Succession Planning in Family Business
Succession Planning in Family Business
Transformation from solo to professional entity and positive impact on
business growth.
Most of my small business clients are family-owned businesses; either the first generation is involved in day-to-day operations, the second generation gets into business after education, or all family members are engaged with second and third generations. In any of the above scenarios, I used to see a common pattern of challenges among family members that affected the business in terms of growth and profitability. In some cases, the challenges in business affected the quality of the family relationships.
- Lack of Role Clarity among Family Members:
The absence of clearly defined roles within family members leads to confusion and inefficiencies in decision-making processes. Although everyone gets involved in all the business issues, no one makes a firm decision to solve the problem. This sends a wrong signal to everyone in the organization that a delay in decision-making is acceptable.
- Poor Communication among family members:
Inadequate communication channels have hindered the flow of information within the organization, leading to misunderstandings and discord among family members and non-family employees.
- Micromanagement by Senior Members:
Senior family members’ tendency to micromanage operations is affecting the creativity, innovation and experimenting new things. Eventually, the behavior demotivates the younger family members and professional employees to take new initiatives. Also, the team will be looking up the senior people for all decisions, and the growth of the organization is restricted to the senior person’s involvement and quality of decisions.
- Failure to Empower Next Generations:
The reluctance to delegate authority and empower the next generation results in a lack of engagement and initiative among younger family members, hampering their professional development and the growth of the individuals and organization.
- Inability to Differentiate between Performance and Loyalty:
The failure to distinguish between performance and loyalty leads to the promotion of family members or loyal employees based on the years being in the organization rather than merit; it will create a bias in the organization among people, and professional people leave the organization at a faster rate. The family members promote mediocracy without their consciousness
- Lack of Succession Planning:
The absence of a structured succession plan for family members has created uncertainty regarding leadership transitions, which risks the business’s long-term sustainability.
- High Turnover of Professional Employees:
The frequent departure of professional employees shortly after recruitment signals a failure to provide a conducive work environment, impacting employee morale and organizational stability.
Solutions to overcome challenges in succession planning in family business
In response to the identified challenges within the family business, a strategic solution approach has been devised to address key areas of concern and help the family members navigate the transition of change.
- Portfolio Clarity and Accountability:
A structured framework has been implemented to define partner portfolio roles based on their strengths and aptitude for business. For example, the person with an extrovert nature was assigned a marketing and customer relationship portfolio, and the person with analytical ability and detail was given operational responsibility. In this way, I ensure clarity in responsibilities among family members and foster accountability for business performance. Accordingly, key performance metrics (KPIS) were defined for each member.
- Establishment of Apex Level Committee:
An apex-level committee has been established to review monthly and quarterly performance, providing a platform for strategic discussions and decision-making to drive business growth and efficiency. The senior members were advised not to get into daily operational decisions but empowered to make people accountable for monthly and quarterly business results.
- Empowerment and Accountability of Second Generation:
Initiatives have been undertaken to empower the second generation of family members while holding them accountable for business outcomes, fostering a culture of responsibility and ownership.
- Weekly Forum for Strategic Discussions:
A weekly forum has been instituted to facilitate strategic discussions and decision-making among family members, promoting alignment of goals and execution of business strategies. This forum helped them share communication among family members in their respective areas, thereby avoiding misunderstandings among family members due to a lack of communication.
- Recruitment and Retention Strategies:
A hands-on approach has been adopted in recruiting suitable business heads, supported by clear role definitions, performance metrics, and robust MIS systems. This ensures their long-term commitment and contribution to the company’s success.
- Mentorship and Organizational Restructuring:
Family members have been mentored to differentiate between personal relationships and business results, while organizational restructuring efforts have been initiated to prioritize performance-driven practices and enhance operational efficiency.
Results of succession planning in family business
- Turnover Improvement: Over three years, the turnover rate has remarkably surged from 3X to 11X. This substantial growth signifies enhanced operational efficiency, improved market positioning, and strengthened customer relationships, driving overall business expansion and profitability.
- Integration of Professional Talent: The successful integration of professionals into key roles within the organization enables the organization to experiment with new things and foster a culture of accepting diversity and openness.
- Enhanced Role Clarity and Accountability: A clear definition of roles and accountability among family members signifies a fundamental shift towards a results-driven culture. Aligning individual responsibilities with overarching business goals has promoted synergy, minimized conflict, and propelled collective efforts toward achieving sustained business success.
My hard work with my clients have really paid off in dealing with the tricky parts of succession planning in family business. We’ve together with my clients created a work environment where everyone feels responsible in the family business. Each having the power to make decisions, and work well together with other family members. This has set the family business up for success and made them strong enough to handle the ups and downs of the fast-moving nature of family dynamics. I’m proud to be part of assisting family business into one that runs smoothly and professionally, thru a structured succession planning in family business.
Testimonials from satisfied clients!
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