Communicate to Succeed
Planning for succession is a major issue for private companies today. But many are not prepared to deal with the transition when the time comes, including in the mining industry.
Over half the companies included in PricewaterhouseCoopers’ (PwC) recent 2006 Business Insights survey said that some or all of their senior management would be retiring in the next five years. However, 45% of the companies–almost all of them family- or owner-managed–have not made any plans for passing the business on.
Why are so many entrepreneurs not preparing for the inevitable? One reason is that they don’t know where or how to begin. To start the planning process, entrepreneurs and families in business need to open the lines of communication and talk to each other about their goals in the years ahead. They can then consider options and put plans in place.
Some entrepreneurs may believe they have their succession plan already figured out, so they need not have potentially emotional discussions with stakeholders. Plans devised according to an entrepreneur’s own desires and perspectives without full information, however, is one of the leading reasons that family businesses fail to pass to the next generation.
Importance of communication
Communication is key to succession planning; the following scenario illustrates the potential results when it’s done poorly.
An entrepreneur in his 80s was beginning to think of his succession plan. He wanted to pass on the business to his son, who was in his 50s. His plan was doomed, however, as the son was looking at retiring in the next few years. He did not want as long a working life as his father (who was still looking at acquisition opportunities!), but wanted time to enjoy his family. Had the father gone ahead and prepared his plan–based on the assumption that his son was as he was eager to grow the business–their relationship could have suffered and the company been jeopardized.
Succession planning should be a participatory process in which the stakeholders can share their thoughts, ideas and concerns. This doesn’t mean that the owner necessarily has to share decision-making responsibility or give up control over the process.
Facilitating the transaction process
We see the need to communicate in this story of two brothers in business together. The one who was the CEO knew that the ownership structure had to change. He wanted to buy out his younger brother, but didn’t think the brother would be open to the suggestion. A facilitator met with the younger brother, who indicated he’d like to be bought out, but wasn’t sure if the CEO would be willing to consider it. The facilitator brought the two siblings together and helped them talk about their options. Both were surprised to hear they were on the same page.
Throughout the transaction, the facilitator continued to keep the lines of communication open, and helped to meet expectations, and to identify and address potential issues. The result was a fair and affordable transaction. Equally as important, the brothers maintained their good relationship.
When succession planning takes place behind closed doors, employees and family members are left wondering and worrying, at best. At worst, they can be hurt and angry. These emotions can damage relationships within businesses and families, but that doesn’t need to happen. Conflict can be minimized by sharing information and seeking feedback.
Luanna McGowan is the partner responsible for PricewaterhouseCoopers’ Centre for Entrepreneurs and Family Business, specializing in the areas of succession planning, communication and governance for entrepreneurs and families in business. She can be reached at e-mail: firstname.lastname@example.org, phone: 905-972-4107. Ms. McGowan is co-author of a new book titled Succession Planning Toolkit for Business Owners (www.knotia.ca/store/businessowners).