In recent months, I've been involved in a number of projects where the first steps in succession management have been put in place without a fully thought-out plan to guide the process. This has resulted in fragile relationships and ownership structures that are not as effectively aligned with the long-term strategy as they could be aligned.
This has reinforced my view that there is no room for shortcuts in this important process. Effective succession management relies on a clear vision for everyone's future and a plan built on recognition of all participants' values and aspirations.
High-risk shortcuts can include a casual approach to meetings and communication, the absence of documented sharemilking or employment agreements, insufficient consultation to establish a shared vision and lack of transparency around management decisions.
This is often complicated by a retiring generation that believes what worked for them in building the business will work for those who will own it in the future. Those entering the business can have a perception of being taken for granted or at least not taken seriously in decision-making.
In a similar way, parents find themselves making policy and capital decisions on the spot. Without forums to discuss, key decisions are overlooked and decision-makers feel pressured to make important calls.
Here are some reminders of what is needed to succeed in succession:
First is to acknowledge the difference between "management succession" and "ownership succession". It is vital to prove working relationships before sharing ownership. It's much easier to walk away from an employment or contract management arrangement realising that shared responsibilities will not succeed than to unwind ownership structures. Getting these two in the right order is a key to success.
Confirmation of shared values so that everyone is aware of the behaviours and outcomes that will deliver these is key to a solid foundation. Whether you are just starting out or are already involved in a jointly managed or owned operation, transparency around everyone's motives and consequent motivation is a key contributor. Communicating about and contrasting different philosophies adds significant value. Assumptions and a lack of communication risk building a flawed plan.
The families I am working with putting significant effort into getting these things clear. They are also putting time into understanding their respective personality styles and the impact of these on leadership, management and interpersonal dynamics.
Getting an appreciation of how everyone is wired informs conversations around management approaches. It also highlights the different giftings and talents of those involved, so responsibilities are delegated according to each individual's strengths.
It is absolutely clear to me that many succession plans suffer from too much focus on structure (often the "go to" aspect of succession planning for legal and accounting professionals) and too little time put into making sure structure follows strategy, acknowledges dynamics of the people involved and most importantly responds to their values and drives.
It's never too early to start planning around succession. This requires long-term vision, not short-term fixes. If you've realised you've got down the track and missed out some basics, it's important to pause, rebuild the plan and check in with the people. The effort to get the right vision and culture in place will pay real dividends in this high-stakes process.D
*Kerry Ryan is a New Zealand based agribusiness consultant available for face-to-face or online for advice and ideas. Contact him at Email www.kerryryan.co.nz.