One of the leading family business challenges is the demand for leadership talent greatly exceeds supply. The “obvious” next in line to lead the family business may not be the best choice. The next family business leader may be more suited to a cousin or even an in-law. In addition patriarchs often stay in their leadership positions well into their 70’s while the younger generation is trending toward earlier retirement. These situations leave many family businesses scrambling to meet gaps in senior leadership talent. Who will replace your retiring patriarchs or matriarchs and how will you keep your family businesses leadership pipeline full?
Let’s add another wrench in the family business succession works. The global and more dynamic economy of the 21st century requires executive talent with a more complex skill set than it did for the baby boomer generation. While this is changing almost daily, it currently includes: greater technological literacy, a sophisticated understanding of global marketplaces including multi lingual and multicultural fluency, relationship savvy, with extensive networks of alliances and stakeholders and leadership skills over a delayered, disaggregated and virtual organization
In response to these challenges, family businesses have, by necessity, developed a renewed interest in succession planning systems. While these systems functioned merely as replacement charts in the past, and were a human resources executives’ function, there are two critical differences today: emphasizing leadership development at all levels (not just senior executives) and responsibility and involvement for leadership development within the family group, with the person’s manager and team members. Therefore, removing it as a human resources function.
Most development models fail to consider leadership requirements at all levels. As a person is promoted from line manager to business manager to functional manager, skills and requirements change. Family businesses mistakenly focus on leadership traits, styles and technical competence. They commit a major error when promoting successful individuals without acknowledging required skill set differences at different levels of leadership responsibilities.
Hiring gifted people from outside the family makes sense as a tactic, but not a strategy. Family businesses need to create leaders from family members, not buy them. The more people achieve, the more they learn. Their willingness to tackle new challenges increases. To capitalize on potential, family businesses must define the true work requirements at each key leadership level. Succession planning systems must spell out what’s needed to make a successful transition from one layer of leadership responsibility to the next.
Following a five-step process will facilitate succession planning for your family business. The first step is to tailor a leadership pipeline model to fit your organization’s succession needs. Next clarify standards for performance and potential, in your own language. These standards should be documented and communicated throughout the organization as well as to any family members who have a stake in the business even if they don’t actively participate. With the groundwork complete, evaluate succession candidates through a combined potential-performance matrix. The final step is to review plans and progress of the entire pipeline frequently and seriously. A good time to do this is at yearly family business retreats.
You can eliminate succession planning as a family business challenge simply by implementing this process.