Situation: The CEO of a family business seeks to create a succession plan. One family member has expressed an interest in taking the reins of the company but has failed to take the initiative to demonstrate that he is prepared to take on this role. Another family member is now demonstrating both interest and initiative. How do you plan for succession?
Advice from the CEOs:
- How should this situation be approached?
- Do not view this situation competitively, but rather from the standpoint of what is best for the whole family because many family members stand to benefit from the ongoing success of the business.
- Whatever decision is made, the successor will need support and assistance understanding both the financial and business sides of the company. This individual must also be aware of conflicts and challenges that face the business.
- What else should be done to prepare for succession?
- Given that there are two individuals interested in becoming CEO sit down with each individual and negotiate a clear boundary statement on what you, as CEO, can and can’t do, as well as what can and cannot be expected of you, as CEO, as the succession decision is made. This understanding should be documented in writing and signed, signifying understanding by both the CEO and the candidate. Each candidate should have their own signed agreement with the CEO.
- In a family business, the CEO, as guarantor of the company, may be faced with a different level of financial risk than other family members. Both candidates for the CEO position must understand that if they accept this position, they also accept this risk.