27 Mar Succession Planning Linkedin
“Walk in the Mud to Make a Better Road – Succession is NOT Succeeding, it is ‘’Letting Go’’
I have made a post with a two-page passage on my page in view of family business in troubled times, in the pandemic situation. Let me continue this in forthcoming days on the various questions pertaining to it and the solutions there with all.
The first question is:
Had the family made the succession planning and strategy for the next generation?
Succession planning will become a crisis, if not managed well. Many business families take it causal as they think the succession is involuntary and will happen as it is. In Asia, the general culture and belief is that the eldest son of the family assumes the business leadership position after the founder’s demise. When things go smooth and well, no one thinks the importance of planning in advance and proactive steps for succession planning. The myth is also that in family businesses, the succession process will evolve on its own and the transition will be achieved like a magic. The human mind is dynamic, and it has so much of unknown complexities. The human mind, greed and desires can deceive anyone easily. There are many examples; one can quote to say, Hinduja Group. The Hinduja group, once considered as a closely-knit business family, is facing a big challenge in these days as partition of assets at the first level. Three Hinduja brothers – Gopichand, Prakash and Ashok – contested the claim of Srichand and his daughter, saying “everything belongs to everyone, and nothing belongs to anyone.” (The Indian Express, 28 June 2021). No one, most likely within the Hinduja family or outside would have thought this kind of split will happen.
As a founder, one must devise a plan wisely at the appropriate time and ensure that the son(s), and / or daughter(s) must have the smooth transition route to take the reins. It also must have a strategic element. The strategic succession plan must include the consensus and consulting process. So it is better to “Walk in the Mud to Make a Better Road for Succession”. It is better to walk in mud to create a solution than facing a catastrophe. The better road would be in course after the hard mud walking route; it not only throws light on the current generation’s transition, but also promises for several generational transitions, holding and sustaining the family values, culture, and ethical fibres. It is noticed worldwide that for a family, to go through a situation when the succession plan is not planned well, the family will experience the breakdown of a previously successful business, loss of wealth and / or damaged family relationships.
While succession is discussed in detail, what about handing over to the next generation? How easy or tough it would be to “letting go” for the founder or current generation to the next generation? Remember it is not only letting go of the business one has built, but it includes power, authority, influence, and decision making and more. Therefore, when we talk about succession planning, we must also plan and prepare the current generation which is managing the business, to “let go”. There should be a graceful exit and strategy to keep the future generations at the approachable distance to utilise their experience to get the mentorship. A retired chairman of a family business has an office to take care of his personal charity and philanthropy work and allocates couple of hours for the younger generation to come and discuss any difficult moments with him. It may be voluntary and not compulsory, for the younger generation to consult within the available resources.
Another aspect of transition from one generation to another generation is transfer of business knowledge, apart from wealth, assets, and business. The succession planning must include the process of transferring the knowledge from the earlier generation and the handing over process must be very well planned. Gibb Dyer, Brigham Young University, says there are three types of family capital: Human Resource, Social and Financial capitals. I add another capital called the knowledge capital that also has to be transferred intelligently to the next generation.
In essence, the succession planning is a crisis if not planned well. It is an area to dive deep to consider every aspect of business, family, and society handed over to the next generation for a smooth transition.
Hence Succession accurately is not just taking over but it is also handing over or “letting go”