Your Family Needs More than One Succession Plan

Maryann G. Bell
June 19, 2024

“A leader’s lasting value is measured by succession.” – John C. Maxwell

Succession planning is arguably the most important part of a family business, and many articles on succession make it seem as if one size fits all; that is, only one succession plan is needed. But this is rarely the case. While your family may have a plan in place for who will assume ownership and/or take over managing the core business, many don’t consider the other parts of the enterprise that need succession planning, such as the family office or board of directors.

Management vs. Ownership Succession

Management succession in a family business involves planning for the transition of leadership from one generation to the next or, alternatively, from a family member to a non-family member or vice versa. It includes identifying and preparing successors, establishing clear roles and responsibilities, and implementing strategies for smooth transition and continuity of the business. This process involves mentorship, training, and open communication among family members, non-family executives, and key stakeholders within the business.

Ownership succession in a family business is the process of transferring ownership rights and responsibilities between generations. It involves making decisions about who will inherit or acquire ownership shares and how ownership of the business will be transferred. This process often includes estate planning, the creation of trusts or other legal entities, and discussions about the family’s vision for the business. Effective ownership succession ensures the continuity and stability of the business while preserving family harmony and financial security.

Emergency Succession

A typical succession plan assumes that there will be a structured and gradual leadership transition, and many family businesses stop there. But life happens and sometimes, as the old saying goes, the best laid plans go awry. By preparing an emergency succession plan, family businesses can mitigate risks and ensure that they are prepared to navigate unexpected challenges and disruptions to leadership, such as a sudden death or illness.

An emergency succession plan outlines the policies and procedures for how the business can continue to operate smoothly, even in unforeseen circumstances. This plan should include identifying the chain of command and policies surrounding how to maintain shareholder confidence and mitigate financial losses.

Many companies do not have an emergency succession plan, and some have paid a price. Reliance Industries, the largest private sector corporation in India, experienced instability after founder Dhirubhai Ambani died of a sudden stroke with no emergency succession plan in place. For years, his two sons feuded over leadership of the business. This led to the breakup of the company, and significant financial and emotional turmoil for the family.

Family Office Succession

Succession planning in a family office involves carefully transitioning leadership and key roles to ensure continuity, preserve family wealth, and maintain the family’s values and legacy. The 2024 UBS Global Family Office report revealed that many families haven’t done the necessary work to prepare for succession; in fact, only 26% have a succession plan in place for their family office.

We have worked with several enterprising families who have put time and resources towards identifying core business succession plans, while completely neglecting to consider what will happen to their family offices once the principal, as defacto head of the family office, is gone. When asked, their goal is not for the rest of the family to divide up the money and split, but, as head of the family, they haven’t contemplated that the family office needs a succession plan just like their other businesses.

Family office succession planning should begin well before any anticipated transitions. The first step in this process is to clearly define the objectives of the succession plan, considering the financial goals of the family office and the family’s values, vision, and legacy. Consider making an investment policy statement for the family to outline and formalize these values.

Next, identify potential successors for key leadership and management roles within the family office. These may include family members, trusted advisors, or external professionals with the requisite skills and experience. During this process, consider engaging external advisors, such as family office consultants, estate planners, or wealth managers, to provide guidance and expertise. Their impartial perspective can help with navigating complex family and financial dynamics.

Document the succession plan in writing and regularly review and update it as circumstances change. This can help ensure that the succession plan remains relevant and aligned with the family office’s evolving needs and objectives. Having a separate succession plan helps your family office effectively maintain continuity, stability, and the preservation of the family’s wealth and legacy for future generations.

Double Transition & Leadership Entrenchment

Another important aspect of family business succession planning is mandatory retirement ages and working against leadership entrenchment. Leadership entrenchment in a family business refers to a situation where the current leader, often a founder, remains in their position for an extended period without a clear plan or willingness to transition leadership to the next generation or other qualified individuals. This can occur for a variety of reasons, such as a reluctance to relinquish control, fear of change, or a lack of suitable successors. In many cases, the current leader is no longer fit to lead but does so anyway, creating uncertainty, lowering morale, and increasing family conflict. By the time they move on, whoever succeeds them, usually their child, is already nearing retirement age themselves.

One example of this is the Ford Motor Company. After the death of his son Edsel, Henry Ford I re-assumed the presidency. He was in his 80s, and most of the directors of the company considered him unfit for the position. During this period, the company almost sank financially, and was only saved because of the war. After the war, Henry Ford II returned to assume the presidency despite being grossly unprepared. To avoid the same mistake happening in the future, he instituted a mandatory retirement policy at 65. This example is a lesson on not letting leadership entrenchment occur, and an illustration of the importance of having an emergency plan.

Each aspect of the family enterprise requires its own unique approach to succession planning, tailored to the specific circumstances, goals, and dynamics of the family business. By addressing succession comprehensively across all areas of the business, families can better ensure continuity, stability, and long-term success for generations to come.


Madeline Tolsdorf collaborated in the writing of this article.

Want more content? Check out Wingspan Insights.

Author Thumbnail

About Maryann G. Bell

Maryann has led transformation through board work in Austin after almost two decades in finance. Maryann holds a BA from Georgetown University and an MBA from Harvard Business School.