As seen in the Boston Business Journal
The economic uncertainty of the past few months has challenged family-owned businesses unlike any other time in recent history. Many owners were forced into crisis management and survival mode. As the restrictions ease and the economy opens back up, they have a unique opportunity to evaluate their business at all levels and to discuss how to adapt to a new environment. Many of these discussions will revolve around the operations of the company but it is also an important time to review the succession plan.
It can be difficult to achieve a successful succession plan in a family business. It’s an evolution; it is constantly changing and being revised as the owners and the company mature. Documenting the owner’s vision regarding how they see the company operating once they are no longer there is the ultimate goal of any succession plan. The owner, key employees, and the owner’s family are all crucial participants in the creation the plan. Communication among all participants is imperative and it’s probably the most important aspect if any successful succession plan.
The bad combination of unforeseen events and no plan
It can be difficult and time consuming to make The necessary decisions needed to finalize a succession plan. Prior to finalizing the plan, a company may be exposed to risk and potential loss of value in the event of an accident, especially for companies with a 100% owner.
Developing a succession plan is a recommended strategy for a business with . It can serve as a roadmap for the strategic visions of the company to be carried out in the event an owner exits the business, whether planned or unforeseen.
In many family-owned businesses, the owner’s wish is for future generations or other family members to someday take over. The timing of this transition can be a hurdle, as children may not be ready to lead the business especially in the case of an unforeseen event. In these instances, it is likely that the business leaders in place would be forced to choose from one of the options below:
No matter what choice the business selects, it can only be accomplished with a documented plan.
The starting steps for creating a business succession plan
Creating an updated organizational chart, as it currently exists today, is step one in the business succession planning process. The owner needs to determine whom they consider key components to the ultimate success of the succession plan. As part of this process, the owner needs to systematically chart the progression of each person on this chart as if they no longer existed at the company. This process identifies weaknesses that may currently exist within the organizational structure, helps the owner identify the key current employees, and determines if any specific individual is capable of taking on another important role in the company. All staffing weaknesses within the organization should be identified, documented and addressed before the plan can be finalized.
The most important thing to remember when creating a succession plan is you are not going to be here to carry it out. This statement is obvious but owners who have had a say in every aspect of the business need to fully understand that they will not be around coaching from the side lines. Therefore, the following documentation becomes critical to achieve the desired result.
A strong corporate infrastructure will retain the value of the business, and by putting the steps outlined , above into place, external business partners will be confident about the successful continuation of the organization.
The plan must be fluid to achieve its objective. What the business owner may want to see happen today may not be what is appropriate a year from now. Over time, the plan will need to evolve to adapt to the growth of the company and its employees.
The actions above will move business owners toward building an effective succession plan. Conversations about succession within a family business can be difficult, but they are important to the ultimate success of the business today and for future generations.