Around the world family-owned enterprises play a pivotal role. Today, family businesses are confronted with a multifaceted agenda that reflects the dynamic nature of the modern world. Two prominent themes that resonate across continents are sustainability and digital transformation. Both topics feature highly on the family business agenda worldwide, emphasising the delicate balance between tradition and innovation. One crucial aspect on the family business agenda is the challenge of generational succession. As older generations pass the baton to their successors, strategies for seamless transitions and knowledge transfer are imperative. Nurturing leadership skills, instilling a strong sense of values, and fostering open communication are integral components in ensuring the longevity of family businesses. With plenty of family firms approaching transitions in the next few years, conversations around the next generation of leaders and owners of family firms continue in all corners of the globe. In an era defined by rapid technological advancements, family businesses are compelled to adapt or risk becoming obsolete. Digital transformation is at the forefront of their agenda, with a focus on implementing cutting-edge technologies to enhance efficiency, streamline processes, and connect with a tech-savvy consumer base. Embracing innovation while preserving the core values that define the family business is also a delicate balancing act. A growing awareness of environmental issues has propelled sustainability to the forefront of family business discussions. From responsible sourcing to eco-friendly production practices, there is a concerted effort to integrate sustainability into every facet of operations. Family businesses recognise the importance of aligning with global sustainability goals, not only for ethical reasons but also as a strategic response to shifting consumer preferences. Maintaining a delicate equilibrium between tradition and innovation emerges as a recurring theme on the family business agenda. While tradition serves as a foundation, innovation is essential for relevance and competitiveness. Successful family businesses navigate this tension by leveraging the strengths of their heritage while embracing change, ensuring a dynamic and forward-looking approach. Family businesses are no longer confined by geographical boundaries. The global agenda involves expanding market reach, forming strategic alliances, and navigating the complexities of international trade. Connectivity is not only about tapping into new markets but also about sharing best practices, learning from diverse perspectives, and adapting to global economic trends. The family business agenda around the world is a complex one, woven with threads of generational succession, technological adaptation, sustainability initiatives, and the delicate dance between tradition and innovation. As these enterprises navigate the complexities of the modern business landscape, the ability to embrace change while preserving core values emerges as the linchpin for sustained success. In this era of interconnectedness, family businesses find themselves not only as custodians of tradition but also as pioneers of a sustainable and technologically advanced future.

As an experienced Family Business Advisor, I understand the unique dynamics, joys, and challenges that come with passing the torch to the next generation. In this article I will share some insights and advice on how you can effectively prepare the future leaders of your family business. Embrace The Power Of Mentorship Within a family business, there is a wealth of wisdom and experience that can be passed down from one generation to the next. Encourage your seasoned leaders to serve as mentors, guiding and nurturing the younger generation. Through one-on-one mentorship, mentorship programs, or even family retreats, these invaluable connections can help cultivate leadership skills and foster a strong sense of legacy. Instill A Culture Of Learning And Growth In any family business, there is no substitute for continuous learning. Create a supportive environment that emphasises ongoing education and personal development. Whether it's attending industry conferences, enrolling in executive programmes, or encouraging participation in professional networks, active learning will help the next generation stay ahead of the curve and prepare them to make well-informed decisions. Master The Art Of Communication Effective communication lies at the heart of successful leadership and decision-making. Encourage open dialogue and active listening within your family business. Create opportunities for meaningful conversations, team-building exercises, and conflict resolution. By nurturing strong communication skills, you're not only preparing the next generation for leadership, but also building a foundation of trust and connection within the family. Expose Them To All Facets Of The Business To groom future leaders, it's vital to provide exposure to various aspects of the business. Encourage cross-functional experiences, job rotations, and opportunities for the next generation to spread their wings and engage with different areas of the business. This exposure allows them to gain a holistic understanding of the business, nurture empathy for the challenges faced by various teams, and make informed decisions rooted in a deep understanding of the business as a whole. Develop Emotional Intelligence Empathy, self-awareness, and emotional intelligence are essential qualities for effective leaders. Encourage the next generation to cultivate these traits by providing opportunities for personal growth, self-reflection, and feedback. Emotional intelligence not only helps them navigate relationships within the family business, but also empowers them to connect with employees and stakeholders on a deeper level. Foster A Spirit Of Innovation In today's rapidly changing world, innovation is key to staying relevant and thriving across generations. Encourage the next generation to bring fresh perspectives and ideas to the table. Create a culture that embraces experimentation, rewards calculated risk-taking, and fosters creativity. By nurturing an innovative mindset, you're equipping the future leaders of your family business to adapt, evolve, and seize new opportunities. Remember, the journey of preparing the next generation for leadership and decision-making in a family business is an ongoing one. It requires patience, trust, and a commitment to nurturing growth. Celebrate the joy and pride that comes with being part of a family business, as these emotions will serve as a powerful foundation for success. About the Author: John Broons is a globally awarded family business expert. One of only three people in Australia to hold the coveted title of Fellow of Family Firm Institute (Boston, USA), John has dedicated his working career to answering the question: how do I guide and support families in business to a place where they’re thriving? Find out more by visiting his website here

