Succession: Planning & Ensuring the Future of a Business

December 9, 2024
|In Article
|By Jess Webb

Every CEO has a responsibility to ensure the success and longevity of a business.

This is especially true for family enterprises. And this can be a complex and emotional process because this is about mortality. Most people are not ready for it and don’t like it – even when the founder is well into their 80s.

I recently sat down with Francine Carlin, of the Business Harmonizer Group, to discuss the intricacies of navigating succession planning in family business.

No-one lives forever – or will stay in a job forever – so planning for succession is a realistic and critical part of business.

Here is the full interview with Francine:

Family Business is Big Business

  • Globally, the largest 500 family enterprises generate US$8.02 trillion in revenue – up 10% from 2021.
          •  2023 EY & University of St. Gallen Family Business Index, E&Y Global Ltd.
  • The U.S. economy is largely made up of family-owned or -controlled companies, totaling 87% of American businesses. They account for more than 82 million jobs, or 62% of the country’s workforce, and represent 64% of U.S. gross domestic product (GDP) – totaling $5.9 trillion.
          • First Bank Centre for Family-Owned Businesses, 2024
  • Family-owned businesses account for 63.1% of all private sector firms in the Canadian economy and generated 48.9% of Canada’s real GDP in the private sector, at $574.6 billion. They also employ 6.9 million people across the country, equivalent to 46.9% of private sector employment.
          • Family Enterprise Canada

 

Where to Start

Succession, says Francine, is a strategic decision. It’s a journey and a process necessary to ensure the on-going viability of a business, and to sustain harmony within the family community. Before getting down to the legalities, here are the first steps we recommend:

  • Hire an Expert Facilitator

A neutral, trusted masterful facilitator is critical to establish a safe environment, foster collaboration and ensure everyone’s needs and concerns are heard. While it’s not therapy, Francine calls it “facilitation with heart” that requires being open, vulnerable and willing to hear other people’s perspectives.

  • Start the Conversation Early

Every family member – whether they work in the business or not – needs to be at the table.

Necessary conversations include talking about retirement, choosing and grooming a successor, timelines, fair ownership agreements and protecting family wealth, which are difficult and influenced by family dynamics and history. Each family member’s experience of the business and the owner will be different, depending on their birth order and the life cycle of the business, over time.

These emotional, legal and technical conversations take time – often years. Without them, signed-off, fair agreements are unlikely.

“Sometimes the journey is a little more windy, more iterative and not prescriptive.

You have to meet people where they are.”

                      • Francine Carlin
  • Establish codes of conduct

Competition, gossip and feelings can make for explosive and unproductive conversations, so getting agreement on codes of conduct within and outside meetings is critical.

Talk about the values that are important to guide conversations and decisions before you talk about strategy and governance.

People need to see themselves in their agreements going forward and to see that they helped shape the direction forward.

  • Create Emotional Assets

A story approach can be effective to establish everyone’s unique and collective community’s connection to the business.

Ask people to tell stories – and share photos or mementoes – of their history and experience with the family business.

  • Create a Document of Agreement

While not a legal, technical document, an ‘evergreen portfolio’ is a charter that captures the agreements made and stand as a reminder for codes of conduct when ingrained habits and emotions take over. This can include:

    • Common values grounded in respect and truth
    • Principles of how you’re going to work together
    • Definitions of roles and levels of involvement. e.g. interest as an active employee or to distance themselves.

These agreements can, ideally, help the family to work better together, grow their generational wealth, and be good custodians of the company.

The Challenge

    • If you run a family enterprise, have you started your succession planning?
    • If not, what step can you take to begin?

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