By Simran Senani

Ease of Doing Business for MSMEs: Leadership transition in a family business is a deeply emotional yet crucial part of their professionalisation journey. Even though owners realise that transitioning the business is the right thing to do, they find it very difficult to let go. This process requires them to face their own mortality and answer “what after me?” Quite often they devote their entire adult life to successfully running the business and preserving harmony in the family.  When asked as to what they would do if they didn’t run the business, they get puzzled. In some cases, they also deeply wonder whether or not they will be respected and seen the same way by colleagues, friends and family if they are no longer running the show. At times they agree to retire but their role is not defined which makes the situation difficult to handle both for them and the organisation.

Next generation family members or professionals who are willing to lead the business despite being very sharp and having the best of exposure feel pressured to live up to the expectations of the family and to maintain the legacy.  They ponder –    “Am I doing enough?, Am I doing it right ?, How often can I go asking for help ? When will I really get it all together ?”

In many cases, there is an absence of a clear leadership transition plan from the leader to their successor. The main issue is that family businesses knowingly or unknowingly tend to underestimate the time and focussed attention required for the transition to happen from the outgoing leader to the successor.

Preparing the outgoing leader 

To start with, promoters who are uncomfortable and resistant to letting go should see this not as the last chapter of their life’s book but as the next new chapter and a big opportunity to take the business to greater heights. In our experience, leaders who are looking at it in this way not only do a better job in paving the way for the future of the business and family, but are also open-hearted and tread joyfully on this path. Once the leader is ready, it is best to start thinking and planning the process sooner rather than later.

It is essential to define the role of the retiring leader in the business and decide how they will spend the rest of their time. In the case of one of our client families, the Father was proactive and understood that planning this beforehand is crucial. He fixed the date of his retirement which was the day he turned 60.  He made it clear that his retirement meant that all decisions will be taken by his son who was 35 and he will be in the advisory role. He clearly stated that advice was to be given only when sought. This was not it, he also leveraged his strengths and interests for self and company. He decided that he will look after the legal matters of the company and devote the rest of his time to his spiritual journey. Also, he set clear boundaries by stating matters where he must be consulted such as when there is dilution beyond majority etc. His son, who was his successor, felt deeply understood, trusted and supported by his father.

Preparing the Successor 

Many family business owners expect their children to lead the family business without discovering whether they wish to do so or are capable of doing so. And even if they are willing and capable, their willingness to devote time and effort to learn how to lead the business is not amply checked.

Analysing the readiness and competencies of the new leader, whether family or non-family is the first step. It’s natural to wish to select a successor with similar qualities as the outgoing leader, however, it is important to understand the changing landscape of the business and decide what attributes the next leader will need for growth and perpetuation of the business. Once the leader is chosen in light of the aforementioned, day-to-day operations must be left to them along with planned sessions for grooming them from an operations and strategic point of view.

One successful successor of a family business appointed a professional coach and co-created the transition plan along with him and the departing leader. He scheduled weekly conversations with the outgoing leader around the handover of leadership. There was a difference in leadership styles of both and hence multiple conversations were facilitated by the coach to build alignment for the way forward. After the transition successfully happened over a period of two years, the coach brought to the table that it is natural for the departing leader to want to know how the business is doing even after he steps down. The successor decided to seek guidance from the outgoing leader through regular scheduled meetings. This not only fulfilled the needs of the departing leader but also gave the benefit of his wisdom to the successor.

Conclusion

We’ve often seen succession being described as the passing of the baton in a relay race. This metaphor indicates three parts of the process – preparing the person currently holding the baton, selecting and preparing the person who will take it further in the race and orchestrating the handoff. Amidst the pressures of today’s fast-paced and uncertain life, although discomforting, it is imperative to plan leadership transition in family businesses beforehand. Deep emotional acceptance, mindset shift and working on an agreed plan is required both from the outgoing leader and their successor.

Simran Senani is the Senior Consultant at BAF Consultants. This is the third article in the series ‘Making Family Businesses Succeed’. The next feature will focus on the process of successful leadership transition while professionalising family businesses. Views Expressed are the author’s own.