Welcome and Update

It is a solo show this week and I’m going to be talking to you about some of the issues and factors to be considering when it comes to succession planning, more on that a little bit later, but given it’s the first solo show for a while, I thought I’d give you a quick update on, what I’ve been up to over the summer.

It’s obviously been very interesting time for all of us, we’re all having to experience this global pandemic for the first time in our lifetimes and I hope wherever you are listening to this, that things have been okay for you and that you’re coping okay with stuff. 

The Family Business Partnership

I have launched, during this pandemic, my own independent, consultancy business, helping family businesses, it is called The Family Business Partnership.

Check out the website by going to www.familybusinesspartnership.com and there’s various bits on there as to what I do and how I can help, if that’s of interest.

I’ve also spent the time collating what I have called ‘Collections’ on the podcast website. So if you head over to www.fambizpodcast.com/episodes you’ll now see that there are collections on there that collate all the episodes that focus on a particular subject into a simple ‘collection’.

So, rather than having to look through, say 100 or so different episodes to find one on the topic that you are interested in, you can click on one for Governance, one for Next Gen one for family business interviews, and the last one is the succession collection and you click on a button and it takes you to a handy list of all the episodes that focus on that particular subject!

So, if there is something that you’re looking for specifically, and you perhaps haven’t caught the episodes the first time round, you can dive back into the collections by clicking on those buttons.

I hope that’s useful.

I’ve also, started a newsletter for the podcast as well. So if you want to have, access to episodes directly in your inbox each week and, updates on blogs and videos, etc. that I do over the course of the month, then sign up to the newsletter and I can deliver those directly to you.

Again, there’s signup pages on the homepage at the podcast website. If you want to go and do that.

Succession Planning

So let’s start the conversation on succession planning.

Now, succession is complex. There’s no one size fits all.

There’s no out of the box solution that you can press a button and they go, there’s your solution to your succession planning, woes.

So with that in mind, I thought I would have a chat today about some of the common barriers that I see when I’m talking to families about succession, some things to consider if you are looking at it now, and don’t really know where to start and you’re looking for some pointers.

Succession planning itself is multilayered. You can sort of break it out into leadership, management, ownership and lumping it all together can make it seem very complex and very cumbersome.

So, I’ll talk a little bit more about that later on and also we’ll link into things like governance. So if you’ve, if you’ve missed the series on governance that I did at the beginning of the year, again, you can go and check out that collection on the website because, succession and governance are intertwined.

They are linked and I’ll refer to that throughout the show today. I had been planning on recording a series on succession immediately following the series I did on governance back at the beginning of the year. And the reason I didn’t is because it felt a little bit insensitive talking about succession planning at a time where businesses were having to cope with all sorts of different challenges as the pandemic hit and various, lockdowns around the world, had an impact on people’s businesses.

I decided to defer the series until now, and have focused more on stuff that might be more useful during the, the initial stages of the pandemic and, and onwards.

I’m not suggesting that the pandemic has gone away. I’m not suggesting that now is the absolute, perfect time to think “Right? let’s get started with succession planning” but it does feel appropriate given some of the conversations I’ve been having with you guys that have been getting in touch around succession that it is something that has been brought to the table.

Is now the right time to be discussing Succession?

So I guess a good starting point is to discuss whether now is the right time to think about succession planning? If it’s not something that is already on your agenda, or if it’s not something that you discuss as a family particularly often, we are in the middle of a global pandemic.

There’s hopefully light at the end of the tunnel with the news around various vaccines, having a positive impact and so hopefully we’ll be back to some form of whatever ‘normal’ looks like by the spring next year.

There’s an old Chinese proverb that says  “the best time to plant a tree is 20 years ago,
and the next best time is now”. I think the same is always true of succession planning.

Now, obviously, if you are having to face issues around keeping the business going in the very short term, that has to be the focus, but if you’re looking at things from a more long-term basis and how you can come out the other side of what we’re going through at the moment, with plans and being stronger than ever then succession planning should perhaps form part of those discussions. 

Two Options

In essence, at the very start if you don’t have a succession plan, you have two options in front of you.

1. To continue not to have a succession plan.
2. is to have a succession plan or to start a succession plan.

Once you’ve started that process, the discussions can then focus on the different areas that you’re looking to cover within these conversations.

