Every time I hear about a family business that is closing down its shutters once and for all, my mind races about the delicate yet important subject of succession planning. This happened recently to me as the closure of a 90 year old family business in Valletta was recently all over the news.

It is very common that in the realm of family businesses, that families have broken up or businesses have failed or forced to close, all because the generation in control did not pause from their daily operational duties and consider how to set the next generation up for success. Many family business owners fail to recognise that in successive generations, family businesses need to involve different people, with different interests, relationships and aspirations, operating in a different business environments, with a different ownership context and culture . When both the family business and the family itself have changed, but the approach to owning and managing them has not, it almost always has an unhappy ending.

Just as a business must reinvent itself as markets shift, so must a business family reinvent (or at least thoughtfully revisit and refresh) its ownership and leadership model. In my experience, family business owners should take five steps in advance of succession decisions:

• Articulate the changing dynamics. As families grow, they inevitably become more complex. What once happened all under one roof in one generation can over time quickly span to multiple households. Growing up with different experiences often results in a group of individuals with a much wider set of interests, expectations, and behaviours. Coordinating these more diverse groups presents much different challenges. It would be useful for present family business owners to understand the changing players and dynamics by updating their family tree and analysing the changes from the last transition period to today so they have better context for what the business, family and owners need in the future. It is only once these differences are clearly understood that several discussions with different family members and owners can be held to explore how those differences might affect the future.
  
• Look outside the company for advice. I feel it is often underestimated how much value family business advisors can bring to such a process. Family business advisors are people who have been through succession planning and the implementation of such delicate stages in various contextx. They are trained to balance what they business needs and what the main family members players need. It also would help to engage where possible with other family businesses to understand how they have managed their transition process. While their situation may be different from your own, getting insight into their approach and the reasons they chose their path can shed light on your own challenges and decisions.
  
• Be open-minded. I am all for respecting family values and what the family business stands for. However whenever any conversation about how to move forward is framed within the context of “but that’s how we’ve always done things here”, it means that moving forward is going to be a herculean task. It is entirely possible to stay true to the past and simultaneously embrace new ideas. In the end, tradition and values will guide you, but present family business owners should not allow them to be the primary reason for continuing down a particular succession path.
  
• Succession planning is a delicate balance. Planning for succession is one thing. Implementing the plan is another thing. I always advocate that no business can ever start “too early” to draw up a succession plan. However good timing at implementing a succession plan is pivotal. There are common mistakes when it comes to such timing. The pride that present family business owners feel with bringing the next generation into the family business and the honour that next generation family members feel at being included in the family business, can lead some individuals to make their decision about succession too early. Committing prematurely as either a senior or junior generation family member can put undue pressure on the successors and alienate talented — maybe even more talented — family members. So it is important to develop a written succession plan and allow it the necessary time to have any new information mould or change the written succession plan, before implementing it. Put simply, family businesses need to make succession planning a topic that owners plan for and discuss regularly and continue to ask themselves: “Do we have the right people in the right places working well together to make the right decisions with the right information for our ownership and family?”
  
• Talk openly about plans for the future. As already mentioned, succession planning is a process, not an event, and it equally affects the family, the business, the owners, and other linked stakeholders. It is so fruitful that discussions are held between the present family business owners and the next generation. Discussions on the past, what worked well and what was challenging. Discussions that allow present family business owners to share their aspirations and views on what an ideal future would look like, whilst acknowledging what the new innovation and other personal aspects will likely mean for the future. For example, I see this so regularly, that a current generation leader is today able to unilaterally make most decisions about the business as controlling owner, but does not spend enough time to discuss how the next generation would fare better with a governance process that delegates some decisions to a board of directors that requires significant decisions to be approved by a majority of co-owners and possible even independent directors on the board. Doing all of this will not only create a shared view of the future and drive commitment from both generations, but it will also provide the next generation with a roadmap for the transition will actually happen. how to eventually transition to their own children.

I believe the above 5 steps set the right foundation to first build all the foundations necessary to have a solid succession plan and to then eventually to start implementing that succession plan. As always, failing to plan, is a sure plan to fail.