megram - Index

megram - 55JunOttawa - Index

Business owners cannot possibly know when they
will fall ill or die so they must deal with succession as early
as possible in the life of the business.This requires open
communication, particularly among the family members
and the key employees of the business.Vague future assurances
from the owner contribute to uncertainty,infighting,
frustration and bitterness.
By settling the arrangements for succession early on,
family members are able to plan their education and
careers, taking into account the opportunities that may
exist in the family business.The owner of the business has
to identify a successor and then prepare that successor to
assume the role of leadership.To do this the owner must
be prepared to relinquish his or her authority to the successor
and to acknowledge and support the successor’s
management abilities. It would be an understatement to
declare that this is a very delicate process because the
owner may have to choose between his or her children in
identifying the person to lead the business.In this area,outside
advisors can be of invaluable assistance and play a key
role in the succession planning process.
Succession planning is not a task you have to undertake
all by yourself. The team approach often includes
accountants, lawyers, bankers and other people whose
professional standards or practices can provide the maximum
benefit to your business owner. By starting early,
the owner of the business can monitor its growth and
determine and develop the vision of its future direction.
By bringing managers, family and other advisors into the
process at an early date, the succession plan will develop
with the business and the strategy will arrive in a
timely fashion.
The succession plan cannot succeed without the loyalty
of non-family employees. It is important that the
owner of the business designs measures to cultivate and
keep the loyalty and commitment of key individuals.This
is done by ensuring that they feel respected, challenged
and financially rewarded. Compensation is critical. The
owner must decide what it is worth to attract and retain
good people and to develop the expertise that will be
essential in the transition to the next generation.
Transparency is crucial.The family should,if possible,avoid
the mindset that it must own 100 per cent of the enterprise
since this may serve as a disincentive for good, key
non-family members to remain with the business.For those
who see that the dilution of the family’s ownership is a
threat, the compensation system should incorporate other
means to retain key personnel, such as performance
bonuses and non-voting share options.
It is important to allow key employees to provide their
objective insight into the company’s business but at the
same time avoid asking them to take sides, which may
make it uncomfortable for them in their work environ-
June 2008 • 25 • Fifty-Five Plus Magazine
ment and may actually drive them away from the business.
If a non-family member will never be the successor to
the business it is essential to be candid and upfront about
it to avoid contributing to frustrated ambitions and disgruntled
employees when the family member inevitably
gets the senior job. Putting into place objective compensation
and performance evaluation systems are invaluable
when managers and employees happen to be family members
because they protect these family members from any
appearance of favouritism and arbitrariness.
If the transition plan is to involve family members, it
should spell out in writing the duties of these family members
and have their compensation set by an independent
committee. This will minimize the problem of other
employees looking upon the family member’s compensation
as some form of disguised allowance. Setting the compensation
and evaluating the performance in an objective
fashion eases the tension for everybody.
It is also important to match the talent of the family
member with their projected role in the business. It is not
unusual to encourage children to participate in different
businesses outside the marketplace to improve their individual
talents,abilities and value in the marketplace,which
can then be brought to the family business at the time of
succession.This can also be achieved by rotating children
through various areas of the company,which will allow the
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