All business owners face the task of trying to determine what to do with their businesses when they retire or in the event of a sudden death: sell to the next generation, sell to a 3rd party or sell the assets and wind-up the business. According to the Canadian Federation of Business, only about half of business owners have a succession plan. Not having a plan can create a lot of turmoil as you would expect.
If there is a next generation to consider and there appears to be interest, owners are often encouraged to start gauging their children’s interest and competency in the business when they are teenagers or young adults by bringing them to work at entry-level jobs in the business.
However, according to a recent Harvard Business Review blog, this approach to planning for the next generation may be considered “short-sighted” in some regard (my words). In fact the opposite was suggested. Children should be encouraged to try to build a career outside the business before they are encouraged to come into the family business.
With the belief that family business owners bring their kids into the company early on and “damage” them, by perhaps making it too easy for them or not setting them up properly to succeed, the suggestion was made that owners should be encouraging their children to develop their skills and competencies on the “outside” and then interest them in coming back to well defined roles in the family business, which maximizes the best use of their acquired skills and experience.
Creating a next-generation development program to develop the necessary skills and competencies and helping the next generation find their right roles in the business was suggested as essential elements in business succession planning. Getting the group dynamic right, that is how they work together and communicate, helping them find their voice in the organization, perhaps with the help of non-family members in the business, and giving them room to operate – “know the rules of the room they are in, be it the family room, the owner’s room or boardroom” – were also suggested as essential elements to business succession planning.