Over the past few decades, Behavioral Economics (aka Behavioral Finance) has focused on what most psychologists have been studying since the late 1800s … namely, despite how we like to think about ourselves, we are not purely rational beings driven solely by logic. Given this now widely accepted fact of modern science, how could we expect human beings to act without emotions playing a significant role when it comes to exiting a business one has built, grown, and has been a central part of their professional (and often personal) identity? Especially when you consider the blood, sweat, and tears that likely went into building and sustaining the business. Furthermore, when family is involved, how likely can it be that no feelings will emerge in the process of considering, planning, and executing a transition process? It is, of course, exceedingly common to ignore the role of one’s emotional (or internal) life in daily decision-making, and to believe our conscious minds completely dictate how we move through the world. Relatedly, transition/succession planning experts and researchers refer to the following as the most common reasons that exit/succession planning is ignored rather than carefully and proactively addressed, as stated by family business owners: I’m too busy. It isn’t that complicated. The kids aren’t ready. The business isn’t ready. While there can be truth to many, or all, of these statements, as a result of accepting them without exploring underlying psychological factors, there is a fundamental failure to adequately and effectively plan a successful exit. In my coaching and consulting work with family businesses and family business members since 2008, I have found that addressing the following three areas of the planning process are critical as they are often impacted by hidden psychological mechanisms and the needs of the current gen/owner: Loss Substitution Departure Loss – When determining a successor (whether a family member, employee, or outside buyer), the business owner comes face-to-face with their own mortality. Often, regardless of age, owners (on some level, often unconscious) encounter the fact that, even after they have left, the company will continue … a symbolic reminder that the world will march on without us. Although consciously this can be of great comfort to the business owner by providing a sense of legacy, most owners have difficulty facing the harsh reality of human existence that we all deny in order to function effectively in the world and lead full lives. To quote Neil Peart, a writer, musical lyricist, and highly respected percussionist and drummer, “we are only immortal for a limited time.” Other defense mechanisms and reactions often at play include denial (“I’ll be able to keep doing what I am doing until I am 85 with no negative consequences or impact on the company or family”), persecution (“The kids are pushing me out”), regression (sudden, unexpected, childish behaviors) and extinction bursts (one more big project or major deal that keeps an owner tied to the business for the foreseeable future). In my experience, listening closely to owners for clues about how they are facing (or not facing) this undeniable loss provides significant insight into how to move the process forward. In addition, exploring how they have previously managed loss in their lives can lead to fruitful discussions on their anxieties, fears, and how they wish to be remembered after their exit. However, ultimately, open acknowledgement of the closing of this chapter of the owner’s life is critical. This can be done with good listening skills and empathy from trusted others, through hearing the stories of other owners who have exited or sold their businesses, and by creating “emotional space” (tolerance and acceptance) for owners’ complicated and often contradictory feelings as they move closer to transition. As one close colleague told me when he was in the process of transferring his business, “Everything I have to do right now is the exact opposite of what I have spent my entire career learning how to do. On a gut level, it all just feels wrong … even though I know rationally, I have to let go.” Substitution – An owner in the early stages of exit preparation is less likely to take concrete action, more likely to object to any forward motion, and stands a greater chance of frustrating family and advisors who would like to help them plan a transition. This is where the value of establishing a relationship with a trusted advisor is clear. Similar to hiring a CPA or Estate Planning Attorney, family business owners and their family members can access trained, qualified, and experienced third-parties who can help owners begin to consider their life after exit…their “next chapter.” Owners are best prepared when they have answers to how will they replace time formerly spent at work, meals and meeting with clients and vendors, relationships with management and staff, and, perhaps most importantly, their identity as a business owner. There are various studies that show a majority of business owners regret their decision to exit once the initial “shine” wears off. Through recent discussions with a close and well-regarded colleague, I have begun to understand and frame this experience as a “post-transition/post-deal depression.” Exited owners have more freedom and time, but often lack purpose, meaning, activity, social connection, and, in many ways, a new sense of self that must be built. For many of them, it is crucial that they begin exploring, selecting, and engaging in activities long before their exit; this can include joining one or more boards, starting a new business, teaching, mentoring, consulting, revisiting interests and hobbies that were abandoned long ago, and joining community or philanthropic organizations. Days filled with golf or playing with grandchildren are not realistic plans, as they do not satisfy many of those needs that exiting business owners have for influence, impact, relevance, purpose and quite often, a healthy and appropriate sense of value to the world. Departure – The potential for problems in the business and among family members is significant if the actual departure is not adequately planned and managed. Examples of challenging post-exit behaviors include continued involvement with the company, antagonism towards the next gen or new management, or misplaced blame or anger directed at family and friends. In making sure that exiting owners are moving towards the next part of their lives, not simply dealing with the loss of their business identity, it is critical to mark this important moment in time. Throughout human history, rituals help us recognize and move through stages of life. I have seen success using rituals such as: creating a look back at the departing owner’s impact (through videos, photographs, storytelling), multiple celebrations (in other words, one that includes employees, vendors and other business colleagues, another with family members, and even another with friends), symbolic representations of the owner’s contributions. A physical gift that an owner can possess and gaze at can be psychologically impactful at the time of exit, but perhaps more importantly, is comforting in quiet post-exit moments of doubt, regret, or even despair. Employees and family members can (quietly) brainstorm these and other ideas to support an effective departure. I have seen the positive impact of photograph collections that display the owner’s history and development of the business, journals filled with heartful comments, stories, and memories from employees, clients, vendors, and family members, valuable objects of meaning to the owner (such as a gold-plated version of a manufacturing company’s product, or a scale model of a company building or other structure). These sometimes include a personal inscription or quote that is similarly meaningful, perhaps even a saying or expression the owner themselves often used. In summary, addressing loss, replacement, and departure thoughtfully not only can assist the exiting owner emotionally, but can support the very real transition of leadership for the company. Putting in time and effort beyond the legal, financial, and structural components of transition demonstrates to everyone that working in a family enterprise goes well beyond an exchange of work and time for financial compensation … that being part of something larger than oneself, appreciating relationships, and caring for others’ emotional lives truly differentiates working in an enterprise that attends to far more than just the bottom line. About the Author - Michael Klein, PsyD, is the author of Trapped in the Family Business: A Practical Guide to Uncovering and Managing this Hidden Dilemma ( trappedinthefamilybusiness.com ). He holds a doctorate in psychology from The Graduate School of Applied & Professional Psychology, Rutgers University and can be reached at DrMichaelKlein.com . Copyright MK Insights LLC and republished here with the permission of the author.

