BY LOIS LANG
When it comes to family business succession planning, one of these three things is certain: Most family business leaders don’t do it, they don’t do it well or they wait to do it until it’s too late. While the longevity of chief executive officers in nonfamily businesses is an average of six years, for family-owned businesses, they tend to stay 20 to 25 years.
Sure, that long tenure contributes to leadership stability and consistency. But it also can result in flat growth, a narrower business focus and decreasing leadership drive. In addition, when the top executive and upper management family members don’t step aside in a timely manner, it can cause frustration for next-generation members, who are often ready to charge forward and make their mark. Once it becomes clear that the successors might reach their mid-to-late 50s before taking over, it becomes hard to retain the ambitious ones. That’s why all family businesses need to have a solid succession plan in place—one that helps the senior generation leave with ease and welcomes the well-prepared next generation.
While succession planning can happen at any level within a business, we commonly think about the top five to eight key positions as requiring a practical, structured succession plan. As you plan your store’s future leadership, keep these five key points in mind:
Think beyond seniority. Many family business executives choose their future leaders based on seniority, while others pass the business leadership to the child of their choice. But these “easy” choices can backfire if the adult child or the one with the most seniority has not gained respect from other family members and employees. Be open to broadening your search beyond the next of kin.
Embrace a more professional process. The more thoughtful, objective and inclusive the process of bringing on the next leader, the more likely that the transition will be embraced. Succession readiness calls for a written transition and an individual development plans for the future CEO within three years of the estimated succession date. Implementation may involve identifying other executive team members with succession needs, building a coaching strategy and providing stretch assignments in different functional areas of the store. Make the development process for all rising leaders professional, using skill evaluations and performance assessments to discern progress and performance.
Rank possible successors based on key criteria. Rather than just appointing the next-oldest family member to the leadership role, consider creating a list of all the possible successors and rank them, from 1 to 10 (with 10 being high), in each of the following areas:
● Past work experience and advancement history
● Geographic mobility, if appropriate
● Learning agility
● Prior leadership positions, including size and scope of responsibilities
● Advancement potential
● Advancement desire
● Interpersonal skills
● Assessment of the individual compared with the company’s values and leadership competencies
● Past performance ratings
● Risk-taking ability
● Decision-making ability
● Problem-solving ability
Doing this for each potential successor will help you see which ones are best positioned to move the company forward.
Groom the next generation. Once you have a successor in mind, offer her additional development through job rotations, stretch assignments, profit and loss responsibility, and additional exposure to staff members, retail sales associates and customers. The more emphasis you place on prepping the next leader, the smoother the transition will be.
Consider a nonfamily leader. When a family business member utters the words, “Let’s consider a nonfamily CEO,” the first reply is usually a colorful “No!” A nonfamily CEO, however, frequently brings diverse, in-depth experience to drive business growth, generating new professional alliances, partnerships and strategy opportunities. A nonfamily CEO also can be a great mentor for the next generation of family leaders, serving as a “bridge CEO” from one generation to the next. While the family may hold all the stock, it’s critical to develop a performance incentive that will reward and retain the nonfamily CEO as well as an employment agreement that fairly treats and protects this key individual.
Start planning now
Thoughtful, ongoing planning for succession is a necessity for long-term business success and sustainability. The time to start is now. Develop a clear plan about the succession of senior leader positions, including who will be next, when the transition will take place and how that successor will be groomed to make the move smoother. The more planning you do today, the better the future will be—for you and your family business.
Lois Lang is a speaker and consultant with Evolve Partner Group, LLC where she focuses on helping organizations become high-performance workplaces. Lang works with clients on management succession readiness, organizational/team strengthening, executive coaching, executive compensation design, wage studies and mediated conflict resolution. Lang can be reached at firstname.lastname@example.org or 209-952-1143.