It’s never too early — create and implement a clearly defined business succession plan now
Consult qualified advisors
Identify suitable candidates
Treat everyone fairly
Although it may not be possible to treat all family members equally, try to ensure that they are treated fairly. Given the differing levels of commitment that your children may have shown, should you divide the business equity equally between or among them? Should those who may not be involved in the business be treated equitably from a financial perspective? If so, it may be more palatable to family members if they understand that the ultimate decision is yours and that family members who are not involved are being treated generously to compensate for the fact that they have been excluded from the business.
Set realistic goals together
Begin by writing down achievable goals for the business as a family. When a family establishes the long-term outlook for the business together, this will help to foster a team-oriented environment and will likely minimize any risk of conflict. Revisit these goals periodically and hold family members accountable for meeting these mutually agreed-upon goals.
Communicate regularly and effectively
Err on the side of over-communicating rather than under-communicating. In fact, once you have identified a successor, involve them in your succession plan and share your long-term goals with them and with any other family members who are involved. The gesture will likely be seen as collaborative and inclusive. By including your chosen successor, you can help them make an informed decision about whether they want to participate and, if so, to what extent. In addition, when you involve family members and discuss their concerns, such open communication helps to clarify everyone’s expectations about their roles and their commitment to making the transition a success. Their input can minimize potential conflict and help to maintain stability in the business and in the family.
Many forward-thinking families have gone so far as to implement formal governance structures, including regular family meetings and co-operative decision-making. Communication should be open and direct at these formalized family meetings, and all participants should be encouraged to suggest topics for discussion. Use the meetings as a time to learn what each person cares about and what their motivation is for their position. You may even want to consider inviting a business facilitator to ensure the preliminary meetings proceed smoothly and to attend when the issues discussed are likely to cause tension or hostility. You may also arrange for your team of objective qualified advisors to attend occasionally.
Implement co-operative decision-making
Whenever possible, try to address issues as they arise in a timely manner and take an open-minded approach to resolving them. It is important to brainstorm a variety of possible resolutions and think outside the box. Devising new and interesting options together and moving away from authoritative decisions will create a sense of co-operative decision-making. So, have an open discussion about the potential solutions during your family meetings, weigh the options and combine elements of different solutions when possible.
Establish a clear process for managing conflict
The process for managing conflict is as important as the outcome. If you choose a formal governance structure, this could include a shareholders’ agreement to deal with critical and sometimes uncomfortable questions such as remuneration, exit and entry, and death. In addition, to minimize the effect of any conflict on the company, the shareholders’ agreement could contain a conflict resolution policy. For example, your policy could require the use of mediation. If this process is not fruitful, the conflict could then be submitted to arbitration rather than to the courts. This procedure can help preserve the confidentiality of the company’s business, shorten the time it takes to resolve conflicts and minimize the costs of a dispute.
Continue involvement after succession
As you approach your retirement date, try to give your heir or heirs the lead in implementing the succession plan. This can improve the odds of a successful transition. However, you should have an ongoing role after the transition, perhaps in an advisory capacity, to ensure that the plan is carried out smoothly and in accordance with your objectives.
Conflict in a family business is expected, but if you can avoid the obvious pitfalls, communicate regularly, resolve issues in a timely manner and establish a clear process for managing conflict, this will help to increase the likelihood of keeping your business in the family and having it run harmoniously and successfully.
Contact the Opheim Wealth Management Group today for more information on how we can help you and your unique situation.