Being a professional accredited Family Business Advisor it is always a great comfort to be able to obtain cutting edge academic research and advice from the Chairman of FINH, Prof Ken Moores, one of the world’s leading authorities on family business. In my latest article for Australasian Bus & Coach Magazine below, I spoke to Ken about what he discovered during his extensive research into Succession Planning and about how some ideas that may be counter-intuitive to many family business leaders is actually best practice. David Harland – Family Business Advisor.
In a family business, letting go can be one of the hardest parts of succession for a leader, which is why it’s critical to face it head on. A great deal of the succession advice we’ve read focuses on preparing the next generation for their new roles; however, it’s equally important for incumbent business leaders to determine how (and when) to leave the company and prepare themselves for a life beyond their business.
Many business leaders don’t want to leave the business – there’s always one more deal on the horizon, a few extra dollars to add to the retirement account, or retirement jitters that get in the way. Psychological pressures, family dynamics, fears of mortality, and objective financial concerns all combine to create real barriers to letting go. It’s common for entrepreneurs to resent a loss of control or fear the loss of a personal identity that is deeply connected to their business success.According to Professor Ken Moores, the co-author of Learning Family Business: Paradoxes and Pathways and Founding Director of the Australian Centre for Family Business at Bond University, the pathway to managing a successful exit from leadership entails following three key steps. Ken says that, the development of a defined timeline for retirement, creating management systems and developing a successor, and sticking with the plan increase the prospect of a successful exit from the business. Letting go is made much easier when a timeline has been agreed upon and leaders feel that the systems in place will ensure success after they’re gone. A successful plan also requires the senior generation to create new roles in the business, ideally as ‘ambassadors’ or ‘governors,’ so that their experience can continue to benefit the firm while leaving day-to-day business activities to the new managers.connected to their business success.
Ken found in his research that even well managed successions could go awry when the presence of ‘retired’ CEOs who could not accept their new roles dragged out the process indefinitely and made life difficult for the new management. Business leaders have to accept that they will eventually become replaced by a successor and actively prepare for that eventuality, as early as possible. Doing so involves creating plans well in advance and the cultivation of a deliberate mental disassociation from the business. Psychologically, letting go becomes easier when leaders have developed an identity outside of the firm.
As we have mentioned in previous columns, it is critical to get prospective heirs active in the business early on so that they can demonstrate success in the business and establish that they are capable of leading the business in the future. It is also very important for senior leaders (particularly the CEO) to be seen as supportive of any new strategies that the heir plans to introduce. Managing the development of a successor and ensuring that he or she has the proper experience is generally the task of the current CEO, meaning that he or she needs to accept and plan for replacement.
Ken believes that learning to let go of the family business is a paradoxical aspect of leadership in that it requires the leader to plan for a time when he or she will no longer be leading. Where so much of a business leader’s previous life consisted of founding or learning a new business, achieving success, and justifying one’s place in the business, this stage of life involves the reverse: becoming a voluntary outcast so that the new successor can take over. While letting go is a challenge, the rewards of a successful transition can be immense: seeing your family business become a multi-generational success story and perhaps enjoying a well-deserved retirement.
For more information on how to plan a successful succession contact FINH on 07 3229 7333
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