Up to three quarters of British family firms are putting off succession planning, despite listing it as one of the top challenges they face, says the chief executive and founder of a family business organisation, who says fear of retirement, mortality and upsetting family harmony are among the factors driving this inaction.
Attendees at a Families in Business (FiB) event said in a live survey that succession planning and growth strategy were the two biggest challenges they faced, followed by communications, relationships, and ownership.
Organisation founder and chief executive Dani Saveker says she is not entirely surprised by the results as succession planning is a “constant challenge” for family firms.
But she says preliminary results from FiB’s annual survey show at least three quarters of British families do not have an effective succession plan in place – with some lacking one entirely, while others have a plan but have not shared it with other family members.
Two out of every three UK private enterprises is a family business, employing over nine million people and with a combined annual turnover of £1.1 trillion (€1.3 trillion).
Saveker, who was formerly the fourth-generation chief executive of her family business, says obstacles to succession planning include: a fear of change and the future; assumptions by the current generation about who will takeover; a lack of suitable candidates from within the family; a fear of facing retirement or mortality; an inability to let go – especially among the founding generation; and fear about upsetting relatives.
“Because very often there might be a difficult discussion to be had, it’s possibly too overwhelming and families think they’ll deal with it tomorrow, and get on with running the business today,” Saveker says, adding: “Inevitably what happens is that rather than having a proactive plan in place, we have a reactive situation and generally we have people that will put a succession plan in place when someone’s been taken ill.
“That is not the most appropriate way to deal with significant wealth, the responsibility for employees, their families, suppliers, customers and so on.”
Saveker says succession planning, which she prefers to call “future-proofing”, should not just be limited to deciding the next chief executive or chairperson. “It links very closely to governance, and how to manage the business, now and into the future, who will that involve, how to manage share transfer, how will to protect the family and the business, and how to protect the wealth within the business and the wealth within the family.”
She says very often the process of starting a dialogue between family members is more important than the eventual written succession plan, adding: “If you’ve involved your workforce, your staff, it means everyone is on the same page and pushing in the same direction with a very clear objective and focus for the next 12 months to 100 years.”
When it came to growth, Saveker recommends discussing what that means with all stakeholders as it may mean different things to different people. “Stick to what you know and have a clear focus and strategy, rather than being distracted or trying to do something you know very little about. Always, always use your trusted advisers to assist you and consider bringing in specialist skills and non family members,” she says.
FiB’s annual survey closed at the end of March and its findings will be released in the FiB Annual Report to be published later this year.