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Grooming the Successor in a Family Business
The majority of businesses in most countries are classified as family
businesses. A family business is any business is which a majority of the
ownership or control rests within a family. It might be that just one
member works in the business while others serve as ‘silent’ owners or
directors.
Succession in a family business
is the process of transferring leadership to another family member. It
is not a single event but rather a planned series of actions that
prepares the future owner to take over the responsibilities of heading
the business.
Succession usually begins when the children of the owners learn about
the enterprise from their parents. They ‘grow up’ with the business and
subconsciously learn much from the behavior of their parents. They may
want to run the business someday or they may not.
Eventually, if one or more members of the next generation have an
interest in taking over the enterprise, the process of selection takes
place. Selection is the process of choosing who will be the firm's
leader when the owner retires or steps down. It can be done on the basis
of age, qualifications, abilities and interest. It is a sensitive and
delicate process.
Once the identity of the
successor has been determined steps must be taken to prepare that person
for control of the enterprise. It’s possible to transfer this control
from one family member to another without creating problems for the
business if sufficient forward planning has been done.
Training or educating the successor can be a challenge. The younger
person may need extensive training and/or education to succeed in the
position and a parent may not be suitable as the source of this
knowledge. It is an issue that demands in-depth consideration to work
properly.
Sometimes an alternative trainer may have to be found within or outside
the firm. This will be a person who is committed to the task and action
oriented. This person will need the support of an educational and
training program that is results oriented and designed to produce a
well-trained beneficiary.
There is a training variant of the management by objectives (MBO)
concept that’s called the training by objectives (TBO) concept. TBO can
be an effective method for providing the training and the evaluation of
successors within an objective and goal-driven framework.
In the TBO process, both the trainer and the trainee work together to
define what the trainee will do, what the timing of each phase of the
action will be, and how the evaluation process will take place.
This system places the successor in a responsible position in the
business that has well-delineated objectives. It also provides steps of
increasing responsibility as training and business goals are met and
more rigorous goals are established. This enables the successor to enter
the firm in a well-defined position with a specific job description.
The owner’s experience in the business will enable a determination of
which criteria are necessary for good training. Usually, an owner will
want to assess a successor in the areas of decision-making, leadership,
risk management, ability to deal with people, and how they handle
stress.
The successor must also learn the culture of the firm. They are not
there to impose their style on the organization; they are there to learn
the way that ‘we do things here’. If cultural change is required it will
be under the auspices of the new owner and not during the training
period.
While undergoing training the successors should be also be introduced
into the owner’s ‘outside’ network of contacts. This can include the
firm’s customers, bankers, accountants, lawyers and other business
associates. This will give them time to get to know the successor and
perhaps create some opportunities for the successor to spend time in
those other businesses.
Outside formal education may also be needed for the successor to manage
the business. Courses in business management, accounting, law and other
topics related to the owner’s role are often beneficial. This highlights
the need for long-term planning well before the owner intends to retire
or leave the business
Whereas families are emotional
and determined by birth, businesses are essentially unemotional and
conducted within a framework of contracts and legislation. To function
effectively at the head of a family business, the designated family
member will have to put aside many of the emotional aspects of the
family and focus on the business.
For this reason, their education and training must be a good fit with
the requirements of the position. Grooming the successor in a family
business is something that takes careful planning if it is to have a
chance of success.
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