Family business succession planning is a complex and challenging process that involves transferring leadership and ownership from one generation to the next. Over the years, succession planning has been recognised as one of the more difficult challenges that families in business have to overcome and there are several factors that come to the fore and can make it difficult to navigate successfully. These can include emotional dynamics, balancing the needs of the business with the skills of the family members, lack of formalised processes, estate planning and general economic conditions. Firstly, emotional dynamics within families can complicate succession planning. Personal relationships, historical family roles, and unresolved conflicts may interfere with objective decision-making and it also raises questions about mortality too. Emotions can cloud judgment and hinder open communication, making it difficult for family members to align on a clear succession strategy, or even want to bring up the topic of conversation in the first place. Secondly, balancing business competence and family ties is a delicate task. The most qualified family member may not necessarily be the best leader, causing tension between meritocracy and familial obligations. Striking a balance between competency and maintaining family harmony is a perpetual challenge in the succession planning process and for many it raises more difficult questions, especially if there is more than one potential candidate in the next generation, and if the next leader is to be a family member, causes parents to choose between siblings which is made all the more difficult by the perennial desire to do everything equally and fairly amongst all their children. Thirdly, inadequate preparation and a lack of formalised plans contribute to the complexity. Many family businesses fail to establish clear guidelines for succession, resulting in ambiguity and potential conflicts. The absence of well-defined processes and communication channels can lead to confusion and disputes among family members but by introducing plans and communicating them well, family harmony can be maintained and the process followed to determine the successor. Moreover, the transition from an entrepreneurial founder to subsequent generations often involves a shift in organisational culture. Maintaining the original vision and values while adapting to changing market dynamics requires a delicate balance. Differences in management styles and approaches between generations can create resistance to change and hinder the smooth transition of leadership. From a founder to second generation transition results in the entrepreneurial founder who set out with an original idea, passion and determination to succeed stepping back and relinquishing more of the decision making and responsibility and as such the business takes on a new dimension. The next generation will want to put their stamp on the business but may have different drivers and desires for the business and this again may cause some degree of discomfort when discussing transition from one generation to the next. Estate planning and taxation may also pose additional hurdles. The complexities of legal and financial aspects can strain family relationships. Balancing the desire to treat all heirs fairly while ensuring the continuity and growth of the business requires careful consideration and expertise in various domains and for some families it seems easier to defer the conversations to a later date and succession simply becomes the ‘elephant in the room.’ Lastly, external factors such as economic uncertainties and market volatility add another layer of difficulty. Navigating the challenges of a dynamic business environment while simultaneously managing internal succession dynamics requires strategic foresight and adaptability and remains on the agenda for many family firms still building back their businesses after the global pandemic and with prevailing economic and political uncertainties likely to remain for the immediate future. Family business succession planning is not easy due to emotional complexities, the delicate balance between family ties and business competence, insufficient preparation, cultural transitions, legal and financial intricacies, and external market pressures. Addressing these challenges demands a combination of open communication, professional guidance, and a commitment to preserving both family relationships and the business legacy. Succession planning is however an inevitability and something that needs to be given sufficient time to achieve a successful outcome. In many cases it takes time and needs honest and authentic conversations, between the generations, to work out what individuals want and also what is ultimately best for the family and the business. Professional advisers are well placed to offer a sounding board to move conversations along and there are plenty of other resources on hand to help families consider the options available to them. When running a business day to day it is difficult to find the time to have the conversations that are needed on a topic as emotive as succession but time needs to be set aside to talk about it openly and formalise and then communicate a plan in order for it to have any chance of a successful transition taking place. Succession can be a difficult challenge to address, but it doesn’t have to be as long as all parties involved are willing to talk openly, honestly and work together for the shared end goal, a successful transition to the next generation of leaders in a way that is best for the business and ensures that family relationships are maintained too. This article is part of a series that has been published by Family Business United to support a series of Family Business Insight Events with Barclays Corporate Banking

Succession planning is a crucial aspect of ensuring the longevity and prosperity of family businesses. As the torch passes from one generation to the next, unique challenges arise that can either strengthen the business's foundation or lead to its unravelling. The Legacy Continuum: Passing The Baton Transitioning leadership from one generation to the next is a delicate balance between upholding the family legacy and adapting to modern business practices. The challenge lies in merging tradition with innovation, ensuring that the values and ethos of the business remain intact while embracing change to stay competitive in evolving markets. Effective succession planning involves aligning the vision of the incoming generation with the established principles that have guided the business thus far. Striking The Balance: Family vs. Business Dynamics One of the primary challenges in succession planning for family businesses is navigating the complex interplay between family dynamics and business interests. Personal relationships and emotional investments can often cloud decision-making processes, leading to conflicts and rifts that jeopardise the business's future. It is essential to establish clear boundaries and communication channels, separating family discussions from business strategies to maintain a harmonious transition of power. Identifying & Developing The Next Generation Succession planning is not just about designating a successor; it is about grooming future leaders who possess the skills and vision to steer the business forward. Identifying potential candidates early on and providing them with the necessary training and mentorship is key to ensuring a smooth transition of leadership. Investing in leadership development programmes and fostering a culture of continuous learning empowers the next generation to take on greater responsibilities with confidence and competence, building their understanding and knowledge and helping them gain the respect of those around them for the value and skills they bring too. Embracing Innovation & Adaptation The business landscape is constantly evolving, and family businesses must be willing to embrace change to stay relevant and competitive. Succession planning provides an opportunity to infuse fresh perspectives and innovative ideas into the business while honouring its heritage. Adapting to new technologies, market trends, and consumer demands is essential for ensuring the continued growth and sustainability of the family business across generations and maintaining the relevance and competitive edge of the business at the same time. Preserving Family Harmony & Unity Succession planning can often strain family relationships and lead to conflicts over roles, responsibilities, and decision-making authority. It is imperative to foster open and honest communication among family members, addressing concerns and grievances proactively to prevent tensions from escalating. Establishing clear governance structures and conflict resolution mechanisms can help mitigate disputes and preserve family harmony throughout the succession process. Looking To The Future: A Legacy Of Success Succession planning is not just about transferring ownership and leadership; it is about securing the legacy of the family business for future generations. By approaching succession with foresight, strategic planning, and a commitment to both family values and business excellence, family businesses can ensure a smooth and successful transition that paves the way for continued growth and prosperity. Embracing the challenges of succession planning as opportunities for growth and evolution is key to building a lasting legacy that withstands the test of time. In the intricate realm of family businesses, succession planning serves as a pivotal moment that can either solidify the foundation for future success or introduce challenges that test the business's resilience. Navigating the complexities of succession requires a delicate balance of preserving tradition, fostering innovation, and nurturing the next generation of leaders. By embracing these challenges with strategic foresight and a commitment to both family values and business excellence, family businesses can set the stage for a prosperous and enduring legacy.

