Goal 2: Prepare the next generation

Starting succession planning early is vital to enable family members sufficient time to develop frameworks that support family cohesion and collaboration. It can also provide Colin with the best opportunity to mentor the successor and allow his children to develop the proper skills for long-term success.

Colin believes retiring in seven years at 75 will be sufficient time for his children to settle into the new management structure. Mr. George says that the family, and new management, can use this transitional time – and the post-retirement period – to leverage Colin’s experience and knowledge. As Colin hands over greater responsibility to his two children, one option is to establish an appropriate role for Colin, such as senior member of the ‘Family Council’. Moreover, the role needs to be clearly delineated and communicated to all affected parties (staff, customers, family members).

Mr. George says that one of the most important steps to prepare all family members to accept any new management structure is to discuss all core elements of the family enterprise and how it will be governed. Here are the key areas to consider:

  • Compensation. How will management be paid? Who decides this, and how often is this evaluated?
  • Performance. What is the process for evaluating performance?
  • Ownership & shareholding. Should family members who don’t work in the business be allowed to be owners? Who can own shares, and how can you buy/sell them?
  • Decision-making. Who makes certain decisions (management, board, family) and how will they be made (majority ownership, consensus, mediation, other)?
  • Dividends. What formula is used for paying out dividends to all shareholders (including inactive shareholders)?