Successful succession planning in a family business

So when a business owner becomes so successful that it needs more than ‘family’ to take it to the next level, it’s natural that they start thinking about ‘what’s next?’ in the transformation of the business model.

How do we transform our production facilities?
What kind of marketing strategy is going to capitalize on what we’ve done so far, yet move us to the next level?
Has the time come to recruit one or two managers with real depth of expertise to help us make those critical strategic decisions?
How can we become less dependent on our platform client and build greater security?

When Business Owners partner with a Human Resources Director from People Puzzles, these are often the kind of dilemmas that sit on the shoulders of many owners and general managers. It might take a couple of hours before the next question is put on the table: ‘Do the people that have worked with us so far have what it takes to contribute to the next phase of our journey?’

These are all great questions. You could say they are quite easy questions. But often extremely difficult to answer. Why? Because many SME leaders feel a huge sense of guilt at contemplating the dismissal of a loyal employee who has been on ‘the bus’ as long as they have and have done nothing wrong. Surely they don’t deserve to be fired?

Let’s take it to a higher level of difficulty….. Is the business owner competent in the job? Does he or she really feel able and motivated to lead the team, make the right judgments… take the tough decisions?

This is a scenario I faced recently with one of our clients. The Managing Director, Neil, was passionate about his sector and product range… and spent many hours advising clients and lobby groups on sector issues, regulatory constraints and product development. What Neil didn’t do was lead, manage, sort out the financial processes, tackle several performance challenges and people issues. For sure he had no passion for the commercial aspects of the business. The company was founded by his father and understandably, Neil felt a powerful obligation to be the successor and to manage the business going forward. To do anything else would feel like an act of abdication. He probably knew how some members of the royal family must feel!

And its times like these when that a credible HR Director can ask some key questions. Again, easy to ask but rather tricky to answer:

So actually what are the critical competencies required to be the Managing Director?
Are these competencies within the current post-holder?
Even if they could be developed, does Neil really want to be MD and be removed from the work that he was passionate about?
And who, in the business, had a set of capabilities that had the closest match.

Meanwhile the owner’s son, Jon, was a recent graduate and keen to make a difference. Whilst he hadn’t any real business experience and was just in his early twenties, Jon loved to get involved in the business… immerse himself with performance issues. He spotted the need for greater collaboration and brought people together. There were no other talents in the business and insufficient funds to justify a senior manager salary.

At the end of the fact-find process, the conclusions were, at its simplest….

The business needs an active leader to take it to the next level.
Whilst Neil is the MD in name, in reality there is a vacancy.
The vacancy needs to be filled, without delay.

The next few weeks we wrestled with some key questions:

Would a young man, fresh from University, have the credibility with the shop floor?
How long would it take for Jon to learn to become a really capable MD?
What meaningful role could Neil be doing? What would be the working relationship between father and son?
Is it fair to give such a young person such a responsibility?
Could Neil get comfortable with a sense of being ‘demoted’?

Three months after the start of the HRD assignment, Neil announced he was to step down, handing the reigns to Jon. Several arrangements were agreed:

Jon was delighted to be given the job.
The ‘promotion’ wasn’t expected to be a life-long commitment – but that the arrangements would be reviewed in a couple of years.
Key organisational issues were clarified: Jon would report to the board to ensure his plans and investment proposals are governed by the family. He would be mentored by both Neil and his grandfather to ensure a process of knowledge transfer was underway.

And what of the father? Neil took accountability for several key areas of the business:

Skills and knowledge training to both staff and key customers
Mentoring and coaching of Jon
Team leader of the consulting arm of the business
Chairman of the company board

So whilst it’s too early to measure the impact of the change in MD, the level of energy and optimism in the business is at a different level. As we all know if a business is managed by a determined leader able to take the team with him/her, the business is off to a great start. And Neil? Well he had two choices…. Do a job he was not cut out for, to fulfill a sense of family obligation or contribute in a way that plays to his expertise and his passion. I’m pleased he chose the latter. Neil will probably retire in a few years having really enjoyed the last few years of his career.

Making sure a growing company has the right competencies, particularly at the helm of the business, is key. Whilst it’s really difficult for a family business to take a ‘dispassionate inventory’ of its skills, knowledge and the potential of its team, it will pay dividends (literally) to be able to take a step back and assess what qualities are within the team. And what’s missing. Sometimes, one of the most valued qualities an HR Director from People Puzzles brings to the business is to facilitate such conversations, do drop us an email if you have similar issues you would like to discuss.