Planning ahead for the future of your family, or your business is key. Succession can be both planned and unplanned. An event of unplanned succession is likely to be chaotic as well as emotionally draining. At worst, the business, farm or estate could grind to a halt while the family struggle to obtain 'Confirmation' (probate) for the owner’s estate. It might also be that the practical aspects of running the business have gone to the grave too - for example banking passwords, key supplier relationships and customer arrangements. There are also some heavy-duty tax issues to consider, particularly Inheritance Tax, which need careful planning. Why would a founder choose to leave this chaotic burden behind for their family? Especially so if there is a complex business or asset in the background. Common reasons for the lack of a plan are often because the founder can’t face the prospect of making difficult decisions or risking disharmony amongst the family and so they avoid the issue entirely. Or perhaps they are simply too busy with the day to day running of the business. An effective business succession process, on the other hand, would involve a well-considered and written Will, a separate plan for the business in the event of the founder’s death, a record of practical issues, a set of constitutional documents for the business, good communication and a group of people who are ready and waiting to take the business forward. A good starting point would be to take advice from advisors who are experienced in this area, as well as talking through the issues with peers who have been through a similar process. However, pre-determining a fixed outcome may end up in difficult territory. It is worth asking each of the next generation, or indeed the management team, what their plans and aspirations are and of course managing their expectations. Often, in the families we have supported, we have been surprised by the response from the next generation or management team, so don’t assume anything! Would they be good stewards of the business or asset? And how would external influences play a role - spouses, a divorce, and even the impact of other advisors. There are two schools of thought around whether it is best to bestow a business/asset onto a member of the next generation and simply provide cash to the other siblings, or whether to confer a majority ownership on one of the family with minority shares on the other siblings. To make this decision, a close understanding of the personalities involved as well as simulating how things can play out, all coupled with emotions, are significant issues to work through. A well-considered shareholder agreement will be vital. Could that decision be turned on its head and the position considered from the point of view of what is best for the business/asset? A variation on the theme is to introduce external management, so leave the shareholders as owners and key decision makers but have experienced external management to deal with the operational aspects. Once the plan is established, communicating that plan effectively is critical, delivered in a way that does not disenfranchise other family members. Would that be best done by one of the senior generation or with the help of external advisors? How far in advance should this be started? Our experience says that a good succession plan is a few years in the making, giving time for people to become comfortable with the changes and the roles they will step into. It is also important to understand the separate roles that everyone might play - being an owner is different from being a director, albeit interests can be aligned. Succession is a minefield and needs careful planning and support from others who have successfully navigated the process and found an amicable solution for the family and their business interests. About the Author - Mike Kane is a partner at Turcan Connell and wrote this article with Kirsty Ross, Director at Turcan Connell. Find out more about their work with family businesses at www.turcanconnell.com

The issue of succession for a family business is bound up in a complex combination of commercial and personal issues. In business terms, the aim will be to hand the business on to people with the skills and experience needed to protect the legacy of the business and build on the current levels of success. On a personal note, the owners of a family business will wish, as far as possible, to pass the business on to the next generation, giving their successors the chance to enjoy the same opportunities they did and build a dynasty for the future. There are some technical legal issues around company law which might impact on this intention, however, and in this article, we’ll examine some of those issues and offer advice on how best to achieve a smooth succession. Articles of Association Shares in a family business are treated like any other shares – as private property which the owner can treat as they wish to, without there being any obligation to buy and sell those shares to either individuals or the company. There are contractual, statutory and regulatory issues which complicate this, however, and the articles of association of the business are most likely to have an impact. The articles of association set out the purpose of a business and outline the regulations which will govern operations. Points set out in the articles of association usually include the following: The organisation and structure of the company The process of holding shareholder meetings How shares and dividends in the company will be issued and the voting rights enjoyed by shareholders How directors will be appointed and the responsibilities they will have The articles of association operate as a form of contract between the company and the shareholders, and a framework for governance of the company. Once drawn up, the articles – which will include the legal name of the company – can be accessed as a public record and are often held at the registered office of the company. The articles can be revised, particularly if this becomes necessary due to a change in the law or because a regulatory authority has demanded the change. Changing the articles in this manner would require a meeting with shareholders at which a resolution is passed. As well as offering a form of ‘user guide’ for the company as a whole, articles of association are often required when opening a company bank account or applying for business loans. Once in place, the articles act as a binding agreement between the company and its shareholders, and the type of change mentioned above can only be made via a special resolution which requires the agreement of at least 75% of shareholders. Transfer of Shares It is possible to gain more insight into how articles of association are drawn up by looking at model articles for private companies listed by shares, as published by the government. Of most relevance to the issue of succession is Model Article 26, which states that ‘The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.’ This could cause issues with succession following a death unless the circumstances are covered by the Will of the deceased or a shareholders agreement which may be in place. The possibility, for example, is that the remaining board members, following a death, may disapprove of the beneficiaries to whom shares have been passed (perhaps because said beneficiaries have no interest in the company) and will therefore decline to register the transfer of shares unless it is being made to someone with whom they approve. Many shareholders agreements will contain clauses which require an individual shareholder to offer their shares for sale to other shareholders in circumstances such as their death, incapacity or – as an employee shareholder – upon leaving the company. If the other shareholders opt not to exercise their right to buy then share transfers will need to be approved by the board (as set out in Model Article 26), whereas if shareholders do choose to buy the shares the estate of the deceased will receive the value of the shares, rather than the shares themselves. A method for valuing the shares will generally be included in the shareholders’ agreement, making it simpler for the executors of any Will to value an estate including shares before a sale or transfer has gone through. There is a chance that a shareholders agreement won’t include a clause requiring shares to be offered for sale following the death of a shareholder, but even in these circumstances pre-emption rights may apply. Pre-emption rights on transfer of shares mean that the personal representatives of the deceased will first be expected to offer the shares for sale to other shareholders before simply transferring them to the beneficiaries in line with either the Will or the rules of intestacy. Shareholder Agreements Everything set out above helps to underline why anyone wishing a smooth succession – i.e. leaving their shares to future generations of the family – needs to take positive action to ensure that this happens, with particular regard to the wording of any shareholders agreement. The agreement should be drafted to ensure the following: There are no clauses obliging shareholders to sell their shares on death or on leaving employment Transfers of shares to family members such as children and grandchildren are treated as permitted transfers i.e. free from pre-emption rights Any transfers of this kind which are carried out properly should be approved by the board In some cases a more cast-iron clause could be inserted into the shareholders agreement, stating, for example, that only direct descendants of the named founder of the company are entitled to hold shares, and that the board does not have the right to approve transfers to any party not qualifying in this manner. Of course, the fact that a shareholders agreement can be changed with the approval of all parties or a specified percentage of the holders of voting shares, and articles of association amended through a 75% majority, means that there is always a chance, in any private limited company, that the provisions in a shareholders agreement are not set in stone. The commercial interests of the company will always trump family ties in the eyes of shareholders, sometimes even those shareholders with family ties, and so things could change at some point in the future. The overarching advice for anyone planning the succession of a family business on their death is that simply passing shares on in a Will is not be sufficient to guarantee a smooth succession without paying proper attention to what is set out in the articles of association and any shareholders agreement. It is probably true to say, therefore, that any succession planning, rather than being left until such time as that succession can be said to be looming on the horizon, needs to be at the forefront of your thinking from the very beginning, i.e. when the company is incorporated or if not at the earliest opportunity. Should you require any advice or support on how best to preserve the legacy of your family business, please contact the specialist family business team at Buckles  for a confidential, impartial consultation.

