BRIGHTON, Mass.—It’s harder than you think to pass on your family business to the next generation, the Harvard Business Review reports. “When a family business assumes that the next generation can simply take over without pausing to consider the CEO job description, governance, or the evolving business context, they may be setting themselves up to fail,” the Review wrote.
To avoid potential pitfalls, follow these five steps. “Just as a business must reinvent itself as markets shift, so must a business family reinvent (or at least thoughtfully revisit and refresh) its ownership and leadership model,” the Review wrote.
- Articulate the changing dynamics. Understand the diversity of the current and future stakeholders and seek “to explore how those differences might affect the future.
- Look outside the company for advice. Ask other family businesses how they navigated the change in leadership and what they learned along the way.
- Be open-minded. Tradition can be good, but don’t get fixated on “but that’s how we’ve always done things here.” Rather, discuss with the owners how to stay true to the past and still thrive in the present and future.
- Don’t commit to succession decisions too early. Don’t commit prematurely to a succession plan that might alienate other family members. Instead, have the mindset of developing a plan over time to allow for new information and changes.
- Talk openly about plans for the future. It’s smart to be open about what will happen when the current leader steps down. Don’t keep family members in the dark about who will be following in his or her footsteps.
Remember, “the next generation may support this sequel or may have different ideas. Doing all of this will not only create a shared view of the future and drive commitment from both generations, but it will also provide the next generation with a roadmap for how to eventually transition to their own children,” the Review wrote.
For more on succession planning for your family business, see “4 Tips for Successful Succession Planning” in the June 2018 issue of NACS Magazine.