Many families focus on deciding which individual is going to be the next leader of the business, the family council, or the board. But there are serious problems with this approach.
When families think of replacing an existing leader, they often look for someone whose attributes are similar to the person who is successfully leading the business right now. Today’s leaders are capable of guiding a family or a company of the size and complexity that exists today. Many families are not thinking of skills they’ll need leaders to possess ten or twenty years from now, when the family or the company may have grown to three times its current size. A new kind of dynamism will be required to successfully keep the family united and help the business adapt.
The best way to approach a transition or plan a succession is to not to think about what is needed today, but about what will be needed in ten years. For obvious reasons, that’s difficult to gauge, but you want the next crop of leaders to have even more talents and skills than the current leadership team. If you are in a leadership role, you want to replace yourself with someone more talented than you are, because the company and the family are both going to become more complex over time.
If that’s the goal, it can be almost impossible to cultivate the necessary leadership skills in house. That’s why many families look for outside talent, either as an interim step or as an ongoing solution. Finding a new CEO from within a family of fifty can be extremely difficult, especially because you’re not only replacing what you have now. You need even more. When you’re looking for someone who’s going to surpass your own abilities, you may not have the capacity to mentor that person yourself. How do you train someone to think out of the box when you’re in a closed system? It’s just not possible.
When you hire somebody from the outside, you can hire with an eye toward the size the company is going to be in ten years. You can select someone who has the skills and experience required to grow through acquisitions, perform a turn-around, or integrate LEAN practices into the business and manufacturing operations, etc. The new hire can help to increase the skills and experience of the whole team, so the group as a whole will be able to meet the challenges ahead. Someone from the outside can raise up the capabilities of the entire company by many more notches than if you just hired from within.
The same thing can happen at the board level. When you bring in an outsider who has experience on the board of a much larger company, that person’s involvement can raise the entire level of the board.
The biggest challenge is developing the talent needed for family governance. Most families don’t hire outside family council chairs. They do however, take advantage of outside consultants to educate and increase awareness of the whole family. There are also ways to increase the knowledge of the family leaders or candidates by sending them to classes and conferences, and by building a network of other family business leaders who are operating where you will need to be operating in the next 10 years.
Recognizing that the needs of the company and the family exceed the current leadership’s abilities takes a great deal of humility. But it helps to think of succession planning from a stewardship perspective rather than a more limited leadership perspective. Ask yourself what the current leadership team needs to do to be good stewards of the business. That perspective allows you to sublimate your own ego, and think about what’s best for the company, the family and the community. Even the most accomplished business leaders don’t know everything, and nobody can possibly have all the skills needed to see a business through all its phases.
With this perspective, you can begin to build strong leaders while keeping responsible stewardship as the central goal. Stewardship makes succession planning all about the business and the family, and not about the individual leaders.