Eventually, every family business faces the prospect of transferring leadership or selling the enterprise. It can be a difficult milestone to cross, but it's a normal part of any organization's evolution.
The goal of any business transition is to optimize the results. In a family-run organization, that can be interpreted as achieving a successful transition of power among family generations or maximizing the sale. Each of these outcomes is doable, but only with a commitment to planning ahead.
My colleague Yannick Archambault and I have had a few things to say about succession planning over the past several weeks. We have discussed the perils of holding on too long, the orderly process in which good and effective succession planning should proceed, and how to manage the many emotions the very idea of succession—or sale—can trigger. In this post, I want to reaffirm the importance of succession planning in general. The fact is, an eventual transfer of leadership and power is inevitable. And if you don't plan for it, you are putting the future of the business—and possibly the family—at risk.
Where angels fear to tread
It's important to be clear-eyed about this: no one leads forever. But good planning can ensure that both the business and the family will indeed continue to be led and that risks will be managed.
What risks, exactly?
First, that family leaders will lose control over their legacies. After all, if you don't set the terms and expectations for a sale or transfer of leadership, someone else will step in to do it for you. That's why it's important that all generations within a family organization accept that first-generation leaders won't be in charge forever and to set goals and expectations for their departure.
These early conversations can be uncomfortable. What's more uncomfortable, however, is letting emotions, rumours, and assumptions take root in those conversations' absence. That's why it helps to enlist an impartial third party who can help both to make these talks productive and to envision a future beyond the current leadership. I've said it before, but I'll say it again here, too: it's equally important to establish a common vision, a north star, that sets the family's guiding values and ensures that every generation has something to follow when the inevitable ultimately arrives.
Second, failing to plan can also impact a business's ability to attract and retain talent. Like any business, a family organization's health is directly linked to the morale of its people. Employees who feel that leadership has a clear vision for the business are more likely to stick around. In contrast, those who see resentments and anxieties forming between family members may feel motivated to jump ship. That's not to say every employee should be given all the details on how the family will handle succession, just that having a plan creates a more transparent and motivating place to work.
Lastly, without a plan for succession, businesses can get stuck in a rut. With no clear direction for what an organization hopes to achieve beyond a succession or sale, it can be difficult to move forward with new ideas, innovative transformations, and long-term strategies. As a result, growth can stagnate, and teams whose futures aren't well-defined can be hesitant to plan ahead.
Expect the unexpected
Remember this, too: the need for succession can happen without warning. Sudden departures or deaths can cause chaos, forcing leadership to make quick decisions that are bound to have major impacts. It can be months—or even years—before these disruptions subside, and that's assuming family members have the direction and the motivation to pick up the pieces.
In short: the first generation may want to believe they're invincible, but the reality is that none of us are. When the time comes, it pays to act confidently and decisively—and that can't happen if you're only reacting.
The aim of any business is to create and sustain value. No matter how healthy a company is before a succession or sale, any transition introduces risks that can diminish that value, especially in the absence of a plan. That's why, for the benefit of everyone's future, it pays to make peace with the inevitable and make a strategy that will ensure the outcomes of any succession are in your family's—and the business's—best interests.