Succession, the boardroom drama that captivated audiences around the world, highlighted in exaggerated detail the problems that can occur when planning succession in a family business. Sibling rivalries, wealth dissipation and boardroom conflicts are just a few of the problems. What are the best ways to ensure an orderly succession?
“Whilst each family is indeed unique, it should not be misconstrued that each approach to preparing for an orderly succession requires a completely bespoke plan – there are steps that should be taken to secure a smooth transition which will ensure that the next generation is set up for success,” says Aileen Stephens, family enterprise tax partner at Deloitte.
Deloitte has distilled those steps into five interrelated factors to achieve a successful transition to the next generation. They cover communication; transition of control; education of the next generation; family member equality; and governance and structure.
“Family members often have different visions for the future of the business,” says Stephens. “Clear and open communication helps to align these expectations and ensure that everyone is on the same page about what the future will look like.”
A smooth transition to the next generation requires planning far ahead of time, she points out. “In fact, it can be a transition over decades. It can often be as important to agree and plan for how the transition out of the business is managed, as well as how to hand over control to the successors.”
Deloitte works with clients to tailor appropriate next-generation training, development and education based on the requirements of the family and the business, Stephens explains. “There is no ‘one size fits all’ and getting to know the particular family dynamics at play will be the guiding principle of how best to tailor the education journey.”
When it comes to equality, it is natural that certain family members will play a more active role in the business than others. “The key is mutual respect,” she says. “Full transparency in leadership succession decisions tends to mitigate acrimony, and on the flipside, promotes buy-in from other family members and key stakeholders.”
Successful family enterprises are almost always grounded by solid governance structures, Stephens says. “There are many options in the family enterprise governance toolkit that can be leveraged to promote family harmony and to enable a successful transition of control to the next generation, including a family constitution, family council and an advisory board,” she adds.
One business which has successfully navigated the transition is Southern Tapes & Packaging, founded by Tony and Mary Lee in 1997. The business has expanded over the years and, along with sister company Down2Earth Materials, now employs more than 40 people.
In the past two years there has been a succession from Tony to his daughter Aisling Lee who now runs the business, with involvement from her sister Karen. A number of other family members remain involved, Tony points out, “such as cousins, uncles and significant others”.
“It was time for new ideas and energy,” he says. “I was ready to focus on other things outside of the business and thankfully my daughters Aisling and Karen, who have worked in the business from a young age, were willing to take over the responsibility and bring the company to the next level. We share the same core values and for me that was very important as I believe these values are the fundamental reason the business was a success.”
Outside assistance helped to smooth the transition process. “Aisling has always shown a strong interest in the company, and she worked her way up over the last number of years to where she is now,” says Tony. “While we believed she was capable, we did bring in an outside adviser to help us assess the business and implement the process and this cemented it for us.”
The aim was to find a succession plan that suited everyone. “We were very lucky that none of our daughters felt entitled to anything, nor did their husbands, and that for us, was our starting point,” he explains. “We think it’s important to include wider family to help eliminate any conflict up the road and we valued their thoughts throughout the process.”
Tony has remained actively involved in the business, which Aisling welcomes.
“This was a positive as we didn’t want Tony to leave the business,” she says. “We value his input when needed but we know not to bombard him with the mundane day-to-day elements of running a business as he has been there and done that. What we found helpful on making this work was to ensure we had clearly defined roles. It has helped us to stay in our lanes but at the same time we know we can still call on each other, especially Tony, when we need his advice and his wisdom.”
