By Lois Lang
When it comes to succession planning for a family business, one thing is certain: Most family business leaders don’t do it, they don’t do it well, or they wait to do it until it’s too late. While the CEO longevity in non-family businesses is an average of six years, for a family-owned business, CEOs tend to stay for 20 to 25 years. Sure, that long tenure contributes to leadership stability and consistency, but it can also fuel flat growth, narrow business focus and decrease leadership drive.
Additionally, when the CEO and other top-level executive family members do not step aside in a timely manner, it causes a high level of frustration in the next generation of staff who’s ready to charge forward and make their mark. Once it becomes clear the children might reach their mid to late 50s before taking over, it becomes hard to hold on to the ambitious ones. That’s why all family businesses need to have a solid succession plan in place—one that helps the senior generation leave with ease while welcoming the well-prepared next generation.
While succession planning can happen at any level within the organization, we commonly think about the top five key positions for a written, structured succession plan. As you plan your company’s future leadership, keep these points in mind.
Think Beyond Seniority
Many family business executives choose future leaders based on seniority, such as “he or she is the oldest, so he/she will be our next CEO.” Of course, a single owner can make the easy decision to pass the business leadership to the child of his choice.
But this “easy” choice can backfire if the adult child or the one with the most seniority hasn’t gained respect from other family members and employees. In other words, sometimes the easy or obvious choice isn’t always the best one. Therefore, be open to broadening your search beyond the next of kin.
Evaluate Key Criteria
You should also embrace a more professional process of skill evaluations, performance assessments and reviews of career history. The more thoughtful, objective and inclusive the process of bringing on the next leader is, the more likely the transition will be embraced.
Succession readiness calls for a written transition plan and an individual development plan for the future CEO within three years of the planned succession date. Implementation of the plan may involve identifying other executive team members with succession needs, building a coaching plan, and providing stretch assignments in different functional areas of the company.
Rank possible successors based on key criteria. Rather than just appoint the next oldest family member to the leadership role, consider creating a list of all the possible successors and rank them from 1 to 10 (with 10 being highest) in each of the following areas:
- Past work experience and advancement history
- Geographic mobility, if appropriate
- Learning agility
- Prior leadership positions including size and scope of leadership responsibilities
- Advancement potential and desire
- Interpersonal skills
- Assessment of the individual compared to the company’s values and leadership competencies
- Past performance ratings
- The ability to take risks
- Decision-making ability
- Problem-solving ability