The majority of small business are family owned. In many case, business have been handed down from one family generation to the next. It can be wonderful and rewarding experience or it can be regretful decision.
There have been many book written, and course developed, that explore the experience of passing down a business to a family member. Family business succession planning is not necessarily easy, particularly when there are decisions to be made concerning who assumes what role. When there are many siblings, the problem is extenuated. How does the owner decide who should inherit what role? There are tough questions that need to be answered:
- Who has the greatest interest?
- Who has the greatest capability?
- What will be the role of those not chosen to lead the operation?
- What will the impact of these decisions be on the cohesion of the family?
- How can the answers of these questions be determined?
There must be good communication. There must be clear standard in place to evaluate family member’s interest and capabilities. Successorship should be earned, not appointed. In most family business situations, potential successor are exposed to the business at an early age through sharing information and working on part-time basis. When ready, they should work full-time, in non-managerial functions. After learning the functional aspects of the business, they may assume managerial positions. Often they are sent out to work in other businesses to gain a more well-rounded perspective of the industry or business environment. Eventually, they assume the presidency, most likely with the direct consultation of the former president until they and those surrounding them feel confident.
During all stages of succession there should be objectives planned to measure the individual’s performance and aptitude. Inherent in any successorship plan should be the recognition that the designated individual(s) should have the freedom to pursue a career not related to the family business.
Family business have many advantages. Family pride and loyalty are the reason they are often more successful than their competitors. The cultural value of the family remain intact from one generation to another. They can serve to keep a family united in seeking objectives and goals. They give the family common ground and mutual interest. They can give employment opportunities to children as they grow, and career opportunites as they mature. The reward are many, however, they can backfire into an arena of confrontation if not handled properly by the founding member and those who have been passed the authority.