In my last post, Is Your Company Ready for the Next Generation, I explained the importance of the first of seven phases that make up my 7 Steps to SuccessionSM process. In that blog, the cornerstone of the Founder (G-1) was thoroughly developed.
This blog will focus on the Successor’s (G-2) first phase, or block, in the McCabe Arch. I will discuss some family, financial, and emotional issues that a successor often encounters. In this cornerstone, the next generation needs to demonstrate that they are committed to this career path and willing to start the succession planning process.
Remember, it is not an obligation to assume ownership. It’s just the beginning of the process and the successor must personally assume the responsibility to actively create a solid succession plan along with the Founder. In all of my assignments, both G-1 and G-2 understand this clearly.
UNDERSTANDING G-2’S ROLE
The successor must commit the appropriate amount of time to learn not only the business operations and support functions, but understand the financial impact of the company – all of the things necessary to run a business. There are many opportunities and obstacles that lay ahead for earning ownership rights; the successor needs to understand this before moving forward. In order to understand what is at stake, the successor should think about these 5 questions:
- Do they understand the future growth potential and marketing position to keep the company competitive?
- Will the company require an upgrade of its product line?
- Do they understand the importance of the business to other family members and the community?
- Can they personally make a contribution to the ongoing success of the business?
- If there are co-successors, can they peacefully co-exist and create a unified leadership and management team?
Sometimes successors will have answers to these questions immediately. Other times, they may think they know the answers, but then realize that there is more to it than they thought. It is important to go through this exercise with them. It’s one thing to THINK you know the answer; it’s another thing to be able to clearly state what it is.
Emotions may surface when they ask themselves, “Do I have the fire in my belly to run the company month after month, year after year?”
INTERACTIONS BETWEEN FOUNDER, FAMILY & SUCCESSOR
In a perfect world, the Founder and Successor would have a close relationship with one another, but that is not always the case. The Founder and Successor may have some tension between them that stems from G 2’s poor choices as a teenager or young adult. The Founder still ‘sees’ that younger person, not the person that the Successor has become.
Many times siblings influence the succession plan. If brothers and sisters are active in the company, jockeying for the top jobs can cause friction. Everyone thinks they should be ‘the one.’ A tranquil scenario would be where only one sibling is active in the business while the other siblings have successful careers elsewhere. Those siblings have expressed no interest in taking an active role in the family business. Even then, the topic of financial ‘fairness’ might flair up when the succession plan begins or when the post-modum plans of the founder are disclosed after a premature death.
G 2 and G 1 cornerstones could be placed fairly close together to improve both formal and informal lines of communication. There may be less need to involve trusted outside advisors; rather those advisors would simply provide assistance on technical matters.
If the Founder/Successor relationship is not ideal, the cornerstones can be placed farther apart from one another. This symbolic placement allows trusted advisors into the succession process to help create a consensus and keep the plan moving forward.
If there isn’t a viable company that can be passed on or a willing successor, the succession process shouldn’t begin. But if both sides are present and willing, this cornerstone should be firmly placed. All future steps ascend from here.
Contact me if you have any questions about this phase of the succession process or to learn more about my succession planning and business continuity services.