Sustaining the family business: A strategic approach

When I was young, I was intrigued by the family history and events recounted by my father and mother. One story that particularly resonated with me was the will and testament penned by my great grandfather.

There is much to be learned from the clarity and precision of this document, which meticulously divided his property and other assets among his five sons and two daughters.

The will clearly delineated the restricted rights of married daughters and their children to visit and reside in the ancestral home and the assets they were required to relinquish upon departure.

The clarity of this testament was instrumental in preserving family harmony for two generations, preventing significant disputes among the heirs.

Succession planning

Wills and probates are documents designed to transfer the assets of an individual or family to future generations or designated beneficiaries.

However, devising a comprehensive plan for the succession of a business venture is a more complex undertaking that cannot be solely addressed through these traditional documents.

It is crucial to distinguish between these two distinct concepts. Succession planning involves creating a comprehensive strategy for the transfer of businesses and assets within an individual or family.

Key aspects of succession planning

Let us explore the key aspects of succession planning and the considerations to keep in mind:

● While doing succession planning, the first thing we should try to learn is the nature, culture, and future potential of the existing business.

● The interests, skills, and perspectives of the successors need to be clearly understood. This is something that needs to be handled very carefully.

● It is best to deal with talent business and other assets objectively rather than emotionally. Often ventures that are entrusted to some people only on an emotional level are later seen to go astray or collapse.

● But if some assets or places are inseparably connected with the heritage or the history of the institution, it is not wrong to keep the necessary things in the documents to maintain them and not to lose them by passive sale.

● After properly understanding the skills and interests of the heirs, it is advisable to assign the responsibilities and business divisions that suit them.

● A method is not to be adopted in which all future matters can be decided and fixed by a document. For example: Suppose we have appointed a son as the future head of a major organization. This may not be possible for several reasons. When it comes to this, it is advisable to think of succession planning as a referral book containing guidelines including what else to do. This is not something that can be settled in a single agreement document.

● Care must be taken so that it does not become something that inhibits or restricts constructive engagement and change. However, provisions should be made to strictly protect matters that may have adverse repercussions if the changes are made.

Professional succession planning

From what has been described above, a general outline of succession planning is evident. This is a process that professional succession planners approach with meticulous care and attention.

When working with large business families, they often immerse themselves in the family environment, building relationships and gaining a deep understanding of the family dynamics and business operations.

They also provide ongoing coaching to the next generation to equip them with the necessary skills to implement changes and assume new responsibilities.

This includes addressing any discomfort or disagreements that may arise within the organization or with the younger generation during the succession process.

(The author is the Director of Hanhold Consulting Pvt. Ltd. E-mail: [email protected] Web: www.hanhold.com Tel: 62386 01079)

*This article was originally published in Dhanam Business Magazine.