International Finance
Interview Magazine March-April 2019

A Business Is ‘Most Vulnerable’ during Succession

A Business Is 'Most Vulnerable' during Succession
Rochelle Clarke, global strategist and business succession expert draws insight into the dynamics of a family business while transiting from one generation to the next.

In your expertise, how often do you see members successfully expand their family business?

The statistical success rates for family business transitions have not been encouraging—with a mere 30% of family-owned businesses making it to the second generation and about half of these making it to the third. However, those who engage the help of a third party advisor have seen much higher rates of success.

What are the common reasons found responsible for the decrease in longevity of family businesses? Can you state an example?

Family businesses are most vulnerable during the succession or transition from one generation to another. The reasons for this are numerous; but one common contributing factor is poor or ineffective communication resulting in failed successions. Another is failure to plan for succession. Common complaints that have their roots in communication include: unwillingness or inability to have key business conversations; lack of accountability among family members; and lack of boundaries (business taking over family life).

What is the chief knowledge that families must possess to ensure smooth transition in ownership from one generation to the next?

Families need to know what their succession journey should look like and where their potential succession issues are along that journey: what could potentially be standing in their way: be it lack of an identified successor, absence of a transition plan, or some other factor.

Rochelle Clarke
Rochelle Clarke
Founder, Succession Strength

How important is it for a generation to change the structure of a family business after the transition?

It is important as it is needed for the business’ survival. Businesses need to be flexible in order to remain relevant. The longest existing family-owned businesses have had to reinvent elements of their operation as technologies have advanced: ways of working has changed and the needs of their customers have evolved. A generation with a finger on the pulse of the industry will make the changes that are necessary for the survival of the business.

During the transition period, is coaching a significant process? Why?

A number of factors determine whether the guidance required will be significant. For example: the number of persons requiring guidance; how far along the business is in the transition process; and the level of preparation of the incoming generation.

For example: if the incoming family member has already spent a significant amount of time working in the business, the level of anticipated disruption and need for coaching may be minimal.  If there are a few family members, or if the business is at the beginning of the transition process, the amount of guidance needed may not be as much as that required for a business with many family members or a business that is trying to fix a problematic transition.

Can you define Succession Strength’s business model?

We aim to help businesses identify potential hurdles in their succession efforts via our assessment survey. With knowledge of their potential challenges via the resulting report, owners or their successors could either take action via the self-help approach by selecting a Succession Strength product that best fits their needs; or by engaging with us for more involved coaching.

How does your venture play a key role in this transition?

We help family-owned businesses prepare for the future by providing solutions for major problem areas such as communication and succession.

Communication: Establishing dialogue between one generation and the next is the key to success in transition. One barrier to smooth succession would be the key conversations that are avoided or mishandled for one reason or another. We not only highlight the key succession conversations that should be had, but we also work with firms by providing in-depth help with communication issuesgeneral communication guidance (so they can have better, more productive conversations); and conflict management/resolution and continuity planning.

Succession: It is the fruit of healthy communication. Our philosophy is that planning for a business’ continuity should go beyond just planning for succession. It identifies the critical elements in any transition and formulates a concrete plan for wading into the inevitable complexity of change. Through it all, we work hard to ensure that the owners’ vision is never lost in the shuffle. Our business continuity plans help businesses protect their current operations while also taking succession into consideration.

On what parameters do you assess a family business as on borderline risk?

We assess businesses based on the strength of their communication, preparation efforts, and then, execution. We find that communication is the common factor that could result in issues in the preparation and execution phasesso we really focus on this.

Can you elaborate on your products and their key offerings?

Our Succession Strength™ assessment is an online survey that helps business owners and successors identify their transition hurdles. The resulting detailed report analyses their succession readiness in three dimensions: communication, preparation, and execution.

The 5 Critical Succession Conversations: A Comprehensive Guide for the Family Business, is a book on difficult business succession conversations. In this book, we identify the most challenging conversations surrounding succession.

A series on detailed step-by-step conversation guides crafted by our organisational psychologist help businesses overcome specific scenarios that could be causing tension and pave the way for a smooth transition.

Business continuity template helps businesses distill key processes and functions into a comprehensive continuity plan that will ensure the doors remain open on the family business long after a key business member is gone.

So far, what has been the clientele feedback?

Our clientele feedback has been positive so far. Clients like the amount of detail provided in the survey report and had good things to say about the accuracy. They also seem to appreciate the self-help approach of having a conversation guide that targets the situation they are facing.

Leave a Comment

* By using this form you agree with the storage and handling of your data by this website.