Succession planning is the linchpin for the longevity and continuity of family businesses, yet it remains a daunting challenge for many. This process, essential for the seamless transfer of leadership and ownership from one generation to the next, involves much more than just naming a successor. It requires a strategic and emotionally intelligent approach, addressing both the business’s future and the intricate web of family dynamics.   The Building Blocks Of Succession Planning Successful succession planning starts with identifying potential successors. This involves evaluating family members or key employees to discern who possesses the requisite skills, experience, and genuine interest in leading the business. Once potential successors are identified, training and development become paramount. Providing the necessary education and mentorship is crucial for preparing future leaders to navigate the complexities of the business world.   A clear and realistic timeline for the transition is another cornerstone of effective succession planning. This timeline helps prevent abrupt changes that could destabilise the business. Additionally, defining roles and responsibilities for both current and future leaders ensures a smooth transition, minimising confusion and overlap in duties, as well as ensuring that future leaders are developing the right skills to meet the future needs of the business too.   Addressing the legal and financial aspects of the transition, such as ownership transfer, tax implications, and estate planning, is essential to avoid future legal entanglements and financial complications. Throughout this process, maintaining open and transparent communication with all family members and stakeholders is critical. Clear communication helps manage expectations and reduces the risk of conflicts.   Lastly, contingency planning for unexpected events, like the sudden illness or death of the current leader, ensures that the business can continue operating smoothly regardless of unforeseen circumstances.   The Challenges: An Emotional And Complex Endeavor Despite its importance, succession planning in family businesses is notoriously difficult. One major hurdle is the emotional factors at play. Family dynamics and personal relationships often cloud objective decision-making. The process can stir up deep-seated emotions, leading to conflicts and disagreements.   Founders and current leaders frequently struggle with a reluctance to let go. Their emotional attachment to the business, combined with fears about retirement and doubts about their successors' capabilities, can hinder the transition process.   Another significant challenge is the lack of qualified successors. Not all family members may have the interest or aptitude to take over the business, creating a potential leadership vacuum. Furthermore, ensuring fairness and equity among family members, especially when some are involved in the business and others are not, can be a delicate balancing act. It’s crucial to avoid disputes over inheritance and ensure that all parties feel they are being treated fairly.   Complex family relationships further complicate succession planning. Differing visions, values, and interests among family members can lead to serious disagreements. Resistance to change from employees and stakeholders, who may be loyal to the current leader, can also impact morale and performance during the transition.   Lastly, many family businesses suffer from inadequate planning. A lack of formal succession strategies can lead to a crisis if a sudden transition is required, jeopardising the business’s future.   A Way Forward Succession planning is indispensable for the sustainability of family businesses. Addressing its inherent challenges requires meticulous planning, clear communication, and often, the guidance of external professionals to navigate the emotional and operational complexities involved. By prioritising these aspects, family businesses can ensure a smooth transition and continue to thrive across generations, preserving their legacy for years to come.

