Many people think that succession is only about the transfer of wealth or the identification of a successor. They focus on how to avoid probate and the protection of assets through trust structures, and in such cases will seek the services of lawyers to create their ‘estate plans’. However, where a family business is concerned, in addition to concerns about changes in ownership, it is necessary to think about succession as processes of change in the family and management and ownership of the business over time.
A good way to think about this is that succession is the ongoing process of co-creating and implementing a continuity or regeneration plan.
So, here are 5 things you should know about the process:
1. One thing that is guaranteed in a family business is the constancy of change.
Therefore, it is essential to appreciate that succession is a continuous process of change, influenced by nodal events such as birth or adoption, death, marriage or divorce, illness or retirement.
Change initiates new conversations and decisions the vision, mission, and values for the family, business, and ownership systems. The forums to have these different conversations will also need to be established. Family meetings with an agenda to discuss personal and business developments, board meetings, trustee meetings, management meetings should have forums and setting these up is a part of the process. Governance of these forums determines how decisions are made, communicated, and implemented.
Over time, the voices in these conversations will also change, as some family members leave the family system either through death, or divorce, or emotional cut-off and others join through birth, adoption, or marriage. It is important that communication and governance are developed in such a way that they can accommodate these changes, and keep the ball rolling.
2. The fact that family relationships are the involved means that emotions and conflict will be involved.
How family members communicate is guided by the nature of their inter-personal relationships. If there are historical impasses or family members have different value systems or goals, there will be conflicts. Well, this is normal and the sooner this is accepted, without judgment, the better.
Managing conflict and adopting practices such as forgiveness and releasing blame as a continuous part of the process are useful and necessary activities. They generate and maintain respect for each other, and at a minimum this will allow the family and business to continue regenerating.
How conflicts are resolved when dealing with emotions and business is different. The family is emotional, whereas the business is not. Yet, when there are family members in the business, emotions can and will spill over. Knowing this at the outset can keep a family together and enable the business to continue growing and evolving over time.
3. The process and outcomes must be inclusive.
Many people will approach their lawyers and ask them to set up trust structures without the knowledge of the inheritors in line. They assume they have sorted out the succession process by setting up a trust structure or writing a will. However, leaving out family members in the process of setting up a structure or will is likely to be the biggest source of conflict once a succession event such as death or divorce happens. So, make sure that inheritors understand the process and their voices are heard. Exclusion leads to feeling of injustice.
Also, it is not uncommon for dominant coalitions with decision-making power (such as board voting power or trustees with discretionary power) to exclude family members. Many causes of litigation stem from misuse of these powers and this must be safeguarded against at the start.
Clauses in wills or trust deeds that threaten to disinherit heirs that contest wills or deeds are not necessarily helpful, when the objective is to ensure that the productivity, wellbeing, and happiness of family members is supported. To avoid this, adopt a mindset of transparency and inclusivity from the start.
4. Don’t rush the process; start now.
Imagine writing a will or letters of wishes under duress, such as at a time of grave illness. Chances are you will not be thinking clearly at such a time. Yet, many individuals wait until the very last minute and have been taken advantage of when they are vulnerable. Therefore, start as soon as you can and remember that this is a process so it will require time to have the conversations that need to be had and with rational and clear thinking.
5. You will need a family business advisor.
A family business advisor or consultant will help you begin the process of change and will be a vessel for that change. None of this is easy because of the emotions and decisions and difficult conversations that family members need to have. A conscious advisor is aware of this. Using various tools and expertise, they will work with family members towards the best outcomes for your family as a whole.
How can Be Bold help you?
As a family business coach, consultant, and advisor I work to help family members understand the process of succession as continuity and regeneration and ensure that family members can bring their voices into the process. I empower family members to do this through coaching, as it is not unusual to find that family members have never been consulted or spoken up about the family business and how this is integrated into their lives. We work on communication and governance and then guide on the best way to think about structures that are relevant to your family situation.
You can read more about Be Bold’s approach at www.bbold.co.ke and email info@bbold.co.ke to contact Wanja Michuki.
© 2023 Wanja Yvonne Janice Maria Michuki, Be Bold Consulting & Advisory Ltd.