Educating a business family about the succession and transition process

Listen to David Harland, Family Business advisor in Queensland, Australia, describe some of the recurring challenges encountered by family businesses addressing the transition from first to second generation. In a family business, it is important to create a succession plan before a unforeseen event takes place. This strategy will ensure that the rising generation will be prepared to take on responsibilities at a certain point in time.

In Australia, succession planning in many cases is focused on an event. So we all do a lot of planning with our lawyers, and we do the documentation well, so when the event happens these are the things that occur. The problems with this is that, is there a breed of leadership that is able to take this over at that particular time? How have they been involved up to this point? Are they going to be able to manage themselves and the family group in a leadership role once this event occurs? Well, what we can say is that succession is not about an event. Succession is really about a process and this process must be built around certain structures. There is international evidence to say that succession is really about, can be over a thirty-year period. And this evolves through the structures of governance at the family and at the business level. And it gets down to involving and communicating with the family members no matter which generation they are in. And educating them so that they are capable of taking up these positions and passing the baton so to speak in a stewardship model even before an event of death occurs, so that the prior generation in some ways can see these things happening in a living legacy. When you are dealing with the one representative of the family group who happens to be the patriarch say, sometimes the matriarch, but their view of the world sometimes may be quite different to the view of the rest of the family members. One particular gentleman that we started this process with, he kept saying to us that he was in the business for his family, for the next generation, but he had struggles because they would not step up to the mark. When you spoke to the next generation and other senior managers in the organization they would say, “He never lets us lead this organization. We go and try and make decisions but he is micro-managing us all the way.” He had many discussions with an objective advisor who said, “Nature arbores a vacuum.” So he had to find something that he was going to move into before he could actually leave the leadership role in the business. But he recognized that he had to leave to create the space for the next generation to grow into. Members of the family need to have a certain level of education so that they understand and contextualize what they need to do. And this is what is important in terms of education that the family start to talk. And they can only start to talk when they understand the problems that exist generically and that they are not out on their own. Education is the foundation to the successful transition from one generation to the next.