COMMENT


Expert view Tackle & Guns spoke


exclusively to Mark Hastings, director general of the Institute for Family Business, about how to manage the succession of your company eff ectively.


Tackle & Guns: In your view,


are many family business owners simply burying their heads in the sand when it comes to how they will handle the succession of their


companies? Mark Hastings: Family


businesses make up a substantial proportion of the UK economy – two in every three private-sector fi rms. T ey employ more than nine million people and in 2010 generated collective revenues of £1.1 trillion. Succession planning is


certainly one of the challenges facing family businesses – but it’s a challenge that every business faces. What can make it more acute here are personal relationships. Each year it is estimated


that 100,000 of the UK’s three million family fi rms pass from one generation to the next and approximately 30 per cent of these transitions prove problematic. T is is further


compounded by demographic changes. With senior executives extending their careers into their 70s and 80s, many next- generation family members are unable to make their mark in their middle years and may well decide to leave the business, creating a shortage of successors. On the surface it is


hard to understand why some family business owners fail to plan for


succession. Many leave it too late, risking the survival of their enterprise. T e diff erence between planning and doing nothing are stark, but, unfortunately, the ‘do nothing’ approach remains far too common.


T&G: So what are the main points that should be paid


particular attention to? MH: When planning


for succession, transferring management and ownership are the most risk-laden phases. Some owners regard succession as simply a question of handing over a tried-and-tested way of running the business from one generation to the next. In fact it is a system change – a


transition to a diff erent business structure with a distinctive culture, new procedures and evolving ground rules.


T&G: What is your best advice to family businesses to ensure


that a safe succession takes place? MH: Start early, involve


everyone, be open, transparent and communicate clearly. T e best transitions are processes,


not single events, supported by intergenerational teamwork. Planning cannot start too early, with seniors and the next generation acting in partnership to build the methodical approach needed to overcome all the forces that favour doing nothing. Seniors should view succession


as a positive step. Retirement should be to a new role, and not from an old one. Seniors should let the next generation know that they will be welcomed into the business, but not coerced. T e next generation can have


a valuable role to play in seniors’ retirement, helping them to discuss their hopes and fears. Both generations should take advantage of outside support, including family business advisers. Non-family directors and trusted senior managers can play important roles in the succession process.


T&G: What would you say are the main pitfalls to watch out for?


MH: Some key questions that family fi rms should ask themselves when planning for succession include: • Have fundamental strategic issues been discussed, including whether the business should stay family owned, and whether succeeding generations are able and willing to take over management? • Does the family have


an agreed and documented succession plan? • Have lessons been learnt


T&G: When a family member


can’t be found to take over the company, how should family businesses then manage the


process? MH: T e long-term


sustainability of the business is paramount. Leadership has to go to the best person to lead the business. It is understandable that many business owners want to transfer their business – the result of many years or even generations of hard work – to the next generation. However, sometimes there


is simply no-one available to take over. Also, under business principles, the choice of a successor should be based on competence and it may be that the next generation is not suited or not yet ready to take over the running of the business. In such cases there are a


number of options to consider and it does not necessarily mean the end of the business or the family’s involvement in it. Even when there is an obvious successor, families should look at diff erent forms of ownership, management and leadership structures before making the transition. Succession should be seen as


an opportunity to strengthen and refresh the business. Treated as such, succession can be turned into a business advantage and not a risk. A family business should


clearly approach the issue of succession as early as possible, and involve all relevant family


Succession should be seen as an opportunity to strengthen


and refresh the business – it can be an advantage and not a risk.


from how the family identifi ed and prepared past leaders? • Are there appropriate


Mark Hastings of the Institute for Family Business.


training, development and transition programmes in place for next-generation leader/s? • What would happen and who would take over if the family business leader were incapacitated tomorrow? Do contingency plans exist?


and non-family members in this planning. Strong businesses can easily falter when succession is considered. However, this doesn’t have to be the case. Intergenerational business


succession has its own particular problems that need resolving. If you always place the survival of your company at the heart of your decision making, then succession should proceed with the least amount of disruption.


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