Effective May 21, 2023, P&N has joined EisnerAmper. Read the full announcement here.
For family businesses, family is a crucial part of succession planning. Even with a great plan, a smooth succession will not happen unless there is a willing, competent, and well-prepared successor. Developing effective family business successors starts early and intensifies when they reach adulthood. Let’s take a quick look at some of the components to consider throughout the life cycle of developing effective successors.
The groundwork for developing great family business successors starts at an early age. Values taught such as hard work, integrity, persistence, and empathy can help develop successful traits as well as healthy family relationships.
Children often pick up on signals from their parents, and these signals can have a lasting impression on the development of future successors. If parents regularly complain and stress aloud about business issues, their children will develop a similar mindset. Conversely, if parents only openly discuss the successes of the business, children may develop a false sense of reality of what it means to run a successful business. Family business owners should be mindful of communicating a balanced view of the highs and lows of running a successful business.
Lastly, family business owners should stress to their children that taking an active role in the business is an option, not an obligation. Children should not be led to believe that the business will be handed to them. However, the owners should not withhold plans for his or her expectations on transitioning management and ownership.
Personal development plans should be introduced when the successor(s) is in their early 20s to provide a clear set of conditions required before entering the family business. A summary of plan component examples is presented below, but it is important for each family to consider what makes sense for them.
During the successor’s development, he or she should also be encouraged to develop skills that complement the existing management team. This approach ensures that there will be more opportunities for the successor to make meaningful contributions and reduce the likelihood of potential conflicts between the management team.
Once a probable successor has completed most or all of their personal development plan, he or she should begin a more formal leadership development program. When the personal development plan is done correctly, the successor should have a clear understanding of where he or she needs continued training. A summary of effective leadership development program components is presented below.
Whether you are at the beginning, middle, or end of the succession process, these concepts can be used as a guideline to help you develop effective successors. P&N can help discuss what options work best for you. Contact us to start a conversation.
Read Part 2: Choosing a Successor
*Part of this content was summarized from “Family Business Succession, The Final Test of Greatness” by Craig E. Arnoff, Stephen L. McClure, and John L. Ward.