The Time is Now to Talk About Succession
Thinking about succession may instigate feelings of angst within a founder or family in business. A founder may wonder if the next leader will have the same amount of passion, dedication, and work-ethic to build on their business and vision – they may wonder, does a unicorn successor exist? A family may ponder how to broach this topic with their loved ones – they may wonder, is it possible to discuss succession without causing an unintentional rift in the family? At Wingspan, we understand what drives founders and families to avoid these discussions and believe that with the proper thought and a robust governance construct, succession conversations and decisions can be designed to fit each founder and family’s unique needs.
Key Drivers: Why Do We Not Discuss Succession?
- Letting go of and catching the reins are both difficult: A current leader within a family business may have a hard time relinquishing control. This may arise from feeling prideful in the business they built, feeling an emotional connection to the business given obstacles they surmounted, or fear over the next generation’s ability to sustain the business. The potential successors may not want to force the discussion, either. This may arise from concern over feeling asking a question may pigeonhole themselves into a lifetime of responsibility focused on leading the business…and potentially leading the family, too. One or both roles may feel overwhelming to think about let alone to discuss.
- Family dynamics: Be it a messy parent-child dynamic or a competitive sibling dynamic, family dynamics can make a family business more complex. There may be a parent who thinks their younger child who desires to be the successor is less qualified than the older child, but they fear honesty will hurt the child’s confidence. There may also be dynamics between siblings as they race to see who will come out as the “winner.” Family members may feel discussing succession will exacerbate existing family issues.
- Change is hard: Unless there is a triggering event, it is easier to put off discussing succession; it is a complex topic to both raise and create a plan around, and it may never feel like the perfect time. However, the difficulty in navigating the aftermath of a crisis without a thoughtful and holistic successful construct will be significantly more difficult.
At Wingspan, we recognize that there is nuance across families in their desire to discuss succession. We also firmly believe that building a thoughtful succession plan is integral to the success of the family, the business, and their legacy.
Recommendations: How Can Your Family Discuss Succession?
- Define and then communicate your vision for succession: We recognize that some families have a strong desire to have a family member as a successor while others are open to having a non-family successor, either as an interim successor or a successor for the long-term. Taking the time to define the succession vision for your family is key. Once this is defined, we recommend holding a family meeting to share this vision – transparency around expectations is imperative. To set this meeting up for success, we recommend setting and communicating an agenda and the goals of the meeting prior to ensure everyone is ready and prepared for the discussion.
- Create policies before they are personal: At Wingspan, we recommend families develop family employment policies before the family is interested in joining the business. Defining what education level, amount of outside work experience, and qualifications are necessary to be able to enter the business is critical. We find families often want entrance into the business to be based on merit to prevent the family and its capital from being put at risk. The key is to create holistic employment policies before family members express interest, which benefits keeping the business and family intact.
- Create a robust succession plan: A thoughtful succession plan is holistic in nature. It takes both a strategic and a risk mitigating approach by encapsulating a plan for the key roles within a family business, starting with the Chairman and running through the C-Suite. Ideally, there is at least one successor for each key role. For each successor listed, a transition timeline should be outlined and progress to this timeline should be tracked, which can be encompassed within a succession planning report. It is best practice for the succession planning report to be presented to the Board on an annual basis, at least.
Defining and communicating your family’s vision for succession, creating policies before they are personal, and creating a robust succession plan enables keeping your family and business intact…for the long term.