SUCCESSION:  THE FINAL TEST

BY  PAUL WINTERS

 

 

 

 

"If I put a person into a job and he or she does not perform, I have made a mistake.  Of all the decisions an executive makes, none is as important as the decisions about people, because they determine the performance capacity of the organization  -  Peter Drucker, The Frontiers of Management, 1986.

Succession planning in a family business is an important issue, but one that is given low, if any, priority.  Fear of retirement and family politics are the prevalent reasons given for not planning.  These two issues result in an unwillingness or inability to engage in succession planning.

In larger, publicly held companies the succession of a chief executive officer is of utmost importance to the company.  It is acknowledged that the CEO has a profound impact on all aspects of the company.  The selection is serious and the process is thorough.

Generally, a task force composed of the current CEO and members of the Board are assigned the responsibility for the selection.  Normally some candidates already work for the company.  These candidates may already have been identified as possible successors and have a career path preparing them for the CEO role.  It is also not unusual to have an extensive search for candidates outside the company.  It is desirable to have a number of potentially qualified people for the position.

The candidates undergo a rigorous evaluation of:  their education, their work experience and successes, their community involvement, their reputation, and their personality.  Given all the qualified candidates, selecting the one that will lead the company toward a successful future is a difficult task. 

Contrast that with the succession plans of many family-held businesses.  The retirement and succession of the founder/entrepreneur is more characterized by avoidance of the problem, than properly planning for it.  Why is that?  In an article by Craig Aronoff and John Ward in Nation's Business, February 1992, they found three prevalent beliefs held by those who cannot finalize (or even start) succession planning:

 

"Retirement scares me."

"We could lose it all."

"This business is who I am."

 

Building the business consumed a great deal of the founders' lives.  In the early days, mere survival commanded a lot of attention  The distinction between business and personal life blurred and in many cases was lost.  Letting go is difficult.  After all, the business can't survive without them.  In many minds, it truly is a matter of life or death.

If the company was started at a time of unemployment or family poverty, letting go is even more difficult.  Personal financial security is a strong motivator for continuing to work, even when there is no longer any real need.

Retirement can be frightening.  It is an unknown journey and comes at a time when the peace and comfort of your life are cherished.  When business no longer consumes the day, what do you do with all that time?  And, who are you now that you no longer are President of your company?

These personal and generally unspoken fears hamper many CEOs in planning for transition.  When coupled with the additional concerns of choosing a successor, ignoring the problem can seem to be the easier solution. 

Leaving the problem to survivors after "dying in the saddle" is, frankly, an abdication of leadership and patriarchal responsibilities.  It is not a good legacy to leave behind.

It was found in a survey of business-owning families that, "...40 to 50 percent will have two or more children inheriting the responsibilities of ownership and management."  So, which one is chosen for the most senior position?  Must there be a choice?  Must they be family, or could it be an in-law?  What happens to a non-family employee who is  better qualified to lead the company?

These are real problems.  Many of them have strong emotional overtones and impact.

Fortunately, many business owners manage to face the realities of succession planning.  It all starts with accepting the fact that it must be done.  That is a courageous step. 

For some, it is recognizing that the entrepreneur is not indispensable to the business, but that the business is indispensable to the entrepreneur.  With that understanding, ways can be found to build a new rewarding life.  Those who plan succession properly eagerly look forward to their new life.  They recognize that they are moving up to new opportunities.

Succession planning is not an event that is quickly performed.  It is a process requiring visionary planning exploration of needs and concerns within the family and careful review of a multitude of options.

And, before you ask--yes, it is part of a long-term strategic plan!  In a family business the vision for the family must be accommodated in the vision for the business.

It can take many years to go through the transition and adjust to the change.  Planning requires time.  The organization needs time to adjust to the change in leadership and operating styles.  Both the departing CEO and the new CEO need time to adjust to their new roles.  I have never found a company that started planning too early.

Jealousies and insecurities can sabotage the planning process.  Active, open communication, sometimes with the aid of an outside facilitator, is essential in maintaining family unity.  Accept the fact that the family will have differing opinions on many issues.  But, remember the warning from Winston Church to the House of Commons,  "If we open a quarrel between the past and the present, we shall find that we have lost the future."

Peter Drucker refers to succession planning as a leader's "final test of greatness."  The test is not avoidable, so for the sake of the business and your family, take a leadership position in the succession process.