Succession Planning – Need of the hour for Family Business
“Ensuring frictionless transition within the group will be the top-most priority” – HDFC Ltd Chairman, Mr. Deepak Parekh.
HDFC Ltd., a financial giant is now setting in motion a Succession Planning process keeping in mind the impending retirement of its highly successful CEO.
Corporate houses like Tata, Infosys did face issues in identifying the next generation of leaders couple of years back. However, in the US the exit of Mr. Bill Gates or Mr. Steve Jobs did not affect their business or investors.
Let’s understand this better.
You may have spent over thirty years starting a manufacturing business with great motivation and commandeering it to great heights. Now with age catching up, you want to retire or at least slow down. What will happen to your business? Who will take over after you? There could be two scenarios:
Either your sons/daughters prefer to branch out on their own – as technology professionals or CAs – or find settling outside the country more financial rewarding;
Or your sons/daughters are interested in taking over your enterprise, but they lack the necessary skill-sets since they are fresh out of college. They obviously need to sharpen the knife on various counts: technical expertise, market knowledge, customer services, employee management, mandatory/legal requirements, and more.
Assuming the second scenario is your preferred option, now the question is how to bring your sons/daughters into the organisation. Do you introduce them into your business as Managers or parachute them to leadership positions or even fill one of them into the CEOs chair? Who will train them, you or your ‘trusted’ employees? What method of training would be imparted? When will they be ready to take over the mantle? Are there any measurable matrix that can track their development? Many entrepreneurs don’t have answers to these questions – we don’t know about you.
Many entrepreneurs, sadly, don’t do any Succession Planning at all! WHY?
I have listed below some reasons that emerged from few surveys and from interviews I had with entrepreneurs.
- They never felt it was relevant (only to become victims later).
- In most family businesses, it happens accidentally.
- Succession planning is not a strategic decision.
- Family issues hamper succession planning.
- Father knows the subject well but lacks ability to teach.
- Father can teach, but son won’t listen to him.
- Educational Gap, Communication barriers, Technology divide.
- Functional style & risk-taking ability.
I think one should not avoid or delay thinking about succession planning or regret later. Nov 21, 2016, PwC Report says, Only 15% of Indian family businesses have robust succession plan.
So why doesn’t succession planning happen at all in most cases? Well, business owners lacking clarity on the best way to go about it.
It is a complex process and the best solution is taking help from an external agency. Such experts will develop a plan for the successor that would include transformation of attitude, step-by-step learning program and leadership capabilities etc. Based on the ability of your successor to take responsibilities, solve problems and handle stress your withdrawal from the business enterprise can happen in steps.
In few years you would have transferred the whole organisation into a safe hand smoothly. Th growth and stability of your successor will give you confidence that he/she can handle the responsibilities comfortably in future.
And this satisfaction will allow you to relax with peace. You still can play a limited role by mentoring the successor on policies, decision-making and strategies.
So, are you ready for the Game of (giving up the) Thrones!