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How to ensure a successful transition?
A successful succession requires time, resources and a specific focus on the inherent issues.
Prior to identifying and dealing with the business-related legal and financial aspects, the underlying values should be defined, and the relational dimensions considered.
It’s important to understand the different perspectives, motivations and needs among the family members. It should also be remembered that generational differences can be important when considering aspects such as “the definition of success” or “the purpose of wealth”.
Mutual understanding and support are necessary. It will pay off to create a safe space where “the elephant in the room” can be dealt with and conflict can be handled in a respectful and productive way.
Well-established processes for communication and decision-making as well as principles for different issues and situations should be established, such as policies for dividend distribution or for employment within the family business.
This structured and principle-based approach to deal with family-related issues is often referred to as “Family Governance.” Policies stipulating general principles help the family to professionally treat issues that could otherwise be seen as linked to a person, for example the possibilities for in-laws to have access to information. General criteria and a definitions of the profiles for certain roles in the business also help to separate factual needs from personal feelings.
Summary
Being aligned on the values that are important to the family, the long-term vision for the business and a code of conduct for situations of disagreement will prove helpful when important decisions need to be made and the proper planning of the succession is to be decided on and implemented.
We recommend every family business to take the necessary time to identify and address the specific issues and priorities of the family in relation to ownership and future transition. We also recommend using the principles of family governance as a tool for inclusive communication and structured preparation.
Family governance is not an alternative or substitute to financial, legal and tax planning, but the first step towards a purposeful, sustainable, and effective succession in the family business.