04 Nov Succession Planning: Why It Matters, Matters
If you’re a senior leader in a family enterprise, you’re probably bombarded on a regular basis with pleas to begin succession planning:
- Your attorney is concerned about avoiding income and estate taxes, and disputes over control.
- Your CPA says you need an updated valuation and a plan for increasing the value of your business.
- Your HR Advisor is troubled by the lack of development plans for the next generation of leaders.
- Your financial advisor is uneasy about how you’ll maximize the return on your business investment.
- Your spouse is anxious to ensure your children and grandchildren are taken care of for the future.
And rightly so. The people around you have your best interests at heart. And they’ve given you multiple good reasons to plan for succession. But what’s your reason? Why does succession matter to you?
You may have noticed there’s a big difference in your results when you act from your own clear commitment versus when you listen to someone else’s counsel. Well-intended advice isn’t always helpful. Axioms rarely work.
When it comes to succession, or any other significant change, it’s true that numerous people have a stake in the outcome. However, it’s usually an individual leader who must initiate and spearhead the change. And that leader benefits from having a strong and focused rationale.
Take Roger, for example. He’d been running his family’s successful manufacturing business for more than 20 years when he was approached by a firm interested in buying the company. Some of the younger leaders caught wind and began to lobby for a sale. But an inquiry out of the blue caused Roger to imagine a different future, one in which the business his father started might not be owned by the family. And that in turn prompted him to begin planning for succession “in our time, on our terms.” Roger’s deeply held values about entrepreneurship and self-determination were powerful motivators to begin a thoughtful succession process.
Kathleen, founder of a consumer products company, had a different path to succession planning. Her son Jeremy worked in the business, and was a likely successor down the road. However, when Jeremy’s spouse was offered a major opportunity in London, Kathleen was forced to reevaluate. Having no other family managers in the wings, she thought about just packing it in. But she was extremely proud of the company’s standing in the community and their ability to create jobs. “I’m in business for myself, but not by myself,” she said. Motivated by a desire to keep the business as an asset to the community, Kathleen began working on a plan to retain family ownership and recruit a non-family CEO.
Roger and Kathleen each had their reasons for entering into succession planning. Yours may be entirely different. The important thing is that you have a reason, and not one that others supply for you.
Succession can be a long and demanding process. It can take years, and requires untried skills and new perspectives. So you may be told you need to, and you may believe you ought to. But nothing will help you get started, or help you stay in the game, as well as understanding why you really want to.