One can definitely see a great leap that has occurred in terms of family business. From an informal setup the businesses now have a more structured formal setup. Businesses run by two or more family members that are at least first or second generation businesses are termed as family businesses. It means these were set up either by siblings, father or grandfather or great grandfather. And then carried forward by the subsequent generations.
According to Forbes India, 70 percent of the family-owned businesses fail or are sold off before they are passed on to the second generation due to poor succession planning. How to take succession planning forward and succeed at it, is what we will unravel through this piece.
Challenges in a Family Business
Family business has received a wide range of criticisms from a lot of varied sectors. With some saying it promotes nepotism and doesn’t give a fair chance to the deserving. While others saying same family leads to same thinking in terms of values and the leadership is also stagnant, thus not bringing new thoughts and innovation.
A Family business weakens due to disputes and disagreements within the family. Siblings or cousins are unable to either get along with each other or do not find their expression in their family business. This results in animosity within the family members and as a result affects the business.
Another major issue which crops up, is the matter of ownership, as the ones who have established the business find it extremely difficult to hand it over to the next generation as they think the new generation might not be able to do justice to what they have been doing. Here the trust issues can be evidently noticed. Beginning from the guards to the employees to the top most leadership, one can see the loyalties being confided in the older family members and hardly being passed on to the new generation. These can be seen as one of the major challenges of the family business.
Break Free of Such Challenges
In order to deal with the challenges of family business and make it an ideal working scenario, it is imperative to plan succession to ensure the continuity of family businesses. This is even more significant where members in the family are many and business stakes are high.
Succession Planning not only involves handing over of business interests to the next generation and trusting in their capabilities. But at the same time it means preparing the organisation for this sort of transition. The next generation needs to feel their worth and their existence being important in order for them to give their best. Succession planning in family business, if done well, almost guarantees a long lasting organisation.
The major hassle about succession planning is that the promoters are either too sceptical of their next generation or are too enamoured by them. This leads to imbalanced decision making by the promoters which results in unsuccessful succession planning. Watching interests of the family and business are interdependent. And hence both needs have to be catered simultaneously. This is why success over long run is possible only when business keeps scaling up to meet growth and market needs, and if this is not done joyfully, then next generation does not want suffering and misery and slowly lose interest.
The Ultimate Goal
Achieving Success, Scale and Joy is the Goal of each organisation. This is a well thought out, planned and deliberated process. It is an ongoing process in the entire life cycle of an organisation. Family leadership strengthens family bonds and makes the top leadership more sustained and everlasting. A family which is based on trust and belief has higher chances of surviving than the family involved in divergences and conflicts. If family harmony can be maintained, then harmony in business is also present.
In order to make succession plan successful for all, the founders need to simplify and curate processes to a level where adoption is fun. If adoption is fun then sharing the vision with people and customers becomes an easier task. It also leads to collaboration both internally and externally. Therefore charting the road map for the next 100 years should be the priority of an organisation so that even if the founders are not there the company has a succession planning intact to carry forward for the next 100 years.