Poor planning and a lax talent development program could put your family business at risk of a succession crisis. As the CEO of a second-generation, family-owned company, I am especially versed in how to transition a business the right way.
Be flexible and realistic
Although I grew up in a senior care facility and watched my grandparents and parents manage the family business – I never intended to become the CEO of AEC Living. My advice for leaders of multigenerational companies is nurture the natural talents of your potential successors – rather than force them to get involved with the business.
Strike a balance between their actual career goals and passions – in addition to your business objectives. Time and space can do wonders.
For example – I began working in the accounting department at AEC Living at the age of sixteen. I had had just gotten into a fender bender and needed to pay my parents for the repairs. I returned during my 20’s to pay off my student loans for a master’s in accounting. Several internships and a law degree later – I realized that there was no place I’d rather be.
Fuse talent development with succession planning to allow successors to actively improve your business, rather than rest on the laurels of past success. Successors should be well versed not only in the day-to-day operations of their companies, but equipped to address competition and potential disruption.
I personally have three degrees – in accounting, law, and gerontology – which provide me with the expertise to grow and expand the business sustainably.
Encourage children to take on different task in relation to their interests and expertise – experimenting with different projects and eventually taking on distinct roles. For those less familiar with your business, create a handbook highlighting the distinct steps they should take before assuming a role – from education, licensing, and certification to job-shadowing.
Don’t forget culture
Proper training and screening are essential to maintaining a positive culture and your bottom line. Do not leave this task to HR – as your incoming leader will require a different skill set than a typical employee. Their job will be to inspire and lead rather than manage daily operations.
As soon as your successor has demonstrated their potential to fill a certain role – encourage your managers to invest some of their time in getting to know the individual. If managers insist that they do not have time to sit down with a candidate, consider these sobering statistics:
- Seventy percent of family-owned businesses fail before the next generation can take over.
- A 2003 study by Booz Allen found that 55% of CEOs in North America were forced to resign, compared with 34% of insiders.
- In recent years, forced successions in large companies would have experienced an average gain of $112 Billion in the year before and after a turnover, had their new CEO been the result of succession planning.
Executives should play an active role in talent development to make sure the successor is a good fit for the company. Encourage them to serve as informal mentors and provide cross-departmental job-shadowing opportunities to ensure your successor is familiar with all types of business operations.
Regimented communication and consistent involvement throughout all levels of management is key. I recommend having at the very least, quarterly meeting with your team. Formal meetings may seem tedious – but can save you from stress later down the road when it comes time for the next generation to step up.
Maintain a growth mindset
Establish clear performance indicators throughout training to reinforce company values and principles – from daily decision-making to growth and expansion. Hold quarterly reviews for incoming leaders, your board, and managers in the five years leading up to their new role.
Empower successors within the context of their potential role in the company. Rather than immediately handing them the reins, take a step back and research best-practices for talent development and succession planning used by your industry peers.
CEO turnover is the highest it’s been in 8 years – so it’s imperative to get your successor and executives aligned to ensure a smooth transition. Communicate your business goals with family members as soon as possible. You may need to have a formal sit down to ensure that they are clear on their roles in the company. Be realistic about the capacity of those who may have great interest in business operations but lack the expertise to lead.
Last of all, invest in good counsel and a professional consultant to make sure your strategic planning workflow is up to par with industry standards. This may seem like a major investment, but is well worth the price in terms of ensuring your business’ continued success.
Lauren Zimmerman-Cook is Chief Executive Officer of AEC Living, a second-generation family-owned group of independently operated senior living communities and a Medicare-approved rehabilitation agency. Her career spans over 20 years in the senior care industry focused on driving strategy, business transformation, and the most innovative and forward-thinking senior care in the industry. She is also an active philanthropist and community servant in Alameda, where her business and family reside. As a child, Lauren followed her parents around the Waters Edge Nursing Home and lived at The Lodge for nearly a year, having meals with the residents, listening to remarkable stories that shaped her life.