Today, I will be discussing about family business. Particularly, its importance as a whole both in the aspect of family and business in terms of succession planning. If you are starting a family business, this is a great article for you to read because it will be consist of different lessons regarding the succession process in a family business. You as a controlling owner of your family firm will face three different challenges when the time of succession will occur:
- Disengagement – This kind of obstacle that the company will face is the separation of the current owner from the business. This is not unusual in the ordinary course of business because as time comes, the owner will reach its limits due to some certain factors. Anticipation must be recognized in order to reduce the possibility of leaderless family business. And as well as the controlling owner, for the fact that the former must choose a replacement for the position to take over the company. It will cause the family business if there is no one to control and manage the business.
- Formulation – The creation of the prospect leaders from the next generation family to take over the firm would be difficult because some family members are not into the family business. And it is necessary to choose immediately since the business will be leaderless. So it is essential for the family firm to plan ahead of time before succession occurs to make sure that some family members are ready for succession, to take over to manage the business.
- Process of Succession – the selection of an ownership and management structure for the next generation will be a problem for the controlling owner because as what I have said in FORMULATION, it would be difficult to encourage and convince family members who are subject/candidate for succession. Not all of them are into running their own family business because some are interested on some things or are already engage in their own job. Also, choosing the next management structure would be a pain in the part of the outgoing controlling owner because there is no guarantee that the successor will have enough knowledge on how to run the current management structure and even the other kinds of management structure if it doesn't have any educational background on how to manage a business.
There are only
two choices that both the owner and the family firm to choose from. It could
ignore the problem of succession and decide instantly who should take over and
manage the business (if the current controlling owner is physically and
mentally unable to do so). Or (which is the best option to choose) to plan ahead
of time before the retirement of the current controlling owner to ensure the
effectiveness of the turnover of leadership.
In order for a
succession plan to be successful it must be (1) Strategic, (2) Comprehensive,
(3) Feasible, and (4) Manageable. (1) It highly regarded that
it must be based on a keen analysis of the external environment and the growth
prospects of the family firm; (2) Interaction must be acknowledge in terms of
family ownership and business issues; (3) It should be based on a realistic and
reliable assessment of gaining it for both the business and the family; (4) The
implementation of the succession plan must be the responsibility of those
authorized and with power to formulate the critical decisions. If a succession
plan is consists of these kind of characteristics there would be high
possibility that it will successful. Successful in a sense that it would
reflect the future of the family business and its family members involve in it.
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