One of the best TV shows I’ve seen in a while is Succession. What the show does really well is explore the issues and power dynamic of a very wealthy family and their business. It highlights how difficult navigating succession within a family business can be. There’s an old adage that family business and wealth is made and lost over 3 generations. The basic concept is that once the wealth is made, the next generation maintains it while the third generation squanders it. Often referred to as ‘shirtsleeves to shirtsleeves in 3 generations’ it’s a cautionary tale that conveys the difficulties families face in managing their wealth and financial success over the very long term. The reality is that planning for succession is a serious topic that is too often neglected until it’s too late. The purpose of succession planning is to make sure that the family wealth passes through the generations and continues to grow.
There are often tensions as the family patriarch or matriarch gets older, and their adult children rise within the business. It’s important to manage that situation because these issues only become more difficult and more complicated to deal with later if there’s no succession plan in place. By the time the founder passes away it’s all too late. It happens all too often, and the subsequent problems can become an emotional, financial, and legal minefield for the whole family. None of these topics are going to be easy to deal with but it is necessary to work through the issues regardless.
Addressing these challenges requires careful planning, open and honest communication, and a commitment to the long-term success of the business. Sometimes hard conversations are needed. Seeking external expertise, implementing governance structures, and establishing clear processes can help navigate the difficulties associated with succession planning within a large family business. Obviously, it’s important to avoid any unnecessary bureaucracy but at a certain point, a family grows to a size where it benefits from introducing a more formal process for decision-making than they had in the past. Overwhelmingly, I hear from every family that goes through the process, that they wish they’d done it years earlier.
I had a really great conversation on exactly this topic during my podcast recently with Stu Laundy from Laundy Hotels. These days the family have over 90 venues and a business valued at over $1.5 billion. What was fascinating was Stu’s candour with regard to the real-life struggles that exist within his family as they mapped out the succession plan for the next generation. It’s not easy for the older generation to let go of control and change the way they run the business. What Stu and the family realised and ultimately embraced was that it is critical to have those hard discussions as early as possible because once you do you reap the rewards. So many family businesses can learn from these insights.
You’re not going to avoid conflict in a family business, but you can harness the difficult issues and turn them into a constructive process. These cover a range of topics from the family relationship dynamics, balancing various competencies and skill sets, family Interests, through to the emotional attachment of the founder and how to let go. You also need to ensure fairness and equity for all the family members and the need for the business to evolve and adapt to changing markets and technology. The benefits are significant though and help to safeguard the future prosperity of the business. The planning process helps identify the right people for the right roles and not only educates the successors but develops their talent to ensure a smooth transition and a continuation of the founder’s legacy for generations to come.
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