So I mentioned it a little bit earlier the separation of the different forms of succession, *

• Leadership,
• Ownership and;
• Management 

Separating those out and focusing and prioritising those as part of your discussions is perhaps an easier way to start that process than trying to lump it all in together.

A good friend of mine and fellow family business advisor, Mairi Mikel puts it brilliant when she says succession planning should be referred to as continuity planning.

Because that if the aim of the business owning family is for the business to continue be that in family ownership, be that with family management, be that with family leadership, all of those are variables, but if the aim is for the business to continue then that should be what the planning process for that is called, it’s business continuity.

I think we’re some way off succession planning, not being used as the phrase to refer to this, but if you think about it in terms of continuity, rather than succession, it also takes some of the pressure off of it being an individual or individuals giving up roles and other individuals coming in and taking those on, which seems kind of final.

A Process not an Event!

It seems as if it’s more of an event rather than a process. And in my view, succession planning should always be treated as a process. It is something that you can work on together as a family and linking back to the governance series, if you’ve had a conversation and drafted a family charter that says, ‘this is why the family business exists’, ‘this is who can own shares in it’, ‘this is who can work in it’ and ‘this is the criteria we set for people that work in it’.

If all those discussions have happened, it makes the conversation around succession planning slightly easier because you’ve already laid the groundwork.  In order to own the business, you have to be in the bloodline for example, or in order to work in the business, or to take on a management role, you need to have had X number of years experience outside of the family business.

Those are the sorts of things that you can discuss and agree within a Family Charter that then helps feed into the smoothing of the succession planning process.

It’s also important to remember that these transitions can happen at different times.
So you don’t have to lump leadership, ownership and management all into one day on the calendar where all of those things change. It may be that the first part is to say, we need new management to come in and run the business because in order for the business to continue that’s something that needs to happen that doesn’t necessarily have to change the leadership or the ownership of the business, that could be put onto something that takes a bit longer.

So separating it out and understanding exactly what it is that you are discussing really helps as well with the interpersonal relationships within the business too. So it doesn’t feel as if it’s an all or nothing discussion and the incumbent generation is being asked to give up everything, which again is one of the common barriers that I come across when I’m talking to families.

So in answer to the question of is now the right time to think about succession planning, My answer would be an emphatic “Yes”! That doesn’t necessarily mean it’s easy and hopefully some of what I talk about today will help in understanding the different elements of succession that can then be talked about, but that doesn’t necessarily get away from the fact that it is such a complex area.

What are you trying to achieve?

In future episodes, I’ll be covering some of the technical aspects of succession planning and the legal and financial aspects, but to me the starting point always needs to be, what is it that you’re actually trying to achieve?

Are you trying to ensure that the ownership of the business remains in the family?

Are you trying to ensure that the family business creates opportunity for anybody within the family?

Whether they own or work in the business and understanding that ‘why’, that reason that the business exists, why you as a family owned that business that can help to shape the discussions around succession.

If, for example, the aim is to provide security for family and that doesn’t necessarily mean they have to work in or own the business. An option as part of these discussions could be, is now the right time to sell this business?

Now, there are lots of statistics that are thrown around succession planning. That 30% make it from first to second, 13% second to third and 3% beyond the third generation.

It’s almost used as a stick to beat family businesses up with. The definition of success for a family business is whether the, you can pass the ownership on from generation to generation.

Those statistics in themselves are focused on a very particular type of business in a very particular area, whilst they’re indicative of some of the findings in that study, that doesn’t necessarily mean that you have to measure your own success as a family business on whether or not you can pass the ownership down from generation to generation.

If the right thing to do is for that business to be passed on within the family and has the appetite to do it, and everybody wants to be part of that, fantastic! Everything should be done in order to help you to achieve that.

But if, for example, the next generation don’t feel as though this is their passion.

This is the calling in life and they are not going to be the best owners or the best managers or the best leaders of this business. Then knowing that from the outset, when you’re first looking at this means that you’re not faced with getting 5, 10 years down the line, and that being a shock to you.

So understanding that allows you to manage everybody’s expectations within that process.

For me, one of the most important factors when you’re starting out with succession planning is to make sure that everybody’s expectations are being managed. That everybody has a voice around that table as to what it is that they want to be doing with their lives, either within the business or outside of the business, if that’s the right thing for them,

The starting point for these discussions is if you haven’t had them already is to understand what it is that the family gains from owning the business and what it is the business gains from having that particular family own it.