In 2020, Alex Scott, stepped-down from his role as Chairman and CEO of Applerigg, a private, family-owned business built on the foundations of a financial services group established by his great-grandfather in 1903. A fourth-generation leader of the Scott family’s business, he has been both a successor and managed his own succession. As a result, he has a deep personal understanding of the responsibilities and challenges of managing generational transition, as well as the opportunities. Alex spoke to Paul Pratt of PKF to share his thoughts. According to Alex, succession is a vital part of a family business’s success, particularly because there’s a predilection among businesses not to endure multiple generations. That’s not necessarily because of succession issues, he stresses, it might be that the market the company operates in just isn’t conducive to long-lasting businesses. However, you can’t go through the generations if you don’t get that critical element right. An essential part of getting it right is nailing the timing. How do you know when it’s time to go? “In my own case,” says Alex, “it was when I knew I had a successor who was ready, and that coincided with where I was in my life cycle. I’m 62 and although I had no desire to stop working, I was conscious that I’m not immortal! I was also aware that the last great test for leaders of a family business is to ensure a good succession." “If you’ve got a good successor then, in my mind, you do everything you can to facilitate that process. I don’t think that you necessarily get to choose your own time,” he explains. “To me, the long-term success of the family and the family business entity is more to do with the timing of the successor rather than the succeeded, so I was very happy to flex around what I thought was the optimum solution for my successor.” “I suspect that some people have been asked to succeed in a situation when either they weren’t ready, or after their enthusiasm has waned,” he adds. “I don’t think you can say ‘I’m 65 and you’re 45, so today’s the day!’ I think it’s a much more fluid situation than that but getting the timing right is key.” What happens if the successor is ready ten years before the leader is willing to relinquish the reins? “My decision would be based on what the business was doing at the time. For example, if we were in the middle of a project that needed to complete. It would depend on my own demeanour, but also on where exactly the business was,” says Alex. “People are capable – I was asked to succeed in my early 30s. If a great successor is available, then it provides a really interesting dilemma for the leader who’s in place if they don’t feel ready to go. But it’s a quality problem,” he adds, “because you’ve got, hopefully, two great leaders! Can they cohabit? Probably not. You need to give your successor time and space to develop and to, frankly, get out of the way.” Avoid the void – what do leaders step-off into? “I’ve made it my ‘hobby’ over the last decade to look at people of my age and older, to see how they handle stepping-off,” recounts Alex. “My take is that the better the hinterland that the individual has developed, the more choices they have about succession and being succeeded." "The wider the breadth of their interests, be they for profit or not for profit, the more fun they can have. Family business is not a job it’s a vocation,” he exclaims. “You’ll probably carry on in business, you won’t just stop. I think it’s partly the job of the individual being succeeded to make sure they’ve got options that mean they can step-off, but not many do in my limited experience.” Alex remains a Trustee of Grosvenor and chairs the Grosvenor Pension Plan and Grosvenor Food & AgTech. He is a Director of the Family Business Network International, co-founded and is Joint Life President of the Institute for Family Business (UK) and is a Director of the International Federation of Family Offices. He is also a Trustee of the Francis C Scott Charitable Trust and the Cumbria Community Foundation. “As the business leader, your brain has been multifaceted, dealing with multiple issues and challenges." "To keep yourself interested, stimulated, engaged, and intellectually agile, you’ve got to replicate some of the challenges that you had when you were solely focussed on one business." "Just playing a sport, for example, isn’t sufficient of a hinterland to keep a busy businessperson really interested,” he believes. “Your brain isn’t ready for that!” Alex recognises that it’s different for a creator compared to a successor. “If you’ve created the company, then I think it’s really hard to build a hinterland because it will have taken all your time and effort and one hundred percent concentration, to create something unusual and extraordinary in the classic sense of the word. Most of your social interactions and leisure will have been linked into the business – it becomes all consuming." "My own path has been a bit of a rounder walk,” he says. “The successor and subsequent generations, will probably have had a different up-bringing and education, travelled and had time to contextualise what they’re inheriting, which allows them to develop a broader approach to life,” Alex explains. “While the company is utterly central to everything that the successor is and will be, they have the capacity, the time, space, the breadth of experience and education to take on outside interests. I think that’s part of the richness and the good fortune of being an inheritor as opposed to being a wealth creator,” he adds. Don’t be the family member that crushes someone else’s dreams… “If you’re leading a large family, which is the case with us, then whoever succeeds to that position has to be objectively suitable and acceptable as a leader. I’m not saying that potential successors should lobby their cousins,” jokes Alex. “Rather that when viewed objectively, the achievements and characteristics of that individual clearly position them as an someone who is properly equipped to lead the business." Alex followed in his predecessors’ footsteps by taking guidance of non-family, non-executive directors to select his successor. Their advice was important, he says. “It’s very hard to be objective about your children, or your cousins,” he explains. “We all remember each other from decades ago, but we change over time, have different experiences and develop. I don’t want anyone to measure me on what I was like when I was 19!" “It’s critical to find an objective means of verifying that the individual is really competent to take-on the job. You can put people through a process, but we’ve always relied on non-family, reputable directors and probably, their most critical job is to be influential in succession,” he says. “They need to be comfortable that the right individual has come through the process and in order to do that you can’t just bring them in for succession. They’ve got to know you, the family and the business: what it needs and what it will take in future." “You’re dealing with peoples’ hopes and dreams, so my advice is to pass the job on to the non-execs – they’re not going to have to go to the family Christmas parties and the weddings!” he jokes. The succession osmosis “If you consult the text books, there’ll be a good step-by-step process to achieving a successful succession,” says Alex. “When I did it, it was more of an osmosis – it was more flexible and fluid.” First of all, Alex explains that the family is more than just names on a list. “We facilitate family get-togethers where we spend time with each other and get to know each other. It’s an important part of ensuring that there’s coherence amongst the family group and it’s something we’ve invested in for the last twenty-odd years,” he says. At one of these family gatherings, Alex broached the subject of succession. “I said: ‘I’m not going to do this forever, someone in your generation will need to step-up and become the future leader. There is no specific timeline, but let’s talk if you’re ready.’ In that room it wasn’t obvious to me who it would be, there were some good candidates,” he explains, “but the beauty of having 36 members of the next generation is that it’s not like having to choose between two children. The opportunity to find a good leader is greater.” “Depending on who stepped-up, the way we shaped the role would have been different,” says Alex. “We would have flexed according to the individual who eventually emerged, and had several emerged, then I would have gone into a more formal process. This isn’t textbook. I think no family will follow the textbook ultimately – although you probably want to read the book because that gives you a shape of best practice – but you can flex around best practice to fit your own particular circumstances,” he explains. From that conversation to the succession took three to four years. “It all comes back to when the person is ready,” insists Alex. “My successor was pursuing a very successful career elsewhere. I knew who he was and was impressed with what he was doing, but it was only when he approached me that I thought, ‘let’s grab him!’" "I knew he was qualified and would be highly acceptable amongst the wider family, but I still had to wait for the non-executive directors to agree,” he adds. How strong a voice should the non-executive directors have in the decision? “Theoretically, I think this is one area where they should have a veto,” claims Alex. “If their job is to assist the family to ensure the long-term health of the company then the most important job that any non-executive or any director takes is the appointment of the Chair and the Chief Executive. The choice of people is critical. If the family decides not to listen to those non-executives, then caveat emptor,” he says. The last big risk According to Alex, it’s not fair and it’s not kind for the older generation to hang on beyond their time. “If you don’t want to be fair or kind to your children and your descendants, then look at yourself in the mirror and ask yourself why,” he challenges. “I get it. I understand how frightening it can be and how risky it feels, but I’d also point out to the person who’s refusing to move aside, that they probably took enormous risks in the creation of the business, the fortune, the family enterprise, and they’re going to have to take a risk again!" "It will probably be uncomfortable, but better to make that decision when you’re around, so that if it falls to pieces you can help to pick them up – but don’t be the reason that it falls to pieces. That latter piece is critical,” he adds. “Quite a few people have said to me, ‘but you’re still staying on the Board, aren’t you?’, and I say, ‘absolutely not!’ How can my successor thrive if I’m around and he’s having to deal with that!” Alex explains that while there are governance processes and protocols that can be put in place to “support” new leaders, he advises against it. “You can create a family council, shareholder advisory committee, or other form of sounding board, but all of those run the risk of being shadow governance. I’m sure lots of family business owners would disagree with me, but let your successor grasp the role as hopefully you were allowed to grasp it. And if you weren’t allowed to grasp it, put yourself back in the position you were in and remember how frustrated you were that you weren’t allowed to make your own mark,” he adds. Alex cautions that such a degree of generational interference with successors will put-off good candidates. “If they’re smart and ambitious enough, they’ll reject that compromise and you risk losing the talent,” he says. “Talent within the family should be nurtured and cherished and you need to give talent space to flourish. It’s a cliché, but succession is a process not an event. You’ve got to give the successor the best possible opportunity to succeed on their own terms, without restricting what they do. Be flexible and be prepared to take some risks. If you can’t trust them, then don’t go through succession." "But the fact that your thinking about succession means that you do trust them, so you’ve just got to let go!”, he advises. Handing-on the legacy not just the business “If I’ve done things right, then values and culture should be embedded in the business and in the way that I’ve carried out my business on behalf of the family for the last 25 years,” says Alex. “It’s not codified, but we do have a family constitution – we call it a protocol, and it’s in its third edition." "The succeeding generation have had their hands all-over the last edition, and I think that’s important – to refresh it and continually come back to why we do things, how we do things, why we are we there,” he explains. The answer to the question ‘why are we there’, is probably the most important, according to Alex. “I did a lot of work on this question before succession,” he confides. “As the family grows more disparate, however hard you work to maintain connections between them, there has to be a propensity towards saying, ‘why are we bothering with this? It’s taking up my time, I’m reading stuff and going to meetings, and does it really matter?’. We’ve been careful to understand where we’ve come from." "Not to glorify our past, but to understand how fortunate we are as inheritors and descendants of some very successful businesspeople, and we’re attempting to be as successful as they were.” Purposeful stewardship “For us it’s about purposeful stewardship, and we’ve put together a short, three-minute video about what that means for us. It means that we’re not just inheritors, we’re stewards with a responsibility to preserve, protect and grow, because if you just put something in ice you haven’t really been a good steward,” Alex explains. “In order to be a successful steward, you’ve got to make it relevant to the current day, evolve according to the changes in the family, the economy and global circumstances." “Now that we have a smaller operating company and a larger, liquid portfolio it is particularly important to have an understanding of why you’re doing it,” says Alex. “It’s not just about the money, but who you are and where you’ve come from – in order to preserve, protect and celebrate your good fortune. Hopefully understanding that you’re not special, you’re lucky, and that if you want to institutionalise that luck, then there’s work to do. And that’s the purpose of stewardship,” he adds. “For some, where you come from and why you do it, will have no impact. There are plenty of stories of inherited wealth and inherited companies that have gone horribly wrong,” recounts Alex. “All I can do, is do my best to inculcate in our successors an understanding of why we’re doing it. After all, if we don’t have a purpose, life’s a pretty meaningless.”

Successful family business succession is a key topic of conversation in the boardrooms of family businesses the world over. It has always been a difficult conversation for many family businesses, some would class succession as the 'elephant in the room' that is never mentioned but it is an inevitability that will happen and like many things, planning and open and honest conversation around succession is the way forward. Succession planning involves the transfer of a family-owned business from one generation to another, ensuring continuity, growth, and sustainability. While navigating this transition can be challenging, it is fundamental for the longevity and prosperity of the business. The Significance Of Family Business Succession Family businesses are the backbone of economies worldwide, contributing significantly to employment and economic growth. However, statistics reveal that a large percentage of family businesses do not survive beyond the first or second generation due to various reasons, with ineffective succession planning being a primary cause. Successful family business succession is not solely about transferring ownership but also about passing on values, legacy, and vision. It requires careful planning, open communication, and strategic decision-making to ensure a smooth and seamless transition. By focusing on continuity and adaptability, family businesses can overcome hurdles and thrive across generations. Key Strategies For A Successful Transition Initiating the succession planning process early is critical. By starting discussions and preparations well in advance, families can address potential conflicts, clarify roles, and set clear expectations for the future. Identifying suitable successors among family members or external candidates is essential. Investing in their development through mentorship, training, and exposure to different facets of the business can groom them for leadership roles. Creating a transparent governance structure that defines roles, responsibilities, and decision-making processes is vital for maintaining harmony and direction within the business. This structure can help mitigate conflicts and ensure accountability. Engaging with advisers, consultants, and legal experts specialising in family business succession can provide valuable insights and guidance. Their expertise can help families navigate complexities, address legal requirements, and implement best practices. Developing a comprehensive succession plan that outlines timelines, transfer of ownership, leadership transitions, and contingency measures is crucial. Regularly reviewing and adapting the plan to changing circumstances enhances its effectiveness. Overcoming Challenges And Embracing Opportunities While family business succession poses challenges such as emotional dynamics, conflicting interests, and generational differences, it also presents opportunities for innovation, growth, and sustainability. By fostering a culture of collaboration, adaptability, and shared vision, families can leverage their strengths and values to drive the business forward. In today's dynamic business landscape, where disruptions and uncertainties are prevalent, the resilience and agility of family businesses play a significant role in shaping their future. Embracing change, embracing new technologies, and embracing diverse perspectives can position family businesses for success in the long run. Family business succession is a journey that requires foresight, planning, and commitment. By adopting a proactive approach, nurturing relationships, and embracing continuous learning, families can ensure the legacy of their businesses endures through the generations. Succession is not merely about passing the baton; it's about preserving values, adapting to evolving markets, and charting a path for sustained growth. By acknowledging the complexities, celebrating the strengths, and learning from the experiences of successful family businesses, we pave the way for enduring success and impact in the ever-evolving landscape of business.

