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Succession of Leadership: operational management to strategic insight

Once the successor has aquired some basic business skills, he or she can move on to developing the capabilities and qualities associated with leadership. The successor’s focus at this stage stretches beyond the present - to when he or she will be ultimately responsible for business operations.

Our experience is that effective family business leaders have insight: to business, to family, and to self. Many of the prior steps to succession planning will serve to nurture and develop successors through various operational roles build insight to business and self.

Engaging with the family, especially if the family business has also embraced governance that involves both business and family governance, will serve to develop the necessary insights to family. If the family governance processes involve education and communication over time then those ultimately selected for leadership will be those that know how to manage the dynamics of both family and business.  Securing the commitment of family as owners, successors need to be able to articulate strategic visions for the family enterprise driven from the family’s values and shared by all.   

However in family businesses, the functions of leadership may be shared among owners and/or family members who run the business (these may or may not be the same people). Thus, transitions in leadership can be complex in that it may not be one leader passing the baton to a single successor. The presence of an effective board of directors working in conjunction with a family council can however alleviate much of the difficulty. The Board of Directors and the CEO can share the leadership function. The Board, when informed of family expectations conveyed through family governance mechanisms can help create the vision and formulate the strategic plan business. The CEO is typically responsible for implementing the agreed strategy.


Succession of Management: micro to macro

In previous posts we have talked about the succession of values, knowledge, relationships and networks. Each of these is laying the groundwork for next generation leaders by helping them learn about business and more importantly about OUR business. The next stage takes us into the next quadrant of the learning phases - management of the family business.

 A strong successor development programme provides the best chance of maximising the potential of the next generation talent pool for leadership selection. It can assure the business of management depth and breadth into the future. It also provides the family the best chances of retaining talented members of the next generation. And it can also support the development and retention of important non family managers as the business grows. 

 In family businesses, the same person often serves as leader and manager of many functions. But oftentimes, he or she fails to step back and work on the business (i.e. leadership) vs. work in the business (i.e. management). While the transition to leadership needs to be marked by the ability of aspirants to move from a focus on the micro dimensions of managing to more macro considerations of where the firm as a whole is headed it is imperative that aspiring successors can demonstrate their ability to manage others to achieve these desired outcomes before being considered for higher (leadership) office. Simply put, management is getting things done through other people. This capability highlights the prior proficiency of self-management on the grounds that it is difficult to manage others if one cannot manage oneself. In short, managers assure that proper steps are taken to achieve desired outcomes within the constraints of allocated resources. 


Succession of Relationships and Networks

Our third stage of succession follows neatly on from the previous and involves the perpetuation of the family firm’s relationships. These relationships are important for the successors in creating their professional networks.

An important component of knowledge that can be passed on to advantage in family firms is relationships. In fact successful transitions require key relationships to be turned over to successors. These relationships can be both internal and external. The external relationships are the networks that prior generations have established over extended periods.  While it is important not to assume all families are the same evidence has emerged that in their efforts to create trans-generational wealth enterprising families behave more like family groups. Their networks of relationships are both close and are often with other family businesses.

Following succession customers, suppliers, employees, owners and advisors must all see that the successor is truly in charge and leading the firm. If he or she is CEO in name only, the relationships will stay with the predecessor and the transition will likely fail. Successors of course have to earn the trust of all of these stakeholders, but this can be facilitated by the previous leader as part of the transition process.


Succession of Knowledge

The second of seven stages of succession we have identified is that of knowledge and the conversion of theoretical to practical proficiencies.

Incumbent leaders often struggle with letting go because they feel their successors do not know enough to run the business. Trust and respect for their leadership abilities has been inadequately developed. Are they proficient in the knowledge and skills to lead the business? The next generation may have learned a lot over time, and have undertaken formal education that helped, but the transition from theoretical to practical knowledge takes patience and mentoring. The transition of knowledge and wisdom from elders may have been sporadic.

It is critical that the succession planning process include an assessment of what competencies and knowledge a leader will need to take the company where it is going rather than where it has been. In our experience the proficiencies that family business leaders need to develop is dominated by self-management, people skills, practical knowledge, and on-going learning. These generic skills ranked ahead of technical knowledge of accounting and marketing. For aspiring leaders the development of these generic skills is generally best commenced by some time working outside of the family business. 


Succession of Values

Our last post introduced the idea that preparation for leadership of the family firm and successful succession requires not only the acquisition of knowledge and skills to lead a business but also the internalisation of values and visions of the family to be able to maintain their commitment, support, and harmony.

Succession of Values: continuing differently

We commence with an exploration of the underlying values that represent the cornerstone of the family’s operation of the business so as to emphasise the necessity for these to be passed on in the interests of continuity as a succession of values.   

For leadership succession to occur a successor must demonstrate that his or her values are congruent with that of the dominant coalition that could well be led by the predecessor. That is, are they capable of perpetuating the values of the family in business? If the firm has built a reputation for taking good care of its employees and customers alike that has engendered loyalty enabling the firm to grow and prosper, then it is imperative that the successor places the same importance on caring for these stakeholders. But in this case it is the philosophy of stakeholder care that is to be internalised and not necessarily the practices of the past as “the way we do things around here” that have to be perpetuated. Indeed the paradox implicit in this succession of values is the notion of continuing differently. Incumbents and broader stakeholders need to tolerate this difference provided that the underlying values are preserved because constancy of reliable values has been found to generate value in the market place.

Have your family articulated your values? Are they widely communicated to all stakeholders?