Scott McCulloch is editor of Families in Business.
Is putting off the inevitable the human condition? It may well be but there's good reason for it. Discovering why, however, is akin to tacking in a fog without a compass. Family business experts will attest to that, when they get round to it. Now, yet another survey confirms what they have long been telling us: succession planning is too often relegated to the bottom of the in-tray. When PricewaterhouseCoopers recently interviewed the chief executives of 364 private companies, it found most respondents were likely to step down within the next ten years. Almost half, the accountant said, had put little or no thought into succession planning. This is puzzling since nearly two-thirds of the chief executives it questioned were planning to move on within a decade or less while a chunky 42% intend to step down within five years. Surely those looking to move on must have a detailed plan other than to, well, move on?
The PwC survey is a welcome, if not novel, contribution to family business research. But, like weak evidence collected for an unsolved crime, the report could well find its way to the archives at the dusty end of the research vaults. We all know succession planning to be an onerous task at the best of times. The question that requires asking is whether business leaders really believe they can swerve it? Transition, after all, is inevitable.
To its credit, PwC comes close to revealing why some business leaders fail to plan or, in other cases, do plan but not in terms of identifying a successor. Only 39% of respondents said they had a successor in mind, but less than two-thirds said the person was ready to take control today. This is noteworthy.
Timing is crucial to handing over the wheel and it would be folly to suggest that business leaders attach little importance to succession planning. But the fact that one in five respondents have done "virtually none" and one in four have done "little" raises an important question: Why?
These, after all, are chief executives in the world's fastest growing private companies. Mike Kennedy, leader of PwC's Personal Financial Services unit, believes the businesss leaders have a sense of their desired future, but are "overloaded with managing for today" and short on time for developing comprehensive plans for tomorrow. Kennedy says that unless a major event occurs – such as the company being sold, a shareholder becomes seriously ill or dies – important shareholder documents, like the buy-sell agreements, are unlikely to be reviewed on a regular basis. Pity.
This is a business continuity issue. Encouragingly, one in two chief executives have a contingency plan in place, which is to be applauded. But it raises yet another question: why are some business leaders more prepared for disability than departure? The report speculates that business owners are often in two minds about succession planning. They have nurtured their business and revelled in its successes over the years. But because many of them come to see it as part of their persona, they often cannot face the thought of stepping down one day. "Complicating the matter is how transition is to be accomplished," says PwC's Richard Calzaretta. "Those who expect to sell to another business may be more likely to see succession issues as the buyer's responsibility. But those expecting to eventually transition to family members, partners or employees seem to assume a greater responsibility for planning ahead." At least someone is planning for tomorrow.