If you’re very clear on those and you understand everybody’s ambitions and expectations, then again, it makes having those conversations about succession far easier.

What are the barriers to succession?

Whilst we’re talking about expectations, I think now’s a good time to start looking at some of the potential barriers to succession planning that I’ve seen and why succession planning is not something everybody wants to talk about.

It’s also not something that happens overnight and is very easy to solve.

There are obviously many different legal and financial barriers to overcome, but there are also these emotional barriers and emotional factors that are often overlooked, but are underlying everything.

When it comes to the technical and financial solutions, they’re often driven by our needs as humans and we are emotional creatures.

So there has to be an acknowledgement of the fact that everybody involved in this succession process, irrespective of whether they currently own the business or potentially owning the business, potentially leading the business, whatever role they’re playing, they will have an emotional feeling around this succession plan.

Looking at it from the perspective of the senior generation, if it’s something where they’ve worked in this business for an awfully long time, they might have set it up, they might have taken it on from their parents or the senior generation before them, it’s very likely that their role within the family business forms, their identity is who they are as a person.

Being asked to give that up is difficult.

It’s a hard thing to ask because what are they then going to do that’s going to allow them to have that sense of identity (often be referred to as well as a sense of purpose), their reason for getting up in the morning. If you feel as if you’re being asked to give that up, you’re obviously going to be resistant to that because what else are you going to get up to do in the morning?

One of the things I suggest when I’m working with senior generations is what is it you’re actually succeeding to? If you’re recognising that now might be the time to look at passing on a management role or a leadership role within the business, potentially ownership as well, what is it that you’re going to be doing with your time?

Importantly, that will give you the sense, the same qualities that you would have from what you’re doing on a day-to-day basis now. Could that be mentoring, providing support to other business owners, could it be with a new chairperson role within the family business? Where you can keep the benefit of their years of experience within the business, but pass on the day-to-day management to the next generation coming through.

Retain a sense of purpose

Having that sense of purpose and that sense of identity retained makes it a smoother transition than being asked to just give it up. I used to work in financial planning and one of the questions we used to kind of focus on with people who are approaching their retirement dates or the days they were leaving the family business, I would ask them the question of what they’re going to do with their retirement? The amount of people who say, but I would play golf more or do a bit more gardening were staggering.

The reality is there’s 365 days in a year. I know some people might want to play golf 300 of those and be in the garden for the other 65, but the reality is once you’ve got your garden up and running and you’ve played a few rounds of golf a week, then there’s an awful lot of time still to fill.

And being able to fill that time with fulfilling work and stuff that gives you a sense of purpose and a sense of identity helps to remove that particular barrier to succession. 

A Lack of Trust

One of the other common things that I see that has a big impact on the appetite for having the conversation around the ‘next gen’ taking on roles in the business is a lack of trust.

It can be actually that the senior generation don’t necessarily trust the ‘next gen’ as being as well-prepared as they ‘need’ to be, that they are as hungry as they ‘need’ to be.

I’m putting need in inverted commas, because it’s a subjective thing rather than a factual thing. It’s an opinion and that lack of trust creates this resistance within that
family system and that family dynamic that unless it’s overcome can be a real challenge. 

Because it doesn’t matter how often you have the conversation around well, when it’s my turn, I’m going to take this role on from Mum or Dad or Aunt and Uncle or whoever we’re talking about in terms of the senior generation.

If they don’t have that level of trust that you are the right person to be doing that, then that’s going to stall. It’s just not going to happen.

Fear of Failure

Coupled with that is a fear of failure. So what happens if I pass this on to my next generation and they don’t do as well as I’ve done, or in some cases it can be, what if they do better than I’ve done? That’s perhaps more of an interesting angle to explore, what if my next generation are more successful than I am? and that there will be lots of people listening saying that’d be fantastic, that’s what we want for our kids.

But also if your sense of identity and sense of purpose is linked to your role within the family business and someone then comes along and does it better, that can be as off-putting as, not having a role within, in the business at all.

So there’s some of the common, emotional barriers that I see in senior generation. 

• loss of identity,
• a loss of sense of purpose,
• nothing to succeed to,
• what are they going to do with their time beyond the business that gives them the level of reward that they would have within the business,
• a lack of trust or lack of faith that the person taking on the business or people taking on the business are the right people to deliver what is needed to for the business to be successful.
• fear of failure, that you’re setting the next gen up for, fall.

