Two-thirds agreed they “were more likely to stay with the current firm if they knew they would be offered ownership in the future” and that “they’re interested in becoming an owner in their current firm”.
Just less than half indicated the owners had had discussions with them regarding ownership opportunities.
Bite the bullet
The task of preparing family members for careers and leadership within a business is difficult and at times frustrating.
Professional and managerial requirements tend to become intertwined with family feelings and interests, so transfer of leadership can quickly run into trouble and it is not a common topic at dinner tables.
The patriarch or matriarch doesn’t want to talk about succession, with the unavoidable question being: “What are they going to do after retirement?”
The next generation struggle to bring it up as it is often viewed as inappropriate and painful, so the succession process in family businesses is described in terms of stages or “stepping stones”. It starts with the potential successor being acquainted with the business as a part of growing up, notably working part-time in various areas.
It is common for practitioners to be confronted with a widow’s woes after a sole proprietor has passed away. Widows are confronted with clients and the winding up of the business – and often have no indication as to what the husband’s plans may have been.
A continuity plan enables a business or practice to continue functioning fairly normally after a critical incident and a risk management plan is essential to mitigate disruption.
It is critical to identify risks to the business’ normal operations, coupled with the likelihood and impact of an eventuality.
Chief among issues a continuity plan should deal with are prevention, impact analysis, response and recovery, considering what key activities, procedures and measures must be put in place to manage and reduce risks to an appropriate and acceptable level as well as managing the incident itself, its impact and, by so doing, restoring the business to normality in the shortest time possible.
Widen the net
A succession plan also deals with future exit strategies from the business, such as when a firm plans to sell upon a partner’s retirement or death. A process on identifying potential buyers, reaching out to existing clients and valuations, must be considered carefully.
Common practice with listed companies are share options at certain human capital levels. For talent-retention purposes, owners should identify and engage with employees to strengthen the succession-planning strategy.
Another way is for a son or daughter to take a position in another company before returning to the family business to eventually exercise overall direction, although the parent usually is still in the background.
Zitha Dube (firstname.lastname@example.org) is a director at ZD Group