Keys to a successful family business succession

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Below is a lecture excerpt from EDex Family Enterprise Succession Program by Wendy Sage-Hayword and David Bental, The Family Business Consulting Group

A number of years ago, Kennesaw State University looked at succession planning across the United States. In fact, they did a research project that encompassed 18,000 family enterprises.  The question they wanted to explore was whether having a written succession plan would assist families to be successful in continuity. In other words, if they wrote down their plan, would they be more successful in navigating the turbulent waters of succession? They were astonished to find out that there was absolutely no correlation between a successful succession and having a written succession plan. This so troubled them that they had to re-examine the results to see if there was anything they could learn from the experience. Happily, they learned that there were three things that did correlate with successful family business succession.

  • They learned having a formalized strategic planning process would help.
  • They learned that having a board of directors with outside independent members would help.
  • They learned having regular family meetings would also be of help.

Why would having regular family meetings be helpful? Regular family meetings provides a forum for discussion, so that family members can communicate, develop an understanding, and also deal with the concerns and problems they have before they become unmanageable.

Why would having a board of directors with outside independent members be helpful? One is to help bridge the gap between the two generations, and secondly, to ensure that good decisions are made based on rational decision making rather than family emotion.

If you have independent business people around the table, they can assist the family to focus on the business matters and not let their personalities or emotions run away.

The third, the idea of having a formalized strategic planning process, is important not only to get the family members on the same page, but also to get the board and management are pulling in the same direction. It also lets members of the next generation know how they can fit in. If the company's planning to grow by expanding into a new market, the members of the next generation might be interested in leading that initiative.

These are the three things that research show. If you have a family enterprise, and you want to be successful in moving across generations, you want to be thinking about having a board of directors with outside independent members, you want to be thinking about having regular family meetings, and you want to be thinking about investing in a formalized strategic planning process.

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