Succession Planning in a Family Business
Dana Baldwin
Senior Consultant, CSSP, Inc.
Good friends of mine were the fourth and fifth generation of their family in a very successful business. I interviewed one of the fourth generation some years ago about how they went about doing succession planning for their company. These are the “rules” that they had literally written out many years ago which governed their approach to the involvement of the next generation in the family business.
- Any family member who wanted to come into the business had to work for another company for a minimum of five years.
- If a family member wanted to enter the business, he or she had to make a firm commitment by age 35. After then, there would be no opening for the individual.
- Once a family member came into the business, if he or she decided to leave, there would be no return available. That decision would be final.
One of the most difficult things to do in a closely held family company is to separate the personal lives of the family members from their professional lives.
- The first principle I strongly recommend is: Keep the two lives separate!
- Set up objective criteria for any family members who come with the company.
- Whenever possible, use non-family members to lead, train and criticize the progress of the younger family members.
- Monitor the progress of younger family members objectively, not being harder nor easier on them than would be appropriate for a non-family member.
- Pay for the job, not for the family relationship
- Establish the career path or paths which are possible for the individual, and set out what is expected for each one.
- Knowledge required
- Skills required
- Experience to be gained
- Mentoring – where possible have this done by a non-family member
- Performance levels and attitudes expected
- Do regular performance reviews
- When changes are needed, make them in a professional manner, as would be done for any non-family employee.
- Don’t bring them into the “inner circle” until they have earned it.
- Don’t include them in any decision making process where the family member’s superior is not involved and responsible.
Effective succession planning is a key part of strategic planning for an organization. Having a ‘stable’ of qualified, trained, well-educated and experienced people who can step into a higher level job can be a key to long term success as an organization. It is neither a simple nor quick fix, but one which needs to be well-designed and implemented, with great forethought so that the process accomplishes what its aim: Having the ability to transition from one person to the next in a well-planned, well-executed process which is positive for both the individuals involved as well as for the organization itself.
FINAL THOUGHTS
One of the elements of succession planning is to decide what the key attributes are the successor needs to have for the future. It is not enough to have the attributes of the current person. By having a clear strategy you can see what the future leaders of the company will need to be good at and these attributes can be added to the succession plans of various leaders.
The questions to ask yourself are:
- Do we have a good strategic plan that we live by?
- Is succession planning a part of that plan?
- Does succession planning have its own action plans to enable the company to keep the best and brightest and have them ready to step in when needed?
For more on succession planning, please listen to an archived version of my webinar entitled: Succession Planning by clicking on webinar.
If you do not have a good strategic plan you will not know what these new attributes should be and you may end up developing people who have the attributes of good leaders in the 20th century, not for the 21st century.
Let us help you develop good strategic plan. It will help you better define the skills needed in the future. Start by attending our acclaimed seminar: Simplified Strategic Planning. A link may be found on our website: www.cssp.com.
Dana Baldwin is a consultant with Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at
