When planning for leadership succession, many family businesses rely on their boards of directors to help them. It’s important that the board members understand the family dynamics at play during this planning process so that they are aware of how to navigate any complexities that may emerge. Here, we review five ways a board can help a family business ensure a smooth and successful succession event.
Help the Current Owners Think Through How They Extricate Themselves from Their Role
It is often difficult for the current owners of a family business to outline a path for stepping down from their current decision-making role(s) to that of mentor and advisor to the next generation.
While they may be focused on collaborating with the next generation on succession and outlining short- and long-term strategies for the next generation to take over the responsibilities of the family business, it can be more difficult for those in charge to plan for how they will actually remove themselves and step back from the day-to-day responsibilities of ownership. The board directors can help current owners think through their future relationship with their business and outline the extent to which they would like to be involved. The board can also facilitate discussions with the next generation around the level of involvement they desire from the outgoing generation.
Hold the Current Generation Accountable for Developing the Next Generation
The current generation of ownership is responsible for developing the next generation to assume the responsibility of running the family business and to do so intentionally. The board directors should not only hold the current generation accountable for developing a company strategy alongside the next generation, but also ensure there is progress made against the development plan.
Setting benchmarks for progress and regular check-ins to ensure that the next generation is prepared can help keep the current generation focused and ensure that the transition period does not drag on longer than necessary.
Act as a Sounding Board on How Next Generation Family Involvement in Management Will Look
One of the components of the succession planning process for the current and next generation of owners is determining the roles and responsibilities needed to be filled in order to achieve the next generation’s vision for the business – and outlining the process and requirements for determining whether or not family members will fill these positions.
The board directors can serve as an open-minded sounding board for family members as they work through these design plans, helping them determine rules of engagement for family members and consider the trade-offs. For example, while a family member may be committed to the family business, are they the most qualified potential candidate, or is an external candidate a better fit? The board can offer the family insight into some of these dilemmas while ensuring the focus remains on making decisions that deliver the best outcomes for the owners and their business as they navigate complex family dynamics.
Encourage the Board to Engage with Next Generation Family Members as a Mentor and Guide
Keep in mind that board members are hired advisors. Family business owners should look to the board directors to engage with next generation family members as a candid source of mentorship and guidance as the next generation strives to educate themselves on the business and become comfortable assuming ownership responsibilities.
The board should be relied on to develop a relationship with the next generation and make future owners comfortable enough to seek advice. This also provides next generation owners with an objective group of individuals to go to for guidance on areas where they may be struggling to communicate effectively or reach an understanding with the current generation.
Give Permission to the Board to Hold You Responsible as a Leader
Those in the leadership seats should also ask the board to hold them responsible for acting in the best interest of the company and a successful transition process. Family business owners should foster an open, honest relationship with board members and ensure the creation of an environment in which directors feel comfortable correcting current owners so that all parties remain focused on making decisions that enable a successful ownership transition and the best outcomes for all owners.