Prepare for the company’s future by planning an orderly succession

It may sound utopian to talk about planning the future of the business for a business family, but if we analyze our day to day, both personally and professionally, we plan each day before scheduling what we do — although the time windows in which we do so may be so immediate that we do not perceive it.

Some plans are so automatic that we do not even distinguish them, and we plan trips, studies, careers, sports goals, big purchases; to do this, we schedule a series of actions to be conducted in order to achieve our planned and established goals.

I invite you to reflect on your own planning in some of the aspects mentioned above. You will see that to reach a personal, professional, sports, or leisure goal, you have planned, without knowing it, a series of actions that in turn have materialized in the scheduling and implementation of these actions which led you to achieve your goal.

All this is applicable to business families, their future, and their durability over time, generation after generation. And there is CEDEC, to help plan an orderly generational handover, in which countless factors such as economic, family, profitability, need, and business factors must be taken into account (not necessarily in that order).

Let's summarize how to plan correctly to be able to schedule precisely:

1. Identify the main doubts and uncertainties (personal, technical, resources, ...).

2. Keep in mind the main reasons for failure: lack of common interests, lack of family harmony, a mature business, the financial situation, or a successor with no leadership skills; these are the five most common reasons.

3. It is essential that all involved parties know how to differentiate between the company and the family; the former could be said to be “parameterized” (market, economic performance, technology, etc.) and is thus objective, which is completely different from the latter, which is “emotional” and where everything except rationality and objectivity governs; where feelings, preferences, and emotions prevail. This is an explosive mix which, if one is not aware of it and does not manage it well, could blow up in the face of most family company successions.

4. Differentiate between family, owners, and management, another problem to be dealt with in family companies. The combinations are varied, but all of them must be very clear when the handover is conducted.

5. Advantages of a well-planned succession:
   1. Improved the relationship among family members.
   2. Promotion of a family culture based on shared values.
   3. Possible conflicts between the family minimized, and those which may appear are prevented.
   4. Planning the successor’s personal and professional development guarantees, in so far as possible, their competent leadership.

6. Defining the different phases of succession: awareness, commitment, knowledge, trust, understanding, communication, advice, and scheduling.
   1. Being AWARE that the business family needs this handover, and that it should not be reactive but rather proactive, prepared, and meditated; that is, planned.
   2. It is necessary to verbalize the COMMITMENT to company continuity under majority control, without forgetting possibilities other than those that currently rule company governance (if applicable).
   3. It may be that there is a lack of KNOWLEDGE of how to deal with the handover, what steps must be followed, how much time to dedicate to preparing the handover, and handover implementation.
   4. While it seems obvious, COMMUNICATION to the family of the intention to conduct a handover, and of the plan involved, is an unavoidable obligation in order to have a good ending (this must be led by the one who will “pass the baton”).
   5. Generating the TRUST among all members of the business family is not just a job for the one who will give up control; this is a job for everyone, and each person should make their own reflections in this regard, being aware of their objectives and limitations (current and future).
   6. All components of the business family must UNDERSTAND the decisions that are made, based on the commitment, skills, needs, and benefits for the company, leaving feelings and subjectivities aside to guarantee company continuity.
   7. The external vision of a third party which gives ADVICE and sees things that, internally, one cannot or does not want to see; this third party mediates between family members to reach consensus on an important or recommendable aspect to be considered.
   8. Succession is a process that should be planned (foreseeing conflicts) and that is made up of landmarks to be SCHEDULED, in time and in form. Conducting this planning when the company is consolidated, with good results accounts and things in order, makes such programming much easier to carry out “smoothly”; when the company is not in a “healthy” situation, everything is more complicated and could even destroy the necessary family harmony.

7. In the Succession Process, we must dimension the scope and define a planning of the different aspects to be considered:

Normally, in a succession process, three fundamental aspects must be considered which do not have to be done at the same time, but which must be included in the Family Protocol, in which are reflected the dimensions detailed below and how they will be regulated:

1. It is necessary to define the OWNERSHIP of the company (transfer of shares), keeping in mind fiscal aspects not only of the company but also of the recipients of the new equity. Legal limitations, the particularities of each region or province, and continuous legislative changes oblige one to be well-advised when carrying out the transfer.
2. The second aspect to consider is the GOVERNMENT of the company; new family partners entering the company may have different interests, and the creation of governing bodies to guarantee harmonic operations may be necessary.
3. The third aspect to keep in mind is company MANAGEMENT; daily organization and management supervision by the family (accountability) may require the creation of governing bodies. The responsibilities of each of them should be made very clear. The entry of professionals, whether external or members of the family, is another aspect to be properly regulated.

In short, if we want a successful future for our company, we must plan an orderly succession, with an adequate scheduling and with the help of external advice that mediates between the participants and the conflicts that may arise.