Any entrepreneur or family-business owner who is considering an exploration of the subject of succession and transition planning has to begin with the question, “Why bother?” After all, most business owners are generally happy with how their business is going, and look forward to continuing to work in the business for a significant period of time, well into the future. It’s easy to simply dismiss the issue of succession planning—leadership continuity, in other words—or put it off to some future date.
But, whether you like it or not, the future has a way of sneaking up on you. At some point you are going to be changing places. You will stop going to the office every day, and someone else will take over for you. You will find different ways to enjoy yourself, maybe even crossing items off of your personal bucket list.
You are probably like every other entrepreneurial business founder and owner, hoping to create a successful future, both for yourself and your loved ones, as well as for the next generation of leaders of your company (who in some cases might be your own children). Unfortunately, many entrepreneurial businesses—and most family-owned and run entrepreneurial businesses—fail to successfully navigate the succession and transition process.
Only one in four such businesses makes a successful transition to the second generation, the others failing or being sold before the children of the founders get a chance to take over. Of those that do last to the second generation, only one in three makes a successful transition to the third generation. These are not encouraging statistics.
We’d like to help you improve your personal odds by giving you a head start on building a viable succession and transition plan. Our goal is to help you approach the track record of the world’s longest-surviving family-owned business, The Houshi Onsen, a traditional inn in Japan that is currently run by its forty-sixth generation of family members.
But be cautioned: even when a business owner works diligently to create business succession and transition plans; things don’t necessarily go forward smoothly. While the plans may appear sound, there are often many invisible obstacles and interpersonal land mines that blow up and destroy people’s dreams and relationships. As William Bridges has pointed out in Managing Transitions: Making the Most of Change,
It isn’t the changes that do you in, it’s the transitions. They aren’t the same thing. Change is situational: the move to a new site, the retirement of the founder, the reorganization of the roles on the team, the revisions to the pension plan. Transition, on the other hand, is psychological; it is a three-phase process that people go through as they internalize and come to terms with the details of the new situation that the change brings about.
Managing your way through these transitions is the key to successful succession planning. Founders and owners need detailed plans with carefully plotted paths to help the different generations of owners and leaders uncover these land mines and successfully navigate through them toward a promising future.
So when is the right time to start succession and transition planning? What should the timeline be for creating a succession team of managers willing and able to buy out the founder’s interest in the company—probably relying on the company’s earning stream to fund their purchase?
Some business owners in their mid-forties to mid-fifties ought to be moving on this issue now, even if they aren’t planning to retire for another ten years or more.
Even if you can’t imagine retiring, there are reasons to get started without delay. Events might conspire to cause you to change your mind about retirement. Changes in your family situation can be unpredictable. Personal health issues might slow you down. You could change your mind about your retirement timing and find yourself behind the eight ball on succession and transition planning.
If you want your company to outlive your own personal involvement, then, by default, you have to care about the culture of the organization, and the quality of the talent that you have developed. Moreover, every bit as important as the quality of the talent is the extent to which these talented people are a good “fit” for the culture of your company, today and into the future.
Whatever your choice of outcome, though, it won’t simply happen by itself. You have to take charge and lay out the necessary action plans. This is your life and your journey. Don’t take a chance and leave it to chance. Think about what kind of future you want to make for yourself and your company, and start planning for it.