In the United States, 92% of all firms are family firms. In the next five years, it is estimated that 47% will change their top leadership. At this point, 45% have not chosen a successor and lack a succession plan, while 65% do not have a strategic plan.
As the transition of ownership is evolving 20% do not have an estate plan, thereby gifting Uncle Sam with 55% of company value.
Planning for the Future
Succession planning in the family-owned or closely held business is vitally connected to Strategic Planning. The plans for succession need to be in alignment with the vision of the future company. The days of progenitor succession based on birth position are beginning to fade as companies realize that their financial fate is tied to the capabilities, passion, and commitment of the successor. How do you choose a successor if you have a cadre of waiting siblings or cousins in the wings? How can you use the best practices of Partnership Assessment and development to choose and groom your successor?
What are some of the roadblocks to succession? The roadblocks from both generations usually cluster around beliefs, perceptions, assumptions, and values.
How can you help your family owned business not become a fatality of the often quoted statistics that only one-third makes it to the second generation and ten percent make it to the third generation?
The key to successful successions is working through the 7 tough psychological stages.
The 7 Tough Psychological Stages
|Stage 1||Self-reflection; Courageous conversations with self||Strategic coaching|
|Stage 2||Courageous conversations with family; Future hopes and concerns||Facilitated family business retreat|
|Stage 3||Strategic planning to identify ideal future and succession issues||Facilitated family business retreat|
|Stage 4||Align strategic and succession plan; Identify key traits needed to implement strategic plan of future leaders; Stretch assignments for candidate(s)||Facilitated family business retreat; Successor assessment|
|Stage 5||Decision on leadership candidates||Mentoring, coaching, and training|
|Stage 6||Succession Transition; Leadership development; Training; Coaching, mentor, founder future planning and role||Internal mentors; External coach; Training; Exit planning; Team|
|Stage 7||Managing Change; Anticipate and be proactive on impact of change to internal and external customers; Continue family business meetings, build advisory board, coaching, and training||Team Building; Leadership coaching|