I think particularly at the moment, given the economic circumstances that we’re going to be seeing over the coming months and years, it’s perhaps a tougher decision to make, to whether you’re going to take the business forward or not take the business on as, as somebody in the next generation.

If you’re a senior generation, are you comfortable with the next generation coming in and taking that role on?

So lots of discussions to be had around that.

And there’s lots of solutions to things like that. So it could be that you work alongside each other far more than you perhaps were expecting, because we’re in unchartered territory in terms of the economic situation we find ourselves in, it could be that you retain a role within the business that you weren’t anticipating retaining within the business as a result of what’s going on at the moment.

The important thing is to have those conversations and to be honest about what your hopes, fears, and aspirations are, so that you can each to explain what you’re feeling and what your expectations are.

The Next Generation

Looking at it from the next generation’s perspective, linked to that as well that it could be quite intimidating, I’m part of an academic study , it’s entitled Land of Giants, and it’s looking at the impact of growing up around significance. That could be significant wealth, it could be significant personality, it could be significant achievement.

What what’s evident within that is that it can be quite intimidating taking on a role that somebody else has done successfully in the past, because next gen might not be feeling quite as legitimate as they feel their parents or senior generation are feeling.

It could be that the perception of history is that the parents have had an easy ride with the business so far and now we’re in pretty tough times and do I really want to be taking the business on and being that person that has to steer the ship through these particularly stormy waters at the moment?

And so there could be a lot of doubt as to whether you are the right person to take this business on at this stage.

But, if you’re honest and open about those feelings and put that on the table, either directly or through facilitated discussions, if that makes it easier, then you can overcome those.

It’s when these things are kept within us, when we don’t talk about this stuff, that it can become more of a challenge and more of a problem.

As I touched on earlier, the misconception that there’s an obligation for the next gen to take the business on when it might not be what fulfils their own individual passion, their own dreams and what they want to achieve with their life, that can do an awful lot of damage.

If you feel trapped within the family business, it can do an awful lot of damage to your mental health.

It can also do an awful lot of damage to the business itself. If you’re not there and giving it a hundred percent, because it’s what you’re passionate about, you’re not going to get the same level of output from it as you would, if it was something that was your absolute passion and driving force in life.

So appreciating that it might not be what you want to do as a career, as a job is something to be honest about. That doesn’t mean that you can’t own the business. 

If we separate this out between leadership, ownership and management, if you want to take the business forward as the next gen, and it is your passion, and you’ve seen how emotionally attached you are to the business, and you want to be the person to lead and take that forward.

Brilliant.

Let’s do everything we can to get you to that point.

If you think that’s not you and it’s not your passion, it’s not what you want to do in life, but you want to be a responsible owner and keep the business in family ownership, because you want it to benefit from the family values and you want to have a lifestyle that is supported by that business, but you appreciate that that’s not with you running it, then put that on the table as well.

Have that conversation because all those can all be facilitated. It’s not that it has to be all or nothing, there are the legal and technical structures to allow that to happen.

Being honest about what your hopes and dreams are and about what your fears are around taking the business on, it’s also going to be something that will be overall very positive.

Understand the different perspectives

The point I’m trying to get across most here is understanding that there are different perspectives and there are different expectations and there are different emotions that are being felt throughout this. The legal and technical sides can be resolved, because there are the legal structures that will either do what you want them to do, or somebody will say we can’t do that, but this is the closest we can get to it.

When it comes to the emotional aspects, there’s not a technical solution that is perfect at alleviating those, but managing each other’s expectations is a good way to do that.

I’d like to share an analogy with you that that might help with that process.

Imagine you are sat in a room with the senior generation in your business, whether that’s your parents, whether it’s your grandparents, whether it’s aunts, uncles, whoever that might be, and you were sat one side of the table and they are sat at the other side of the table.

Behind you is a window with a view across a Lake, behind them is a picture of some skyscrapers, for example. 

If I was asking you to describe what you could see in the room, you would say, I can see a wall with a picture of skyscrapers on it. If I was to ask the senior generation the same question, they would say, well, I can see a room with a window with a view over the Lake in the background.

You’re both right!

You’re both completely different in terms of what you can see, but you’re both right.

It’s the same with the expectations and viewpoints when we come to succession planning. We tend to see things from our own perspective and we tend to place our expectation of others based on our viewpoint.

