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Why grooming your successors is critical to the family business

May 09, 2022

Why grooming your successors is critical to the family business

Synopsis
3 Minute Read

A formal grooming plan helps ensure your successors have the requisite skills to effectively manage and lead the family business.

Family Business Practitioner

It goes without saying that the long-term success of any business is contingent on having competent management. Family business owners also recognize this key element of long-term survival. Many of them pay particular attention to ensuring that the next generation family managers, leaders, and owners have the skill sets required to run the family business.

It is more and more common for family business owners to strongly encourage (some insist, while others even make it a mandatory requirement) that the next generation obtain a few years of outside work experience before joining the family business. The view is that outside work experience exposes the next generation to a different corporate culture with different policies and procedures, and different management structures and experiences.

Successors with outside work experience also bring a sense of accomplishment and a certain degree of confidence they have earned their stripes and are not simply being parachuted into the management of the family business due to blood lines.

Although most agree outside work experience for successors is considered a good thing, in most cases the next generation enters the family business with none or very little outside work experience. Given this reality, it is even more important that family business owners ensure that the next generation successors are properly groomed for their eventual roles as managers, leaders, and owners. The best way to achieve this is to develop a formal grooming plan for each of the successors.

In some cases, the founder of the family business will insist on developing a comprehensive grooming plan for the potential successors. These grooming plans should expose the next generation successors to all aspects of the family business with a focus on continued learning, both within the business and outside the business.

The grooming plan should be applied to all potential next-generation successors. Typically, it is best to have the next generation develop their grooming plans first and then have the owners or senior management review it, add to it, and approve it. This enables the next generation to take ownership of their plan (as opposed to it being mandated). Depending on the size of the business, different grooming techniques can be used. Larger clients may look at rotational programs or assigning mentors, while smaller businesses may look for mentors outside of the business to help with the grooming plan. Whether the grooming plan is led by one mentor or a group of mentors, the importance lies in ensuring all aspects of the business are covered, and that all successors follow an in-depth grooming plan.

As a family business advisor, it is comforting to witness the awareness and willingness of next generation successors to embark on formal grooming plans to ensure they have the requisite skills to effectively manage and lead the family business. This will help the founder obtain comfort in the new management and ownership as well as help ensure the long-term success of the family business.

Contact us

To learn more about how MNP can help your organization, contact Danielle Walsh, CPA,CA, Family Business Practitioner.

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