What will your family business be like when your children’s children are running it?

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A thoughtful and strategic succession planning process is crucial for ensuring both a smooth transition of leadership and the continuity of the business across generations. The first axiom is to start early, earlier than you think necessary.

“The best time to plant a tree was 20 years ago, the second-best time is now”

- a Chinese proverb

The Unique Qualities and Competitive Advantages of Family Businesses

Family-led businesses have several unique qualities that gives them a competitive advantage over non-family businesses in the marketplace. Shared values, a strong sense of mission, a unifying family spirit, and the strength of a family name contribute to their success.

Most family business, however, do not realize the benefit of this over the long-term. While approximately 85% of all businesses are family businesses, more than 90% fail within the third generation, primarily for the lack of succession planning.

To be fair, though, most heads of family businesses have never gone through a succession planning process and may not recognize succession planning as a primary responsibility of the CEO.

The Family and the Transfer

Too often succession is seen as the actual transfer of the business from one generation to the next.  A successful succession involves both the transfer of ownership agreements, and the preparation of the next generation in assuming the responsibilities of leading the business and, likely, the family.

These abilities are developed over years, and it is not surprising then, some fifth-generation family businesses are known to start preparing their children for these roles while still adolescents - without knowing whether they will enter the family business or not.

Vision and the Architect

A vision for the family and business is important. The presiding CEO, however, must be the architect of the succession process, giving the next generation a directive of creating a vision and strategy for the family and the business under their leadership.

Sam Johnson, former CEO, S. C. Johnson: A Family Company declared the importance of this with his comment:

“Each generation has the responsibility of bringing to the business

their own vision for the future of the business.”

What the leader of a multi-generational family business wants carried from generation to generation are “the values of the family.”

Stewardship

One of the most compelling perspectives pertaining to family businesses is that of stewardship … being responsible upon assuming leadership and care of the family business for nurturing, developing, and growing the family and the business, and passing it onto future generations better than received.

Each family business is unique so the approach to succession planning should be tailored to the family’s specific circumstances and goals.

Succession and the Family Legacy

Legacies of a family business include the family history, values, stories and reputation. It reflects the family’s accomplishments and bears witness to its challenges. They are the imprints left behind by previous generations for following generations to learn from and experience.

It’s said in family-business-advisory circles that legacy springs from seeds planted in a garden by earlier family members who, while they will never see the resulting fruit, provide for future generations. In that sense each family business’ legacy exists even before its birth.

It may be helpful then, for family-business leaders to understand that their task is not to create a legacy from scratch but rather to sustain the stories that inspire family members across generations, together with a shared set of attitudes, values, goals and behaviors that characterize their own family.

The result is a multi-generational culture of harmonious family relationships, shared wealth, ownership, meaning and purpose.

Envisioning Family Legacy: https://www.thefamilybusinessleader.com/2020/02/29/envisioning-family-legacy/