Life must go on, even after the irreplaceable have departed. So businesses and organizations should be ready to continue when important figures leave. Yet this is something many fail to grasp.
There may be many reasons why senior executives, and chief executives in particular, fail to prepare properly for their departure, and perhaps end up staying too long in the post as a result.
Having worked hard to get to the top, the last thing that many will want to think about is their successor.
Exercising power may have an intoxicating effect on leaders. They may form an exaggerated sense both of their competence and their indispensability and then fail to detect much merit in anyone else around them.
Do you know that only 30% of family owned businesses survive the transition process between predecessor and successor?
And although these statistics may seem disheartening, family owned businesses are said to out perform non-family companies.
As a little girl, I was once told that it is the dream of every entrepreneur to handover operations of his/her business to competent people before full retirement.
Although I am nowhere around the age of retirement, I finally understand why succession is very important.
In short, some people start businesses as to create a legacy or means of income for generations to come.
Today, you will learn why some succession plans fail and how to avoid them as you plan for retirement.
REASONS WHY SUCCESSION PLAN FAILS IN FAMILY BUSINESS
ïƒ˜ SUCCESSORâ€™S LACK OF INTEREST
Itâ€™s quite embarrassing to admit that I have had conversations with people who are being groomed to take over businesses they do not care about in any way.
This automatically means that such businesses are setup to fail in the next generation.
If you are thinking of handing your business over to the next generation, you must study your successor closely and be sure that this person has genuine interest in your business and industry trends.
Does your successor take time to read about the industry? Or ask questions about your leadership
ïƒ˜ SUCESSOR NOT TRAINED FOR LEADERSHIP
A major mistakepredecessorâ€™s make is handing the business over based on emotions and not logic. How many years has your successor worked in that business?
What is their knowledge of how things are/should be done? What is your organizational structure and how have they climbed up the ladder of leadership?
ïƒ˜ LACK OF EXIT STRATEGY
As the owner of the business you must also have an exit strategy and must communicate openly about your succession plans. This must be done years before succession takes place.
Your successor must be trained and informed of all roles in the company.
They must also be educated on key decisions made by the management that have had either a positive or negative effect on the organization.
ïƒ˜ SUCCESSOR WITH NO EDUCATION
Education is key; never assume that your successor knows a lot about the business even if they work with you daily.
Occasionally, ask questions to text their knowledge, send them out to represent you during meetings so industry leaders and your key stakeholders get used to the new face and name of your successor
It should also be noted that just someone is a relative should not automatically qualify them to hold a position in the business.
They should have the necessary qualifications to work in the organization e.g. university degree, work permit etc.
KEY STRATEGIES TO ENSURE YOUR FAMILY BUSINESS SUCCESS
ïƒ˜ KEEP COMMUNICATION OPEN
Communication in any business is key but arguably more important in family businesses. Your succession plan must be tied to your business plan.
You must communicate with the person and prepare the necessary documents for succession. You must also communicate with employees so they are aware of the changes that will happen in 5 to 10 years, which is the recommended succession plan timeframe.
You must also communicate with members of your family so they understand what your succession plans are. Come up with a system that benefits all members of the family.
If your successor has the least amount of shares in the business this might have a negative effect on his/her performance in the long run therefore come up with a scheme that benefits all parties.
ïƒ˜ GET PROFESSIONAL HELP
So many people have handled succession well, from Fords to Rembrandt, The Dantata organization and much more.
Your business can be part of this list of succession is planned properly. Ask your lawyer, business and financial consultants for assistance during this process if you feel stuck.
ïƒ˜ KEEP GOOD FINANCIAL DATA
The downfall of many family businesses succession plan is not having solid data. Have a single point of contact to manage the finances before handing over.
Youâ€™ll need to bring in a qualified accountant if you donâ€™t have.
You may cringe at the cost for this, but the difference between a good accountant and a bad one is the difference between knowing exactly where you are on the road and trying to drive with a mud-covered windshield.
Lastly about finances, ensure that you have all needed funds to retire.
Once your succession plans are in place, the next thing to do is watch from afar.