Dominik Szot, Founder/CEO of MIA. Leadership coach, global entrepreneur, agile leadership mentor, focused on leaders' legacy.
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Peter Drucker wrote that "The controlling word in 'family-managed business' is not 'family.' It has to be 'business.'" Following that principle, in his book The Daily Drucker, he recommends three rules to successfully manage a company business:
1. Family members start to work in the business when they are equally able as other employees to work and work equally hard, too.
2. One top job is always held by an outsider without a connection with the family.
3. Nonfamily professionals are in key positions (e.g., finance, manufacturing or marketing).
Regarding management succession into the next generation, Drucker invites business owners to determine whether it's driven by business issues, family matters or a combination of both.
Many companies in the United States, as in other highly developed countries, are managed and controlled by families. But according to data from the U.S., 40% of family companies survive into the second generation, 13% into the third generation and only 3% into the fourth.
Succession is an extremely strategically important process that requires careful planning. The decision to change the top management to a new one requires maintaining a balance between family values and adaptation to the changing business environment.
Here are six important areas that will help an organization go through the succession process in such a way that all its participants enjoy this change and actively participate in it, thus guaranteeing success. These come from a collection of my experiences that enable successful succession and a business's continuation into the next generations.
1. Having A Clear Post-Succession Vision
A company founder who is about to leave the company is faced with the most difficult decision to hand over his or her entire life's work. Apart from the fact of giving their most precious treasure to someone else, the most important issue is what the doyen will do after this event. A clear vision of their new business is the foundation for maintaining a proper distance. Having a clear plan for what comes next is a kind of security for the effectiveness of the planned transformation. The lack of such a strategy for the "new you" may hinder succession. For example, when certain factors start to disturb the company, the founding owner may become excessively involved in removing them, taking up space that is already due to the successor.
2. Succession Planning
Designing a succession is primarily about defining and describing its expected practical result. A few basic questions make it easier to prepare a detailed plan for the entire operation:
• What will be the new roles and responsibilities of the parties?
• How does this target situation differ from today's?
• What should be the subject of regular monitoring by senior leadership after the succession in the context of the entire business, and for how long?
• What needs to happen for this target situation to occur?
• What might stop succession, and how can this be prevented?
• Who could support the process in the area of mentoring or business coaching?
• What should the succession agreement contain, and when is the latest it should be concluded?
Involving successors in this process as soon as possible matters, too, because the business is their common property and allows them to appropriately address responsibility for the expected results.
3. Successor Development And Balance Between Competencies And Inheritance
When deciding to transfer power to specific recipients, senior leadership can immediately start analyzing the competencies and resources needed by the successors to take up the roles planned for them, so that the organization can function efficiently and effectively under the successor's rule. Stakeholder-centered coaching works great here. The successor himself declares the desired transformation and carries it out among selected colleagues who confirm his transformation based on the observation of specific behaviors. Parallel thematic training and cooperation with a mentor or coach can make it easier for the future leader of the organization to adapt to a new role more quickly.
4. Maintaining Business Continuity
One of the biggest dreams of every company founder is the business's safe and predictable development, sustainable growth and operational stability. To ensure such a state, appropriate monitoring of business processes on the one hand and a balanced risk strategy on the other hand are necessary. The third and most important part is a motivated and united staff that has a full sense of purpose, awareness and the ability to influence the areas in which they work. The fourth is the family code, which will secure the company's succession for the next generations.
5. Transparent Communication In The Succession Process
The uncertainty of the process due to its newness for all parties is a reality of almost every succession. This unknown part that is discovered by everyone bit by bit during transformation can be greatly simplified with proper communication.
First of all, the process should be discussed in detail between the founder and the successor. If this is agreed upon, information about the succession should immediately be sent to the entire staff, informing people what it means for them and what possibilities and opportunities it brings. Openness and transparency are key to engaging staff in the transformation, once employees understand its meaning and importance for them and the organization. In this way, the successor builds self-confidence for the future.
6. Resolving Family And Business Conflicts
A family business is a system of intertwining family relationships and business dependencies. Sometimes relatives hold positions that they received as a result of the doyen's decision resulting from family dependence and not business needs. These people may not represent the appropriate professional level and may be the subject of interest or even dissatisfaction of the team and even other family members. Such situations should be dealt with through appropriate training, mentoring and coaching of these employees to remedy them immediately. The involvement of the entire family in the succession process facilitates easier transformation of the organization.
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