Successful Family Business Handovers – Key Dos & Don’ts
In a recent development, media tycoon Rupert Murdoch has announced his decision to step down as chairman of News Corp and Fox Corporation, marking the conclusion of his tenure at the helm of the media conglomerate. This paves the way for his eldest son, Lachlan, to assume the role of chairman at both companies.
Drawing parallels with the popular TV series "Succession," it's evident how such transitions can become intricate. Therefore, we've compiled a set of a few of the essential considerations for family-run enterprises, whether they are large multinational corporations or smaller businesses, to keep in mind when contemplating a change in leadership.
1. Family Attention & Communication - A Challenge and an Opportunity:
Prioritise understanding interpersonal dynamics and maintain open lines of communication with family members. This ensures they are informed about future plans and visions, allowing them to manage their expectations effectively.
Establish a set of well-defined family and business values that are both articulated and understood. These should serve as guiding principles for critical decisions and the continuation of your legacy.
Refrain from assuming automatic entitlement to inherit and lead the business. The successor should earn their position through demonstrated competence and unwavering dedication.
2. Younger Generation Considerations:
Encourage potential successors to explore new business opportunities before assuming top-level positions.
Verify that the business aligns with their passions and willingness to dedicate themselves wholeheartedly.
Foster an environment that encourages the younger generation to experiment with new ideas and practices before stepping into leadership roles.
Devise timelines and skill development plans to ensure they possess the necessary expertise and experience (and others can also see this) when they assume pivotal roles within the company.
3. Non-Family Relationship Management:
Guarantee that non-family employees are integrated into the transition process, maintaining transparency to minimise potential resentment or uncertainty.
Ideally, secure buy-in from non-family employees and fortify key positions to ensure ongoing support and operational continuity.
Develop strategies to preserve critical corporate knowledge and sector-specific expertise.
Communicate with all stakeholders, including employees, suppliers, and customers, to reassure them that the business is in capable hands and any transition disruptions will be kept to a minimum.
4. The Transition:
Approach succession as a deliberate and well-organised process, avoiding ambiguity regarding leadership changes and roles.
Resist the inclination to micromanage the successor during this phase. If you've addressed the preceding points, trust their abilities and allow them the space to make decisions and grow from their experiences.
5. Shareholders Agreement: Act Swiftly
Establish a meticulously crafted Shareholders Agreement as early as possible. This document outlines ground rules, expectations, and provisions for unforeseen circumstances such as an unfit hire, unexpected events (illness, death, divorce), or a member's desire to exit in a manner not aligned with the agreed-upon family plan.
Creating the Agreement is just the first step; it should be regularly reviewed and adjusted if needed.
Supporting contractor agreements or employment may also be important here, and should also be regularly reviewed and adjusted if needed.
Failing to adhere to these guidelines may not only complicate the transition process but could also lead to financial losses, damages, and potentially jeopardise the future of your business and family.
For more information on this area or to ensure you and your business are both protected with strong foundations for growth and transition ready, get in contact for a free no obligation Discovery Call on how we can assist you in achieving your goals.
Please note that this is a general and brief update, it does not purport to be comprehensive legal advice of all information and/or relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first before taking or not taking any action with respect to this area.