Ask the Expert… How do I avoid conflict in succession planning for my family business?
We get it—succession planning can take on an entirely new degree of difficulty when it involves family. Sometimes it might even seem impossible to keep emotions out of the equation when determining a familial successor (there’s a reason HBO’s Succession is a hit drama). Thankfully, we have a few tips that should help you navigate the process without souring Sunday night family dinners.
Set aside more time than you think you need
Family business transitions are an intensive process involving multiple stakeholders, and rushing through one without budgeting enough time to properly consult with everyone involved can sow frustration and lead to family discord. While it can vary depending on each business’s situation, succession planning is often a 1-3 year process. Consult with your DMCL advisor to determine a sufficient timeline for your succession planning and ensure that you have time to prepare accordingly.
Define roles and responsibilities early on
Part of ensuring your business transitions into the right hands is designating who will handle which responsibilities, including both ownership and day-to-day management. These roles and responsibilities should have clear criteria for the experience, education and skills necessary in order to prevent unqualified family members from assuming them. Having clearly defined roles for family involvement in the business will help you avoid any misunderstandings and ensure a smoother transition process.
Draft clear policies for family participation
In addition to defining roles, it may be the case that you have family members who are stakeholders in the company but not involved in its day-to-day operation. By creating clear policies for who can be involved in the company in which situations and to what extent, you can protect your business from unnecessary complications. This should involve asking difficult yet important questions on each family members roles and responsibilities, as well as the extent in their involvement in the business. Consult with your DMCL advisor to establish a structure that achieves your requirements.
Engage with all stakeholders
Communication will likely be the hardest part of any family business succession planning, but it is also the most important. Meeting individually with each family member to discuss their goals and concerns before coming together as a group is a good way to ensure they can speak freely without pressure from any third parties. Once you have collected your findings, you can meet as a group to share perspectives and address disagreements, which should be codified in a policies and principals document that includes all stakeholders’ input in plain language.
Once you feel confident you’re ready to put pen to paper for your succession plan, it’s time to get in touch with your legal and financial counsel. Your DMCL advisor will be happy to help protect your family’s legacy by providing you expert advice on how to craft a succession plan that ensures your business thrives in the long term.