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Succession planning is where giving and taking meet (“un rendez-vous du donner et du recevoir,” an expression coined by President Léopold Sédar Singhor, of the Académie Française.)


The Art of Transferring


There is nothing more frustrating for a son or a daughter than to hear their father/mother tell them: “I built this for you. One day this will all be yours.”


Parents build a business for themselves. They are the ones who develop a passion for what they do. They are the ones who attend the gala dinners and have their pictures on the cover of business magazines.


They are the ones who get all the awards, and who shake hands with the heads of state, ministers, and other government officials. Ultimately the parents, as founders, receive all the gratification they want from their business.


However, at one point in time, responsible patriarchs/matriarchs need to ask themselves the hard questions:


“What do I do with all this? Do I pass it on? Do I sell it? Do I keep it for myself or que sera sera?”


If the conclusion is to pass it on, then what happens next? How is this achieved in an orderly and non-disruptive manner?


Succession planning in a family business context refers to the transfer of the “baton” (some would say the “flame”) from one generation to the next.


Personally, I would use the term flame, but only if I am confident that the transferors and the transferees are indeed in sync. Otherwise, inevitably, one party will get their fingers burnt in the process. Often, a father’s dream has nothing to do with his son/daughter’s dream. In this case, the term baton or mantle becomes more appropriate.


The act of transferring something to someone else requires both the transferor and the transferee to put themselves in a certain mind frame.


Succession planning refers to the three elements comprising a family business:


Ownership + Shareholding + Management.


Beyond the transfer of shares and the financial interest in the family business, there is the transfer of the (non-tangible) “spirit” of ownership, which is integral to any given family business.


It is often assumed that the transfer of the “spirit” of ownership is something that happens by osmosis, or perhaps something that is hereditary.


It is believed that by the mere fact of being born into “our family,” children automatically inherit their parents’ business mindset and will pick up the traits and core values of “our family.”


On the face of it, this is perhaps a realistic expectation on the basis that “blood is thicker than water,” but in reality, there are many practicalities and external influences that impact this process.


Again, osmosis is not a passive action. For osmosis to occur, and for the NextGen to become assimilated with the thoughts, culture, ideas, values, and vision of their parents and grandparents, they must spend time together and interact with one another.


With the demands of day-to-day life, this time becomes scarce and  often falls low on the list of priorities. Today’s social media has undermined considered opinion, the mobile phone has encouraged casual communication at the expense of necessary communication, and texting has largely overtaken the  bonding qualities of conversation between friends and within families.


Investing in the Transfer of the “Spirit” of Ownership


The stakeholders of successful family businesses must be encouraged to view succession planning as an investment. They invest time, effort, and money to achieve a smooth and equitable transition.


In exchange, they expect a proportionate return on their investment (ROI).


Studies have shown that where an end result or reward is identified, people are much more likely to allocate time and effort as an investment in any given task.


The ROI for a business family in undertaking a succession planning journey is ultimately the success and continuity of the business in the hands of the next generation. As ROIs go, this is a fairly abstract measure or indicator, as this success and continuity are notoriously difficult to quantify and monitor.


Success is often perceived not to be measurable prior to the completion of the succession. This is a misconception in the notion of succession planning. Excuse the cliché, but the act of succession

is not an event that takes place overnight; rather, it is a journey. That being said, it is human nature to want tangible and concrete targets, and to this end, it is important to introduce key performance indicators (KPIs) to monitor and measure success and progress during the journey.


In traditional discourse, the notion of succession planning is predominantly associated with the transfer of power, and is approached from a leadership and management perspective as a process for identifying and developing successors to replace their seniors following their retirement or departure. Ownership, however, is often taken for granted, and not much attention is given to it.


Experience has shown that in a family business environment, no matter is too insignificant and no individual should be taken for granted. KPIs should be introduced across the board and used as a monitoring tool.


KPIs could also apply to transferring ownership and the related “spirit” of ownership, and to the vital preparation of future owners for their impending role.


KPIs can also be used as a tool to measure “what’s in it for me” for a family member. “Am I (my achievements, my ideas, my family, my children, my importance) being acknowledged, recognized, and taken seriously?”


There Are Two Main Types of Succession Planning


Succession planning can be preemptive (during the lifetime of the individual(s) being succeeded) or reactive (following a crisis or following the death of the individual(s) being succeeded), though arguably, reactive succession is not necessarily a plan. Reactive succession occurs when little heed has been taken of the modern adage “to fail to prepare is to prepare to fail.”


Typically, a family business succession planning exercise begins when the current active owner(s) of a given business wish(es) to hand over ownership and/or management to the NextGen, in an orderly fashion.


This may be at a time when the incumbent owner, who may have had success early on in their family business enterprise, wishes to step down while they still have time to enjoy the fruits of their labor. Alternatively, it may be when they are aware that they are reaching the end of their business life and realize that succession will become necessary.


In some cases, however, a succession plan is triggered following the occurrence of a major crisis, such as a family feud, a dramatic loss of capital, or the death of a patriarch or a key family member.


In any event, the passing on of a family business and the agreement to take over a family business is always a leap of faith for all parties involved.


A founder passes on the business with the hope that the NextGen can effectively take it over and run with it. Likewise, the NextGen takes over a business with the expectation that they can do justice to the business and to their predecessors, preserve it, and take it to the next level.


I don’t know what the future may hold, but I know who holds the future —Ralph Abernathy


In general terms, a transfer usually puts into play five elements, as follows:

1. The parties to the transfer: the transferor(s) and the transferee(s)

2. The object of the transfer

3. The relationship among the transferee(s)

4. The relationship between the transferee(s) and the object being transferred

5. The relationship between the transferor(s) and the transferee(s), post Transfer


Excerpts from Dynastic Planning - A 7-Step Approach to Family Business Succession Planning and Related Conflict Management

By: Walid S. Chiniara

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