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Your son John has the best sales record on the team. Your daughter Mary’s advertising campaign was a huge success. But despite their talents and success, neither has a head for numbers. And neither has much savvy when it comes to culture and management. Kevin, your right-hand man for the last 15 years, runs operations smoothly, managing both finances and people with ease. He’s the obvious leader. But he’s not family. And he’s not an owner. As you begin to plan for your retirement, how do you do what’s best for your family without risking losing Kevin? Focusing on the company as an entity rather than the people as individuals allows you to set emotion aside and gain the perspective you need.
Leaders will not always agree on the best decisions. Rather than arguing and creating unnecessary drama, the team can simply refer to the plan, finding the structure and direction to guide them to the correct decisions. Succession planning for family businesses allows you to make necessary changes within the family structure for the business without being interpreted as an individual slap or reprimand.
This is your business. And your family. You’ve poured your blood, sweat and tears into this company. And now you want to see your children benefit from all that hard work. You recognize that the best way for your children to succeed is by ensuring that Kevin stays with the company after you leave. Without Kevin’s leadership, John and Mary will struggle to run the company on their own. Your succession plan must find ways to keep Kevin involved, motivated and loyal.
A succession plan, especially one that endeavors to involve both family and key non-family employees, must be customized to your unique business needs and objectives. Every business, every family and every ownership structure is different. Various options are available, but what’s best for your company may be completely different from what’s best for your peers.
A few options to consider include:
Simply including key nonfamily employees in your succession plan is not enough. They are more likely to be loyal and motivated to work hard if their value to the company and their future with the company are clearly defined and communicated.
Thinking back to your situation with John, Mary and Kevin, how will you keep Kevin loyal to your company as you approach retirement? Will you offer him phantom stock? Assure him with a family employment policy that reduces the risk that he’ll be overlooked just because he’s not a member of the family? Should he have any ownership interest? Or does he need more control to drive the company toward success? Your best bet is to involve your trusted advisors in your succession planning process. With a full understanding of your company’s operations, risks and family dynamics, you and your planning team can create a succession plan that keeps Kevin loyal to the company and helps John and Mary achieve the success you’ve always wanted for them, and for your company.
Succession planning for family businesses is vital. If you’re looking for help with your succession plan, please contact Cray Kaiser today.