What exactly is succession planning? At a general level, succession planning is the process through which a business readies itself for changes in leadership positions. When done correctly, it allows for the identification and development of individuals to take on, and evolve the responsibilities of key roles inside an organization.
However, no two business succession plans are exactly alike. Each process must be tailored to meet the unique needs of the business. These needs may include, but are not limited to recruiting, employee shadowing, cross-trainings, and the hiring of an outside professional (ex: financial advisor).
Why is Succession Planning Important for Family Businesses?
What allows a business to function properly? It’s never just one thing. Rather, it’s the combination of several parts working together in harmony. But this harmonious relationship is only possible through strong leadership. And that’s exactly what a succession planning seeks to preserve – continuity in strong leadership.
Without the proper leadership, the entirety of your family business is put at risk. The company’s mission loses its momentum, improvements stop being made, communication becomes unclear, and valuable employees start looking elsewhere for opportunities.
When these things happen, a business begins to die. And it’s not just the bottom line that’s affected. The weight of regression is felt by everything your business touches, including your employees, customers, and community. All the people and causes you care about are put at risk by your inability to provide the same level of service.
For family businesses, the consequences can be even more dire. Blood relationships can be strained, damaged, and even ruined without proper succession planning. The improper hiring of family and friends can become sources of regret and resentment. Worse yet, your family’s legacy as a whole can be put into jeopardy.
Challenges of Succession Planning for a Family Business
With succession planning being so pivotal, it’s important to understand the barriers that typically stand in the way. Again, this will vary depending on the needs of the organization. But there are problems that commonly arise across the board. These include, but are not limited to:
- Failure To Communicate: Where do you see your organization going? Have your employees been informed? If you fail to communicate your company’s vision properly with workers, employees can feel confused and undervalued. This prevents further streamlining of your business process.
- Not Identifying Key Positions: It’s not only the CEO you have to think about. Most family businesses have multiple key roles they depend upon. Failing to properly identify all key roles in your organization leaves you vulnerable to overwhelm when the time comes for a change.
- Overestimating Abilities: Ideally, our employees will be highly skilled at what they do. But this can blind us to how they will perform in new positions. If careful consideration isn’t given to what training is required for those moving to different roles, they may be unable to perform at the standards needed.
- Not Conducting Performance Reviews: Are you aware of the talent you have at your disposal? What about the talent that’s needed? Performance evaluations are instrumental in understanding what roles need to be accounted for in your succession planning. Not doing so leaves you blind to the future leaders you need and have.
- Hiring Friends and Family: Hiring family and friends can be a wonderful perk of owning your own family business. But that doesn’t mean it’s a decision that should be made lightly. At the end of the day, the roles in your company come with responsibilities. Your succession planning needs to have clear expectations, even for those closest to you.
Family Business Succession Planning Best Practices
Now that we’ve identified the hurdles of succession planning, let’s review how to get over them. That is, the best practices you can implement to ensure your business continues running smoothly.
For starters, let’s get clarity on your most precious resource – time! Just like planning for retirement, the sooner you start the better off you’ll be. And there are some solid general practices that will serve you well as you begin. These include, but are not limited to:
- Starting Early: Thinking ahead one to five years, can make all the difference. By having the focus of your company’s vision steadily on the horizon, you can meet challenges long before they come. You can begin the vital hiring, training, and developing needed for your company’s key positions with room to breathe.
- Leveraging Technology: We live in the digital age meaning many of our business’s needs can be streamlined through the advent of the internet. For example, with tools like online job boards, you have the ability to cast a nationwide net to vet and interview candidates to fill vital roles.
- Defining All Vital Roles: As stated before, you need to have a clear understanding of which positions in your organization need to be most protected. It’s time to take inventory of who’s needed where, why, and how soon.
- Conducting Regular Performance Reviews: One way of helping you determine all vital roles is to conduct regularly-scheduled performance reviews. These help you identify which employees are essential, looking to advance, and those that need support. You’ll want to do these once a year at minimum.
- Open Mindedness: It can be difficult getting out of your own way, but it’s always worth it. To maximize the benefits of your succession planning, you’ll want an open mind. Be willing to entertain the expansion, reduction, addition, and elimination of positions in your business. Moreover, consider an assortment of candidates for the new roles.
- Completely Honest Communication: Once you know what you’re looking for, be direct. Succession planning only works when you’re transparent about your objectives. This can be difficult because it can mean the rejection of family, friends, and existing employees for new roles. But in the end, it’s better to find the true best fit.
When Should You Create a Succession Plan for your Family Owned Business?
It’s not always easy to know when succession planning is necessary. But as we stated earlier, it’s always better to get started as early as possible. To avoid being caught off guard and underprepared come transition time, we recommend running through the following questions:
Does your business rely heavily on the performance of key employees?
Are you looking to fire any employees?
Is your business expanding in size or scope of services?
Do any of your employees have an interest in moving up in your organization?
Are you or any of your employees looking to retire in the coming years?
If you answered yes to any of these questions, it’s time to get started on succession planning. It can seem daunting at first. But if you know who to reach out to, you can hit the ground running on this vital process with plenty of confidence.
Family Business Succession Planning Consultants
At Vertical Wealth Management, we have a clear understanding of how important succession planning is to family businesses. And we have a team of professionals that will serve as your succession planning consultants. With years of experience, they’ll be able to help you in transitioning leaders in and out of your organization’s vital roles.
If your family business needs help staying on top of what it does best, we’re here to help. Please feel free to schedule a completely free introductory call with our team here. And we’ll be able to help you through the entirety of the succession planning process for your family business.