succession plan

What to Consider When Creating a Succession Plan

In a previous article, I addressed the necessity of creating a family business constitution. Having this document establishes your mission, as well as provides agreed-upon guidance and expectations regarding how your family business is run. This includes the difficult, yet necessary, question of succession planning.

While succession is simple when only one child is involved, this is rarely the case particularly as families grow and each new generation presents more eager and capable potential successors. How do you determine the right person to step up as the former family business leader steps down? Regardless of how well you think your son or daughter will do at running the family business after you are gone, you cannot simply assume that your genetic DNA is superior to anyone else’s when it comes to sustaining and growing the business. This is the kind of thinking that can quickly end even the most established family business.

The question of changes of leadership is one that should be addressed sooner rather than later. It’s a sobering, yet vital, process, and every situation is unique. This is why I spent considerable time exploring how other families have approached the question of succession, and discovered more approaches than I thought I would to this age-old question. Let me introduce you to one approach taken by a family that looked to its own leadership candidates to find a natural future leader.

CASE STUDY: The Darley Family

For the Darley family, third-generation owners of W.S. Darley & Co., choosing a successor was not an easy business. Instead of leaving the company to the eldest son or daughter, as many family businesses are inclined to do, CEO Bill Darley requested that his top candidates—his three sons, James, Paul, and Peter, and their cousin, Jeff— submit business plans regarding how they would continue the businesses following Bill’s death or retirement. Then he left the decision to the four of them.

“You can have rotating presidents, co-presidents, you can have one president, you can bring in a president from the outside, but I just cannot make this decision, and I am not going to rule from the grave after I am gone. So, whatever you guys come up with, I am fine with and I will support,” he said, according to Paul Darley in an interview with the Business Families Foundation.

Ultimately, the team of Darleys selected Paul, based on his communication and organizational skills. And that was very difficult for them to step back and play that second fiddle,” said Paul. But the brothers and their cousin agreed it was the best fit.

Family Involvement

In this case, the active involvement of the next generation allowed each of them to not only consider how they’d operate the business, but to understand how other family members viewed the future of the company. While difficult, imagine how empowering it would be to be an active participant and voice in the future of the business. Every family dynamic is different; however, involvement often allows individuals to more easily accept an end result and may help to resolve or avoid feelings of bitterness and resentment.

Does your business have a succession plan in place? If so, how did you come to that plan and who was involved? I would love to hear your experiences.