Overlap Between Business Plans And Family Plans

Notwithstanding, the intricate overlay of family and business plans does not necessarily mean that the family has to separate strategic business planning from planning of family and related matters. Consistency of the business plan with the family plan and with the personal plans of key family members is a critical feature of an integrated approach to planning.

Another reason why it is preferable to approach the succession process from the perspective of strategic planning is that structures can be developed and put in place that best serve the family and the business. In this case, the underlying rationale for business strategic planning is maximising the value of the business, whether the ultimate outcome is a sale of the business or succession. Moreover, this process helps owners to realise that succession is a process, which requires planning. Each of these options has two further sub options for owners: staying in the business in some capacity or leaving it completely.

The strategic succession planning process: the business

Succession planning is a process not an event. This process takes time, effort and involves other people. Because this process extends over many years it is helpful to know what needs to be done now so that things will end up being more or less the way people want them to be in the future. Furthermore, a business is not something one can simply leave to successors in one’s will. It is a living thing that needs to be managed by the best people. These people have to be selected, trained and motivated to take over.

Key players and related issues

Who are the key players? What are their different perspectives, concerns and objectives? When dealing with family businesses, what we see is only the tip of the iceberg. Below the surface is the largest part and it is this submerged section that determines the behavior of the visible component above the water level. To discover what is really going on requires in depth diagnostic work and the mobilisation of relevant strategies. Each stakeholder has an important part to play during the process. To a large extent these strategies depend on the stage of development of the family business.

In relation to the planning of family matters, Ward J.L. outlined a number of questions, the answers to which have the capacity to shape significantly the strategy of the family business succession process.

Family strategic planning addresses the following questions:

• Is the family committed to perpetuating the business, and if so why? Why not sell the company? What are the family benefits in keeping the business?
  
  
• Are older family members confident that their children want to and can run the firm?
  
  
• Should family members in the business work together in one business and location, or apart in separate businesses and locations? Should the family create spin-off ventures for family members?
  
  
• How does the family see itself and the company in the years ahead? Does the family envision that many family members will be active in the firm or will they be passive owners?
  
  
• How will the family build or maintain strong relationships, resolve conflicts and work in harmony?
  
  
• How much money does the family need from the company? How will the family and the business resolve matters of family compensation?
  
  
• How might the family accomplish the family members’ personal and professional goals each year? Should rules be established, such as expecting outside work experience?

Ivan Lansberg outlined a number of strategies for mobilising the succession process for owners and managers.

Strategies for mobilising owners and managers

• Providing owners with specific information about steps involved in developing a succession plan and associated timetable.
  
  
• Being attentive to timing, paying particular attention to how owners are coping with their fears of retirement and change of roles.
  
  
• Helping owners to map out roles for the future that will motivate them to let go and move onto the next life stage.
  
  
• Assisting owners to develop a supportive network of peers who can share ideas, information, and experiences.
  
  
• Encouraging owners to build in incentives that reward the development of a succession plan.
  
  
• Actively involving senior managers in the succession process.
  
  
• Creating a board of directors in order to provide an independent perspective and to safeguard the interest of the owner and business.

The strategic succession planning process: the family

Personal, family and business plans are interdependent. Many individuals and families, and for that matter businesses, do not plan. However, if owners and other relevant family members can be convinced of the necessity and benefits to plan, then the business can start to address its future. It then follows that succession planning is an integral part of the total planning effort.

Strategies for mobilising family members

There are a number of strategies that an accountant can use to assist in the process of mobilising family members including:

• assisting owners, spouses and family members to develop a shared vision of the future;
  
  
• developing a Family Council that provides a forum in which family members discuss issues relating to the business and one another;
  
  
• heightening the family’s sensitivity to the needs of the owner and vice-versa; and
  
  
• helping the family to view the succession plan as a map for their journey into the future.

Summary

There are many forces that interfere with succession planning in first generation and multiple generation family businesses. The constituents in family businesses: the owner, family, senior managers and other stakeholders experience poignantly ambivalent feelings toward succession planning which encourage them to procrastinate in developing a plan. If they wait until the owner’s death, it is often too late to rescue the firm and the family can undergo tremendous stress.

Resistance to succession planning is difficult to change. Nonetheless, steps can be taken to mobilise the planning process. What is needed is a systematic approach to succession planning along with multiple interventions aimed at addressing the resistances of the owner and their spouse, family and senior managers. It is essential to develop structures such as a Family Council, a Board of Directors and a Succession Task Force that can involve those whose co-operation is critical for the development and implementation of a continuity plan.

In the final analysis, the role of the founder is critical in mobilising the family for succession planning. It is for this reason that the complexities of working with family businesses must be understood fully and addressed, including the following questions:

• What should an owner do now to provide for the continuity of the business, the welfare of the family and one’s own retirement needs and long-term security?
  
  
• What should successors do now to prepare themselves for the future ownership, leadership and control of the business?
  
  
• What processes and methods should be employed to ensure that management and ownership succession are handled in a sound, effective and pragmatic manner that respects the concerns of all stakeholders whilst preserving the viability of the business?

The effectiveness and outcomes of the succession planning process ultimately depend on the retiring generation's foresight and planning; the succeeding generation's preparation, willingness and ability to take over; and support of other key family and nonfamily members. Sound advice, counsel and direction are essential.

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