Has your succession planning come to a standstill and you don’t know why or how to fix it? Fear, confusion, uncertainty, an undefined action plan and/or dysfunction within the family or business can all be contributors.
“Not every business struggles with all five of these challenges, but I usually see a number of them in almost every situation when succession efforts have stalled,” says Ricci M. Victorio, CSP, CPCC, managing partner at Mosaic Family Business Center.
Smart Business spoke with Victorio about five reasons succession plans stall and ways to overcome them.
What causes succession planning to stall?
Succession is about transforming the entire organization, not just transitioning a business from one person to the next. Shareholders, family members and key managers need to buy-in to the transition plan or they may undermine your efforts.
Business owners dealing with multiple issues stalling a succession plan shouldn’t feel doomed. You are not alone and there are professionals who can help you get unstuck. A succession coach or adviser can help guide your company through the emotional issues of this transition and identify early warning signs to prevent a smoldering fire from becoming a five-alarm blaze.
What are the common hang-ups and how can they be overcome?
Fear appears in many forms. In a family business it can encompass the fear of failing your family’s expectations or uncertainty about sufficient leadership skills. Such fears can transform into overwhelming doubts. Parents may fear sharing financial information with their children because of worries over perceptions of inequality in their estate plan. When talking about money and careers, familial bickering and artificial harmony replace understanding and trust. A coach can provide guidance in discussing emotional topics without confrontation, how to stay open, asking questions and considering differing opinions without blowing up.
Confusion often comes from being afraid to communicate or commit to action. Without clear communication or an execution plan, key personnel and family will become anxious worrying what is going to happen, who is actually in charge and how it will affect their security, which creates the added stress of business productivity going flat. By creating a timetable, sharing it with family, employees, your vendors and clients, and working with them to make sure it is clearly understood, you can sidestep this challenge.
Uncertainty over the economy and the business’ success has hindered many plans. You may be worried about the business value or if your successor can manage a significant bank loan. For family members, consider using a stock redemption program rather than a straight buyout, lock in key managers with a vested retirement plan, make sure you have a successor development plan and hire the best talent possible for the transition.
An undefined action plan can lead to skipped steps or no follow-through. The succession plan should be integrated into your strategic plan with specific and documented expectations, a timeline, ways to measure success and regular checkups.
Dysfunction — infighting, jealousy, sibling rivalry, secrecy and entitlement will stall family business succession. When relationships are out of alignment, people need to be heard, acknowledged and feel like they are making a contribution in dealing with important issues. Afterward, it’s possible the succession plan may look different than parents originally intended, but you will most likely have everyone on board, moving together. Even in a non-family business, not addressing existing dysfunction could lead to a failed succession effort.
There is a plan for every situation, but there is no standard solution. When your plan stalls, don’t be embarrassed to get help. Succession requires a great team, which includes the transactional assistance from your attorney and CPA, advice from your financial planner and a succession coach who focuses on the transformational goal of achieving a successful business transition while preserving family harmony.
Ricci M. Victorio, CSP, CPCC, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or [email protected].
Website: More tips on how to have a successful succession transition.
Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.