So we might be sat down and having that discussion, assuming that the senior gen wants to give up their role within the business. They want to give up their ownership because that’s what we want. That’s what we can see and understanding that you’re both in that room and you are both seeing things from a different perspective, but you are both right, is a good starting point for having those discussions around succession.

Create a safe Environment

In order to do that, you need to create an environment that allows you to explain how you see things allows you to say “I’m scared you’re not the right person to deliver what we need to deliver within this business”

Not seen as a personal attack, but seen as a way of articulating what it is that is being felt.

Or, “I’m actually scared you’re going to be more successful than I am” or, “I’m not financially independent enough in this business to give up ownership just yet”.

Whatever the reasons are, having an environment that allows you to talk about that in a safe way is invaluable. So I would recommend finding a way to do that.

Once you understand that everybody’s going to have different viewpoints and different expectations and come at things from a different perspective, and you can appreciate that they are no more right or wrong than you are in those viewpoints.

It helps to ‘oil the wheels’ of the communication that’s needed in order to create an effective plan.

I’ve said this a couple of times, but separating out between leadership, management and ownership, what is it you’re actually trying to pass on? Do they have to happen at the same time? Do they have to happen to the same people? Probably not.

But they could do, and there are options available on all of those different variations of that, but being very clear on that is a good starting point.

Summary

So in summary, succession is complex and it’s complex because it’s multi-layered, there’s lots of different facets to it.

There’s lots of technical solutions that are available.

There’s lots of financial implications.

There’s lots of emotional implications to all of the elements of succession planning.

If you are able to create that safe space, to have the conversations around what your expectations are, what your hopes are, what your fears are, then that’s a starting point.

It’s a foundation for building the technical and financial solutions off of.

So in terms of how to start, that would be my recommendation, find a new environment where you feel safe, where your ideas can be challenged, but you don’t feel challenged.

You don’t feel threatened, where everybody’s voice is given equal standing where everybody is listened to.

If that needs to be facilitated, then get that facilitated. No-one is saying this is easy, it’s very, very common for these discussions to turn into the sort of more emotional finger pointing and, personal attacks within these discussions because of the fact we’re dealing with emotions here.

But if you can find that environment, create that environment, then that’s a really good starting point.

If needs be, you can get somebody in to help. There are family business advisors, such as myself and others who will be able to help you facilitate those discussions, ensure everybody’s viewpoint is heard and use their knowledge and experience from other families who’ve gone through this to suggest some options that sometimes won’t have been considered at all.

So, if you are struggling with this, and there are many, many families like yours that will be having a difficulty having these discussions, then I would strongly suggest getting in touch with somebody who can help facilitate those conversations.

Throughout this series on succession, we’ll be covering various other elements in more detail than we’ve covered today. But I hope that’s given you a bit of an overview of some of the barriers that exist to the conversations around succession planning starting.

I hope it’s highlighted that you have a choice.

The option is to do nothing or to start or to have a plan.

Unfortunately it is inevitable that at some stage, if you do nothing, that the process will be taken out of your hands, because it normally means somebody has either lost capacity or has passed away.

In which case the element of being able to choose and decide what happens with the business in terms of leadership, ownership and management is taken out of your hands.

Life isn’t a rehearsal

Life isn’t rehearsal. We can’t come back next time and go, I wish I’d actually stopped. the really active role I had in my family business so that I could pursue my other passions of travel and find wine or whatever it is that you might want to be doing with your time that you think, well, one day I’ll get round to that.

If you put this off for too long, they becomes never and then it’s a regret and, you know, regret is horrible.

So, in order to help avoid regret, let’s understand that life isn’t a rehearsal and we can’t come back next time and do things differently. and we should feel empowered and inspired by the fact that we’re only here for a very short period of time, really in the grand scheme of things.

Ideally, we want to avoid regret and an upcoming episode, which I’m quite excited to record, is going to be focused on the top five regrets of the dying.

And it sounds a bit morbid, and you think “Christ, Russ I thinks that’s going to cheer us up”, but actually it’s quite inspiring.

I find it very inspiring to listen to the regrets of people who are facing the end of their lives in very real time and learning from those regrets, because hopefully we’re not at that place and we have time and the ability to avoid those becoming our own regrets.

So that’s coming up in a few weeks time, in the meantime, if you need any help with any of this stuff, please get in touch.

I would be happy to spend some time on a zoom call, just running through some, some other ideas around this. and, yeah, we’ll get into a lot more of this in future episodes, but I hope that was useful.