Facts about family business succession planning
In an article published in the entrepreneurship section of Forbes, it stated that in the United States, over 50% of GNP was generated by family businesses. It also mentioned that less than 33% of these businesses have unsuccessful transitions from first generation to second generation while 50% do not survive the second to third generation transition.
Why succession planning in family businesses fails
The primary reason researches believe why succession planning fails is because of the overlapping connection between being a part of the family and a part of the business at the same time. Ideally, individuals should be able to easily separate these two entities so as not to affect one because of the other. And that exactly is the challenge.
Sometimes, the reasons are based on the fact that these families are ignorant of the whole process including the preparation part of the succession planning. Another factor is the inability of the members to develop new skills and attitude other than what they are accustomed at home and are necessary at work. Most parents or first generation members fear change. They either know their children too much to trust them in handling the business or they’re too controlling and proud that they don’t want to pass on the knowledge. There is also the “pecking order” in the family that families can’t easily get rid in the business scene. The older siblings expect to get the higher positions and the bully in the family remains a bully in the workplace. Different generations have also different lifestyles that’s why they’re having a hard time bridging the gap. In some cases, the children have entirely different passion and interests from their folks. It is important to know the younger generations’ interests as much as their capabilities. Qualifications should not be limited to the family connection but must also meet the employment requirements.
In effect, the subjective decision making of the first generation members constitutes the biggest effect to the progress of succession planning and development.
The role of family office
A family office is a channel where professionals take charge of making sure that the legacy of a family is passed on from one generation to another as seamless as possible. Through family office, the wealth of a family is ensured to be preserved and continued.
The family itself will be managed. One of the first and effective steps in integrating order among family members is through undergoing family council. This is like a forum where each member is expected to air his thought, wants and ideas. The desired result of this meeting is a consensus of a concrete plan. A conscious effort from all members of the family is an essential step in the whole process.
The next phase will include managing the business side. Proper introduction, trainings, leadership workshops and mentoring for the selected next in line family members will be managed by the family office. The highlight in this part is to make sure that the whole operation, bottom line goals and management strategies will be absorbed.
In a family office, the preceding succession planning and management will be tailored to fit both within the realm of family values, traditions and beliefs and the business’s mission, vision and goals. The team of experts is designed to customize their services depending on the family’s profile to create an effective alignment and integration of each family member’s individual lives, the life of the whole family as one and their professional lives in the family business.
Family office is deemed important in making sure that your family’s legacy is preserved. Most often than not, families who do it alone are left with too much losses or credit, businesses and other properties sold, relationships broken and legacy preservation process failed. The role of a family office is to assist you in leaving a legacy worth remembering. The team is committed to get involved in all aspects along the process but with emphasis to your finances, succession and asset protection. In the course of the endorsement process, estate planning and tax planning will also be emphasized and managed. Options on paying taxes and choosing which one best fits your portfolio and requirements will also be prioritized.
In summary, managing a pair of wealth and important relationships within the family is a very challenging feat. Although some may be uncomfortable having other people around, poking in family and business matters, it is an undeniable fact that help is sometimes needed to prevent a huge problem from happening or to solve one. Hiring consultants bring a new, brighter and refreshing perspective to their clients. Being a third party without biases and evaluate matters objectively, this might be exactly what you’ve been looking for to plan your family’s future.