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Family business succession planning

A family business is any business in which a majority of the ownership or control lies within a single family and there are two or more family members directly involved. We've also heard it summed up in one word: complicated.

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This is especially true during the time of transition when the next generation, or successor, is being groomed for the eventual handoff. Having worked with thousands of family businesses over the years, we have a lot of experience in this area. Many of our coaching clients come to us because they seek outside guidance during this transitional period.

Family business succession planning: 4 suggestions

There are a myriad of issues to consider with succession, but one that is often ignored until too late is the impact succession has on the organization as a whole. While owners are struggling to give up control, and the next generation successor is busy trying to figure out how to move the old company into something that fits their new vision; employees, clients, partners and vendors are also feeling the impact.

If you're in a family business and you're thinking about bringing your child or another family member into the fold, here are some tips about how to do this in a way that has the rest of your organization on board.

1. Hire them because they're qualified

In any family business, the fear of nepotism can lurk under the surface. The best way to avoid that should come as no surprise. Hire the family member because they're actually qualified for the position. Don't hire them simply because they're your kid or your sister's kid. Don't hire them only because they can't find work on their own. For the good of the company, its employees, yourself and everyone else involved, treat this hire like you would any other. Ask yourself: If he weren't my son, would I still hire him for this job? (Conversely, if you're the child thinking about taking over your parents company be sure to ask yourself the same kind of thing: Is this really the company I want to work for?)

2. Honor the organizational structure

If your daughter is hired as a mail clerk and the next week you promote her to vice president over other qualified individuals, you're likely to run into some validity issues with your team. In an EMyth'd business, your organization chart provides every person with a clearly-defined role to play in your business. It defines the precise results that you want your managers and their direct reports to achieve. When you bring your successor on board, make sure they (and everybody else) understand where the new person belongs in the organizational structure and what they're accountable for.

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3. Empower your successor

Many business owners have trouble letting go of responsibilities. It's the classic case of the Technician not being able to give up the technical work of the business. We see it all the time. But when you couple that with the natural child/parent relationship, you can end up with a world of trouble. Often, the parent will appoint the child to a position of authority without actually letting the child exercise that authority. The parent ends up "getting involved" and this can undermine the child's role in the company — especially with other employees. The best advice I give my clients is: Stand behind, not between. Don't get in the middle, let your successor do their job.

4. Have a common vision

An EMyth'd business is an organism that works in concert for a common objective. If there's overlap in the transition process, a time that you both will be working in the business, it's important that you and your successor are on the same page.

At EMyth, we refer to your business vision as the "Strategic Objective." Developing your Strategic Objective is an entrepreneurial exercise that forces the leader to describe with clarity and conviction what their business is all about. When you introduce a new leader to the organization, it's important to be clear about where the business is going and what the destination will be like. Customers, investors, partners, and employees require this level of clarity if they are going to commit to going there with the new leader.

When a business has been around for a long time and you have employees who've been there with you, introducing a new leader — especially a family member — can instigate some resistance from your team. It's important to approach the transition with forethought, to organize it in such a way that your whole team understands the vision and how the business will realize that vision with a new leader.

Above all, open and honest communication is key to setting your successor up for success. If you need support to work through some common issues in family succession planning, download our free guide.

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EMyth Team

Written by EMyth Team

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