Planning for the ‘Generational’ Handover
Family-owned businesses are widely regarded as the backbone of the UK economy. There are over 120,000 UK family-owned businesses, over 15,000 that classify as ‘medium sized’ (employing 50 + people), and approximately 12.2m people employed through family-owned businesses throughout the UK.
However, with many family-owned businesses approaching a ‘generational handover’, the challenge around succession has never been more important. In recent years, the rise in private equity transactions has been closely linked with the lack of quality succession. For many owners, the sale process remains an attractive proposition, however, for those wishing to retain the business within the family, there are many options available to strengthen the succession planning.
Identify Succession Group Early
A major strength of family-owned businesses is the ability to focus on long-term sustainability, and succession planning should be no different. Identifying potential succession early is key to shaping and developing their skills to be ready when the time arises. The emphasis is also on a ‘group of candidates’. Organisations should look widely for their succession to minimise the risk when the hand-over approaches.
As the business world becomes increasingly dynamic and more complex, it is important for future leaders to be well-rounded in their skill-base and experiences. Whilst it is important to understand the family business, it is also crucial to understand alternative, and possibly better ways of working that can enhance the business in the long-term. Future Leaders should be encouraged to seek out opportunities outside of the business and in different dynamics. The experienced gained with be invaluable in the future.
Entrusting your business into the hands of the next generation will undoubtedly be a challenging period. Independent advisors through Non-Executive Director’s and executive search firms can provide an independent sounding board on the relative strengths, weaknesses and capabilities of your future leadership group that will enable you to select the best individual(s) for the job. A family chairman position can also ensure that the strategic direction is maintained but is supported and executed by a strong operational management.
In practice, it is difficult to time the handover perfectly. Frequently, the future succession is not ready when they need to be and whilst throwing someone into the deep end can prove successful, it is risky. Hiring an external senior leader to support, mentor and develop the future talent within the business can be the perfect solution to managing this difficult transition. Finding the individual that is at the right point of their career to support the future succession and shares a similar future vision for the organisation, can be a challenge. External guidance from an executive search partner can add real value by objectively identifying, developing and strengthening succession plans.