Family business succession planning is a critical yet often overlooked aspect of managing a family-owned business. With a vast majority of family business leaders either not engaging in succession planning, not executing it effectively, or simply delaying it until it’s almost too late, the future of these businesses hangs in the balance. One key question that arises in this context is: Who is going to be the next leader? The Stakes Of Succession Planning In the corporate world, the average CEO tenure in non-family businesses spans about six years. However, when it comes to family-owned enterprises, the landscape shifts significantly. Here, CEOs tend to hold their positions for a striking 20 to 25 years. Such long tenures bring stability but also raise challenges when it comes to passing on the baton to the next generation or deciding on a suitable successor. The Complexity Of The Decision Deciding who gets to lead the family business is not a simple task. It involves considerations beyond just familial ties or seniority. Factors such as competency, leadership qualities, vision for the business, and alignment with the values of the company all come into play. The chosen successor not only needs to command respect within the organisation but also prove their capability to lead the business forward effectively. Balancing Emotion And Pragmatism Succession planning in family businesses is often rife with emotional undertones. The sentiment attached to the business that has been nurtured over generations can cloud judgment when making crucial decisions about the future leadership. Striking a balance between emotional attachments and practical considerations is key to ensuring a seamless transition that secures the legacy of the business. The Role Of Communication Effective communication is paramount in the succession planning process. Transparent discussions about the future of the business, individual aspirations, and expectations are essential to avoid misunderstandings or conflicts within the family. Open dialogue fosters alignment on the vision for the company and ensures that everyone is on board with the chosen successor. Embracing Change And Innovation While honouring traditions and legacy is important in family businesses, adaptation to change and innovation are equally crucial for long-term sustainability. The next CEO should not only respect the heritage of the business but also bring fresh perspectives, new ideas, and innovative strategies to navigate evolving market dynamics and stay ahead of the competition, enabling the business to remain relevant and embrace the opportunities available in the next stage of the family business journey. In the realm of family business succession planning, the question of who gets to be the next leader encapsulates a multitude of considerations, from leadership qualities and business acumen to emotional attachments and communication strategies. By approaching succession planning with foresight, transparency, honest conversations and a blend of tradition and innovation, family businesses can pave the way for a successful transition and a sustainable future. In the intricate web of family dynamics and business operations, the decision of who gets to lead the family firm is all about entrusting the helm of a cherished legacy to a capable leader who can steer the business towards continued growth and prosperity. Remember, the journey of succession planning isn’t just about choosing the next CEO; it’s about safeguarding the essence of the family business for generations to come.

Family businesses are pivotal to the global economy, significantly contributing to employment, innovation, and community stability. As these businesses grow, they face crucial decisions about future ownership and governance. One attractive option for the next stage in their development is transitioning to employee ownership. So let's take a look at the concept of employee ownership, its benefits, challenges, and practical considerations, particularly for family businesses contemplating this transformative path. Employee ownership is a business model where employees acquire a significant stake in the company through mechanisms like Employee Stock Ownership Plans (ESOPs), worker cooperatives, or direct share purchase schemes. This ownership structure empowers employees by giving them a voice in corporate governance, aligning their interests with the company’s long-term success. One significant advantage of employee ownership is enhanced employee motivation and productivity. When employees have a stake in the business, they are likely to be more motivated and productive, as their personal success is directly tied to the company's performance. Improved financial performance is another benefit. Studies have shown that employee-owned companies often outperform their non-employee-owned counterparts in terms of profitability and revenue growth. This is attributed to the alignment of employee and company interests, leading to more prudent financial decisions and increased innovation. For family businesses, transitioning to employee ownership can provide a viable solution to succession planning. This option ensures that the business remains in capable hands, preserving the legacy and values cultivated by the founding family while avoiding potential family conflicts. Additionally, ownership stakes can be a powerful tool for attracting and retaining top talent. Employees are more likely to stay with a company where they feel valued and have a tangible investment in its success, reducing turnover rates and associated costs. Employee-owned businesses often demonstrate a stronger commitment to their local communities. By keeping the company locally owned, employee ownership can contribute to economic stability and community development, reinforcing the social fabric of the area. However, the process of transitioning to employee ownership can be complex and requires careful planning. It involves legal, financial, and organisational restructuring, which can be daunting for a family business without the necessary expertise. Financing the transition can be a significant challenge, as the company or employees may need to secure substantial funding to buy out the existing owners, which could strain financial resources or require taking on debt. Moving to an employee ownership model necessitates a cultural shift within the organisation. Employees and management need to adapt to new roles and responsibilities, which can be challenging if the existing corporate culture is not conducive to shared governance. Implementing effective governance structures is critical to ensure that employee ownership translates into meaningful participation. Establishing clear processes for decision-making and resolving potential conflicts is essential to maintaining harmony and operational efficiency. Before transitioning to employee ownership, it is crucial to assess the readiness of the business and its employees. This includes evaluating the financial health of the company, the willingness of employees to take on ownership, and the overall organisational culture. Selecting the appropriate model of employee ownership is vital. ESOPs are popular in the United States, offering tax advantages and a structured approach. Worker cooperatives, where employees collectively own and manage the business, may be more suitable for smaller firms or those with a strong culture of collaboration. Engaging experienced advisers, including financial consultants, legal experts, and business transition specialists, can facilitate a smoother transition. These professionals can help navigate the complexities of the process and ensure compliance with relevant regulations. Educating employees about the implications and benefits of ownership is also critical. Providing training and resources to help them understand their new roles and responsibilities will enhance their engagement and effectiveness as owners. A phased approach to implementation can mitigate risks and allow time for adjustments. Gradually increasing employee ownership over time, rather than an immediate full transition, can help the organisation adapt more smoothly. Transitioning to employee ownership represents a promising avenue for the future development of family businesses. While the journey can be complex and requires careful planning, the potential benefits—enhanced motivation, improved financial performance, smoother succession, and stronger community ties—make it a compelling option. By thoughtfully addressing the challenges and leveraging professional expertise, family businesses can successfully navigate this transition, ensuring their long-term sustainability and prosperity while preserving their core values and legacy.