Prior preparation needs to be done for the replacement of for instance a CEO in family firms.
The role of advisors is important as they help with the transition of leadership between the current-generation leaders and their successors. Advisors help family-owned businesses establish their leadership skills. This process is relatively long if the successors want to be accepted by all employees. They need to take higher managing positions gradually to be respected.
During this process, the successors are asked to develop different skills such as leadership. This is where the role of advisors fully exemplifies its importance. It is when the managing position is shared between the first-generation leader, the second and the advisors. An advisor helps with communication because emotional factors between family members can badly affect the company. The advisors help manage everything during a predetermined period of time and make the succession process less painful and less eventful for everybody. In these cases, interim leadership is usually what is best for the company. The employees can get accustomed to changes while getting to know the future CEO.
Business planning
With the global proliferation of SMEs, issues of business succession and continuity have become increasingly common. When the owner of a business becomes incapacitated or passes away, it is often necessary to shut down an otherwise healthy business. In many instances, successors inherit a healthy business which is forced into bankruptcy because of a lack of available liquidity to pay inheritance taxes and other taxes. Proper planning helps avoid many of the problems associated with succession and transfer of ownership.
All personal and business aspects should be taken into consideration. This is also a good time to plan an efficient transfer from the point of view of possibly applicable estate taxes, capital gains taxes, or other taxes.
Family business
Small business succession tends to focus on how a business will continue to operate once its founder or initial leadership team retires or otherwise leaves the business. While small businesses on the whole often fail after the departure of their initial leadership team, succession planning can result in significantly improved chances for a business’s continuation.
Within the context of succession planning, where a small business is owned by a group of managers or partners, thought should be given to the transition of the business to the partners, how departure from a business will be managed, and how shares or ownership interest will be valued for purposes of sale or buy-out.
When succession occurs within a company’s hierarchy, succession plans should consider issues that may arise relating to retention of the intended successor, the possibility of jealousy by other employees, and how other employees will respond when they learn of the succession plan. Additional issues are likely to arise if succession is to a family member, particularly if more than one child of the managing owner works for the business or if siblings who do not work for the business will gain shares without having invested time and energy in the business.
No part of the process should be rushed, with the integration process being expected to take roughly two to five years.
Author
Fred de Boer, Senior Management Consultant at PUM
