The succession planning process is a challenge for an organisation to go through, but especially for a family business. Retaining a core culture for the business, while also ensuring the whole process is handled in a neutral manner, is one of the biggest challenges an organisation can face.
With research from PricewaterhouseCoopers (PwC) finding that 47 per cent of family businesses in Australia don’t have a succession plan in place, this is clearly an area businesses need to invest in.
Further research by PwC last year also revealed that only three in every ten family businesses have a documented succession plan, while only 18 per cent described their succession process as robust.
Both Managing Directors have come into the role after a lengthy succession process, with each of them having this process overseen by their respective fathers. Andrew and Zina have also been part of a comprehensive succession process, which saw them first selected for the role and then training for the position over an extended period of time.
Their respective experiences also give a number of useful insights into the succession, something every family company needs to consider if they want to successfully hand the business over to the next generation.
Identifying a successor
Among the first, and most challenging, processes when handing over the reins of a business is to select a successor. For many organisations, this is the hardest part of the process, as many may find it difficult to balance family concerns against the need to find the right candidate for the position.
For both Andrew and Zina, the succession process began with being considered for the job, however the process of making this decision varied between the two companies.
In Andrew’s case, the succession process was part of his father John Hewison’s plan to take a step back from the company and appoint a new MD internally.
'[John] could see that, leading out into the future, he had quality people coming up underneath him and the business had to carry on beyond him,' stated Andrew.
However, for Andrew’s father, the goal hadn’t been to specifically hand over the business to a family member, and Andrew went through the same selection process as other applicants.
'It was never John’s intention that I would take over as his son, so there hasn’t been that traditional aspect to a family business,' said Andrew.
'I applied for the MD role with two other colleagues and I happened to be the successful candidate who was selected at the end of the process by an external party. My father wanted to make sure he wasn’t playing favourites and that’s why he stepped out of the selection process.'
In Zina’s case, the selection process began with her father, who approached her directly about taking over his role within the company. Instead of completing an internal selection process, Zina and her father worked together to win over both the other family members and business partners who were involved in the company.
'David, my father, came to me and said ‘We need to start talking about succession planning and I need someone who can replace me who has vision and how can be creative and who is not just day-to-day but can plan ahead’,' said Zina.
“We then took the plan to [the family and business partners] and said ‘This is the succession plan, how do you feel about it?’ and we started putting in the stepping stones from there.”
For both Zina and Andrew, the process of being selected as the successor for the business was just the beginning – the next step was to embark on this plan that would see them assume a leadership role.
Embarking on a structured mentoring programme
Once Zina had been selected for the role officially, the succession process began. It involved her working with her father over four years in order to learn the skills needed to eventually assume the position leading the company.
A major part of this process also involved communicating with different levels to explain why they were pursuing the succession strategy.
'There were lots of steps that came with transitioning into this role. There’s lots of tiers to the business, so we had to ask ‘how can they see the changing of the guard?’,' said Zina. 'We made a point of building that trust with them and make sure they feel like they can talk to me and, equally, if I’m not happy with something I can say that to them.'
For Andrew, his father’s efforts to prepare ahead of time were essential for laying the ground for this transition.
'I’ve been a part of this company’s succession without being the key driver – obviously that came from my father – but I would say the key to a successful succession is planning ahead,' highlighted Andrew.
The process to take over the company was also staggered and, like Zina, Andrew spent time working with his father in order to learn the ropes and understand the business’s strengths.
'I was selected to take over about 18 months prior to physically taking over [the role] and then I was mentored underneath him for the 18 months.'
Both Managing Directors also attributed a large part of their success to the role of TEC, in giving them the support they needed to assume this new responsibility. Andrew found that 'particularly in my situation where I have never been an MD before, my ability to mix with people who are a lot more experienced than myself is incredibly valuable … I wouldn’t like to think what I would do without it.'
What can other family businesses do?
For both Andrew and Zina, the process has given them valuable insights into what makes for a successful succession process.
In Andrew’s case, the process has helped him to understand how important it is to keep the business’s operations separate from personalities and relationships within a family.
'Every family member needs to work really hard to be sure they don’t allow the personal relationships to overlap into the professional scene,' stated Andrew.
'It’s impossible to keep them completely separate, you just have to respect that there is a line and that for the most part you want to keep that as separate as possible.'
Having gone through the experience, Zina also thinks it’s important for succession plans to move at their own pace, rather than be forced into a timeline.
'In my experience, I would say ‘don’t rush’ – if you’re on a timeline and it isn’t working for you it makes it really difficult to get it done, especially if everyone is fighting against it.'
Clearly there are a whole range of different factors that a family business will need to consider when looking to hand over the business. From the process of selecting a candidate through to establishing a plan to hand over responsibility to the next generation, finding a strategy that is right for its situation is vital for every family business.