence that made the enterprise successful in the first place.  Good governance structures can set up the business and the family to continue that legacy of success.

Governance structures run the gamut.  Some are complex and extensive.  Some are simple and straightforward.  Appropriate governance structures for any family business must focus on the particularities of the family and the business at issue.  There is no one size fits all solution. In general, corporate governance is the system of rules, practices, and processes by which a company is directed and controlled.  For family businesses, governance should help formalize issues such as ownership, leadership structures, control, conflict resolution, and communication. For many families, the process of developing family governance can be as valuable and educational as the final product. 

The review and development of good governance for a business family should be a normal part of the life and rhythms of the business. Developing these guidelines can at times pull leaders away from daily business operations and can also surface tension between family members. That is normal, and it is a healthy part of the process of developing good governance. As family businesses work to develop their own governance, they need to determine what will work best for their family. The most appropriate governance structures for an organization must be tailored to the particular organization, industry, and family.

There are pieces, however, that are strong foundational components in almost any organization:

·      Family Vision, and Philosophy – An invaluable starting place for many organizations and families is to take the time to write down the values, vision, and philosophy of the family and the organization.
·      Buy-Sell Agreement – Drafting a clear buy-sell agreement that lays out how the business will transfer among family members and among generations is vital as families grow and new generations come into the business.
·      Succession Plan – Developing a strong bench of candidates for future leadership is important for any organization’s continued success.  
·      Family Council – Family councils, sometimes called shareholder assemblies, can be an important mechanism for family members and shareholders to guide the organization. 
·       Family Meetings – Annual family meetings provide countless opportunities to update family members on the state of the business and plans for the future; to let family members ask questions and be heard; to keep family members who are not employed in the business engaged; and to recognize accomplishments of family members outside of the business.  

Whether your business is in the first generation or the fifth, Good Governance Leads To Better Family Business Outcomes.