Three areas to cover when discussing succession
The best time to start the complex process of succession planning was 20 years ago, but the next best time is now, says family business consultant Russ Haworth.
Succession planning should always be treated as a process and there are several steps that help make it a less painful one, says Somerset-based family business consultant Russ Haworth.
Drafting a family charter can be a good place to start, Russ advises. “This says why the family business exists and includes who can own shares and who can work in it. When those discussions have happened, the conversation around succession planning is slightly easier because you’ve done the groundwork.”
He advises separating the succession discussion into the three areas - leadership, ownership and management. “Separating them out and understanding exactly what you are discussing really helps so it doesn’t feel like an ‘all or nothing’ discussion with the incumbent generation being asked to give up everything.”
Understanding the goals in each area can help to shape the dialogue. “If, for example, the aim is to provide security for family members, that doesn’t necessarily mean they have to work in or own the business.”
Transitions in these three areas may also happen at different times, Russ explains. “It may be that the first part is to say we need new management to come in and run the business. But that doesn’t necessarily have to change the leadership or ownership of the business, which could take a bit longer.
“It’s important to understand what the family gains from owning the business and what the business gains from having that particular family own it,” says Russ. “If the right thing is for the business to be passed on within the family and there is appetite to do it, everything should be done to help you achieve that.” If the next generation does not have the desire to continue, however, this needs to be out in the open from an early stage, he says.
Managing expectations and ensuring everybody has a voice in the discussions is important. It can be very damaging when someone feels ‘trapped’ in a family business; to the individual and their mental health, but also to the business itself.
“You’re not going to see the same level of output as you would if it was your absolute passion. Appreciating that it might not be what you want to do as a career is, again, something to be honest about.”
It can be a difficult realisation for farming families if the next generation doesn’t want to continue or wants some changes. Considering those three areas of leadership, ownership and management may therefore help find a different way forward which takes everyone’s needs into account.
In our second article with Russ Haworth, we look at the emotional barriers to succession planning.
About Russ Haworth
Russ Haworth ACFBA is a specialist family business adviser. Based in Taunton, Somerset, he works with family businesses all over the world. As well as his consultancy work, he hosts the Family Business Podcast.
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