Effective Ways To Do Family Business Succession Planning

The traditional family business succession planning in Nigeria observed from the last two generations is for parents to set up a business and almost from birth, decide which of their children will inherit and run the business after they retire or are gone.  While this is a genuine succession planning, Nigeria has had more of failed attempts than success stories when it comes to family business succession. It fails, because most parents get emotional and fail to provide the needed structure for the success of such successions. This is partly the reason while Nigerian businesses retire with the owners and we have lesser cases of businesses that transit from one generation to another. An example, look back to major cities in Nigeria, which of the top brands and ‘door-opening’ brands of the 1960s, 1970s, 1980s, 1990s or even early 2000s are still here.  Are memories of some names coming to mind already?

What is Succession Planning? I like this online definition that says “Succession planning is the process of pinpointing key needs for leadership and intellectual talent throughout the organization over time and preparing individuals for present and future work responsibilities”. Please note the key words needs for leadership and intellectual talent as we continue our discussion on this subject. 

Some of us may be at a stage when we are considering our children as successors to manage our businesses; while some are thinking about it for another ten or fifteen years from now.  And some of us are presently ‘running our show’, but in less than thirty years from now, the reality of succession may face us. What will be our continuity plan when that reality hits? Wherever you belong on the scheme of things, here are some items you may want to, not only tick off, but consider seriously. 

Formal Education is not enough: Yes I have this on top of my list, because usually, some parents think that once they have sent their children to the University, encourage them to do a masters training or even an MBA, it has fully prepared them for family business succession.  Formal education should only be a part of the plan, and is not enough to prepare anyone to run a business that his or her parent has run for say twenty years. In those years, a lot has gone into the business: culture, goodwill, modus operandi, norms, values, ups and downs, successes and failures, formal and informal operations which cannot be properly managed with a classroom experience only.

The Right Organisational Structure: Organisational structure is relative to type, industry and size of a business.  But organisational structure is critical, no matter where and how you are playing.  If you are considering a family succession plan, it becomes more vital to create the right structure for your business way ahead of time.  It can never be too early to create an organisation structure, but it can become very challenging when you wait too late.

Systems, Processes & Procedures:  To make the transition less challenging and at a reduced cost (monetary, emotional, time and other resources), it will be important, early in your business to run a system that is process-driven, with procedures for key job activities and departments;  in addition to detailed policies that guide the actions of everyone in the business. Not just an informal way of giving and receiving instructions, but processes, procedures, standard operating system and policies that are documented, communicated, implemented, followed through and reviewed as the need arise.

Personality Trait: Every human has a personality trait, and that largely determine what one is  good at and what one will not be so good at. Some people, their personality makes them good for indoor, desk-bound jobs, to others such a job will be a punishment, because they do better with outdoor jobs that keep them on the move. So it is important to consider your type of business, its demands and do a personality trait test with your child to determine if he or she is truly fit for the business or if the responsibility is more suited for another child rather than your first son or first daughter.  I do not like the sight of blood or violence attack; so if my father had insisted I study medicine or become a nurse, I would have been a disaster.

Test their Interest:  You may have an engineering business and have succeeded in having your child study engineering as part of your ‘unofficial’ succession plan.  After graduation, there is need to test the continued interest of your child to follow the path of Engineering, before you begin a detailed investment in succession plan. His or her interest may have been changed by his encounters and exposure by the University environment or overall societal environment as he/she matures.

On the Job Training: Start early on the job training for all your children whether you see them as possible successors or not.  Create an Internship and Volunteering plan for each of them right from secondary school to university graduation.  Some part of their holidays could be spent working either in your business or the business of your friend, associate, partner or even client. It is an exposure they will be forever grateful for.

Second part of on the Job Training:  I recall a proverb in Nigerian Igbo tribe that says, you do not give a child a coal of fire to hold.  It will burn him or her (paraphrased). Power corrupts and absolute power corrupts absolutely, the political scientists say.  So usually, because some of our parents are unprepared for family business succession, by the time some of their kids are coming out of university, the business is yearning for survival and fresh ideas; and the natural thing to do, is to bring a child straight into leadership position.  It is a coal fire that would burn the child and the business.

First recommended option will be to have your child learn the ropes of the job by going through the career path structure in your business.  Let the HR Manager take him/her through the interview process. Get them employed at an entry level and allow them to learn and grow through the process.

Second recommendation will be to allow your child after university graduation to work in other organisations to learn, grow and build a successful career meritoriously.  If your child wants to do their own thing after school, do not discourage it either, the failures and successes will prepare him or her for the role awaiting him/her in future in your business.

Whatever type of job training (from internship to the real job) that you choose, make efforts as much as possible to ensure your child learns through most of the business circle – from Front Desk management, to Customer Service assignments, General Office Administration, Human Resources Management, Accounting, Production or Service delivery circle.  It does not necessarily mean being an accountant when they are not professional accountants. But passing through some tutelage period in key sections of business operations will do more good than harm.

When the time is set to have your child or children take on full responsibility of running your business, here are some things you may want to also consider:

Accountability:  Make your child accountable to the organisation and the team.  A more functional approach is that they are responsible to a Board of Directors. Where there is none, because of the type of business, set up an Advisory Board of men and women they would learn from, who will also bring value to the table and let them have a reporting responsibility to the Advisory Board.

Discipline: I would assume by this time that discipline is already embedded in the culture of your business.  Where there is no sacred cow, and everyone including your child adheres to the rules of the game, the culture, norms, values and work ethics of the organisation including the processes, policies and procedures.  Where this is lacking, failure is on its way.

Professional Support: Of course remember to seek professional advice from your Lawyers, Financial adviser, Estate Planner, Human Resources and Management Consultant to ensure a good foundation and good closure. Professional support will give everyone involved soft landing, especially your existing employees.

Prepare for Environmental Factors: Finally, I would add, make sure your succession plan includes a proper strategic plan that prepares the business five to ten years ahead; and take into consideration possible political, economic, social, technological or other environmental factors that can affect the succession plan or the existence of the business itself.

Conclusion

Family business succession plan is a matter to be well thought-out and implemented, not a reactionary approach to implementation and certainly should not be allowed to be incidental.

It is a way to create an enduring legacy for the family; it can be fulfilling to all parties and stakeholders, but it all depends on the preparedness and the work that goes into it.