Generation next – Succession Coaching

 Many heads of family businesses fail to arrange their succession

Published in Macau Business magazine, July 2013

By André Ribeiro

The Macau economy is thronged by family businesses of all shapes and sizes: from Stanley Ho Hung Sun’s mega-empire, spreading from casinos to property to transport, to the small noodle shop around the corner. But most heads of family businesses fail to properly plan who should succeed them when – for whatever reason – they depart.
Succession planning is not an easy business anywhere in the world. In Chinese culture, the subject is often taboo, as it is associated with death. Customers and partners of family businesses may resist changes at the top. Business and personal relationships are closely intertwined in Chinese culture, and trust in the new head of a business is not automatic.
Often, the most daunting task is to convince the heads of family businesses of the need for succession planning. The head of a business may be reluctant to relax their grip on power after years of hard work building up the company.
They may also fear that arranging the succession will cause conflict among members of their families. But that is an equally good reason for having a proper succession plan – one that takes effect gradually, properly grooming the next generation to take over while allowing the older generation to ease itself out.
Often, the bigger the family, the greater the number of claimants to a stake in the business and the more difficult it is to arrange the succession. That is why more and more family businesses around the world opt to hire help from outside the family.
A consultant can help in two main ways. They can propose their own arrangement for the succession or they can coach the claimants to stakes in the business so each family member can negotiate an arrangement that is acceptable for all.
Accepting an arrangement proposed by outsiders is often the quickest solution to the problem. But whether the solution works or not depends on the members of the family jockeying for the top position.
This solution is usually more successful when the next generation agree to the appointment of a chief executive from outside the family, while they themselves settle for non-executive roles.
Sibling rivalry
Coaching takes longer but can lead to a more widely acceptable outcome where there is conflict between potential successors in the family. Coaching was the solution chosen by a large wine company in the north of Spain, owned by one of the country’s wealthiest families.
In 2006, the 60-year-old head of the business wished to arrange for the reins to be passed to his two sons, who were both in their thirties. Rivalry and distrust between the sons complicated matters. The sons rarely spoke, even about important business matters.
This harmed the business and endangered the succession. A decision on a property on which MOP30 million (US$3.8 million) depended had stalled because the sons would not sit down to discuss it.
The relationships among the family members involved in the business were complex, the parts that each played in the family and the parts that each played in the business were entangled. This was noticeable at family gatherings, where business was often discussed.
The father was regarded more as the head of the business than the head of the family. The personal interests of the members of the family were mixed up with their business interests. This interfered with the performance of other directors of the company, its employees and the business as a whole.
Happy ending
To start the process, both sons were coached individually. They were given exercises in communication, management and leadership, which included role-playing. Within a couple of months, the sons had consented to being coached together, at first once a week and later more frequently.
The family decided to have all of the company’s directors coached. They were taught how to communicate effectively, think strategically and look for operational improvement. The coaching sessions included training in organisational and leadership development.
The business responsibilities of the sons were progressively increased and adjusted. Direct and clear communication dispelled rumour and intrigue. It allowed important business decisions to be made, from decisions on new investments to decisions on reorganisation of the management.
Several arrangements for the succession were contemplated: hiring a chief executive from outside; making one of the company’s own managers chief executive; dividing the business into two so that each son would be in charge of his own part; having the sons take turns as chief executive for a year at a time; or picking one son as the chief executive.
The family agreed that one son would become chief executive and the other chairman. The father retired but continues to attend board meetings.
It was a happy ending to a long saga. It took one year of coaching. It needed the full support of all stakeholders to succeed – and the full support of all stakeholders cannot always be counted on.
Still, this case study shows that there is no reason to fear that succession planning will be disruptive, even when the process is delicate.
Delaying succession planning is not an option for the heads of family businesses. Succession planning should begin at once, with a view to sustaining the business and making it a success in the long run.
The more planning that is done today, the better the prospects for the family and the business alike.

André Ribeiro is the founder of ExtraCoaching

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