Avoiding Pitfalls of Family Dynamics During Succession Planning
Succession planning for any business can be a delicate situation, but especially so for family-owned businesses. There are a lot of things that go into the process that can make things complicated and even ruffle some feathers, but within a family unit, there are specific challenges one might face.
Family dynamics can shift with any significant event in life, and when it comes to the succession planning from the patriarch and/or matriarch to the next in line to run the company, things can get contentious between family members.
If you’re in the process of or getting ready to start succession planning for your family business, there are certain things you can do to help avoid the potential family dynamic pitfalls.
1. Avoid Too Informal of an Approach
It can be easy to fall into an informal approach to succession planning when working with your family. Many people believe having an informal approach to this task will make things easier and limit any adverse shifts in the family dynamic, but that’s generally not the case. When succession planning, leaving personal feelings out of it as much as possible will help keep your relationships intact. Even beyond your family unit, any stakeholders or outside investors will want to see you handle things professionally.
Having a serious conversation with your family about a formal, business-like approach will help ensure that your business continues to thrive and grow while maintaining familial relationships outside and within the company.
2. Have a Predetermined Time Frame
Having a predetermined time frame for succession planning is necessary for several reasons, including avoiding pitfalls of family dynamics. You’ll want to create a specific timeframe and stick with it as best as possible to ensure things move forward as you intend.
When you move too fast or too slow with your succession plan, problems can arise. Moving too fast can cause many issues with family and others, such as not feeling comfortable or being blindsided by the succession plan they had no clue about. On the other hand, moving too slowly with your succession planning can cause people to second-guess decisions and retreat to something that feels more comfortable with them rather than moving forward.
A reasonable timeframe to aim for is between 12 to 18 months, as it gives you and your successor ample time to make the transition for each other, your family, and any other people involved in your business comfortable with the new norm.
3. Be Transparent
If there’s one thing that almost everyone values in life, it’s transparency. Being transparent with your family about your succession plan can lead to limited to no shift in family dynamics. Even if someone or several people in the family aren’t thrilled with your plan, they can at least appreciate you being upfront and honest with them about your plan and why you’re doing things the way you are.
Whether you have family members who are directly involved in the business decisions or who work within your business but not in a decision-making capacity, ensuring that they know what’s going on and not keeping secrets is vital to any succession planning.
Being transparent allows for a smoother transition for the successor to take the lead because your family, employees, and stakeholders are far more likely to trust your judgment than if you were keeping secrets of having “behind closed doors” meetings.
4. Don’t Say One Thing Then Do Another
Going along with being transparent, it’s important that you don’t say one thing but continuously do the opposite or something different. Everyone is allowed to change their mind occasionally, but when it comes to succession planning, standing by your word can make all the difference as your company transitions.
Succession and retirement are emotional times for everyone, not just the retiring person and their successor. It’s all too common for the successor to say that they’re going to do one thing and then do something completely different. It can be something minor that might not seem substantial at the time, but it can put a sour taste in your family and other employees’ mouths.
5. Have People Outside the Family Be a Part of the Succession Planning
A family is a tight-knit group, especially when you own a family business. While it might seem like the right thing to do, not involving people outside your family in succession planning can be catastrophic for your business and your family dynamics.
Having one or more people outside the family unit can help you remain objective and unbiased regarding this critical business decision. Ideally, you’ll want to consult someone who has handled succession planning before to remain impartial and ensure you have guidance along the way.
Even if the person you choose doesn’t have experience with succession planning, as long as they aren’t too close with any one person in the family, they can allow you to remain on task and let other family members feel like you’re making decisions based on good business practices rather than your feelings towards certain family members.
6. Have Every Part of Your Succession Plan in Writing
Many people make a massive mistake with succession planning by not having all the terms and agreements in writing. When everything is adequately documented and notarized, even those unsettled by the changes can’t argue that you’re not following through with what you said you’d do.
As the family member who’s retiring or turning over the reins, ensuring that you have everything documented is vital to your successor doing everything you agreed upon. When things aren’t documented, it gives too much freedom for the successor or others within the family to go against the wishes of the one retiring or the successor, which can cause many issues with your family dynamics.
7. Don’t Transfer Until The Patriarch/Matriarch is Ready
Last but not least, don’t transfer the reins to the successor until the patriarch or matriarch is emotionally ready. Rushing the succession process or trying to convince them to retire before they’re emotionally ready can cause a lot of resentment.
When you’re not ready, you’re more likely to be upset with your family members and not agree to their succession plans, even if they’re solid business ideas. The patriarch or matriarch needs to be fully prepared to hand the role over to their successor without feeling forced or rushed for a smooth transition into a new era of leadership.
The Value of Executive Coaching for Navigating Family Dynamics During Succession Planning
When it comes to succession planning, many changes occur seemingly all at once. Being prepared for these changes and handling them as best as possible will allow for a smooth transition within your business and help avoid any pitfalls within your family dynamic.
Lori Moen is a professional executive coach who’s been in your shoes and wants to help guide you as you navigate these waters. From helping you identify your primary and secondary goals to finding tangible ways to reach them and how to handle potential obstacles, investing in coaching can make all the difference.
If you’re ready to see what executive coaching can do for you, contact Lori Moen at Catalyst Group ECR today. As an experienced Certified Exit Planner, she can help you face the often stressful experience of navigating these uncharted waters and come through the other side confident in your decision to take the next step forward.
