You are the owner manager. You have thought about the succession of your company. You have come to the conclusion that a family succession is the best solution for you. You have completed the first step in the process of transferring management.

You now need to move further into the succession process and equip yourself with an action plan.

Below are a few elements that will help you establish this plan.

1. Clarify the intentions on both sides

Even though you have already had discussions with the potential successors to decide on a family succession, make sure there is a mutual understanding of the implications associated with this undertaking.

Is your potential successor on track? Will he run the company alone or with others? What is your estimation of the number of years the process will take?

Do not be satisfied with having the impression that everything is clear. Make sure.

2. Draw up a strategic action plan for the company

A strategic action plan brings together your decisions regarding the future of the company and its ownership. This exercise is important in putting in place a succession plan. Do not let yourself become too overwhelmed. In summary, the strategic plan (PDF) provides the company’s major lines of orientation and determines the action to take to achieve the stated goals. It helps target the skills that will be necessary for the company’s growth.

The strategic plan will also be useful to the successor. It will give the successor the means to evaluate the potential of the company and to see how far he is willing to go to reach that potential. Finally, the strategic plan will also be useful when the time comes to obtain financing for the transfer of ownership.

In a family business context, this exercise will include thinking about the family members’ objectives. Using the tool "the Lifeline" (PDF) will help you think it through. The strategic plan should take into account issues related to the company, the family, and ownership.

The strategic planning exercise requires an in-depth examination of the company’s current position, opportunities, and threats. If you are not sure how to go about it, seek out assistance.

3. Establish criteria to select the successor

You must now make the most complete list (PDF) possible of the criteria the person taking over the company should meet. These criteria should address the area of knowledge as well as skill, aptitude, and values. If you have prepared a thorough strategic action plan, it will be easier to identify selection criteria.

This is an important step and you owe it to yourself to devote the necessary time and attention to it. Establish the criteria in the most objective way possible. Ideally, think about the criteria without having a particular person in mind. Therefore, the elements in the first column of the list (PDF) should not be determined based on a particular person. Try to remain realistic in your requirements. Run them by someone you trust who also knows your company well. Talk about the criteria with members of your board of directors and with people who guide the younger generation in their career development, such as coaches or mentors.

Above all, do not forget to discuss these requirements with the people concerned. Make it clear to them that they should eventually adhere to these requirements and that they will have to demonstrate this. Let them know that one or more evaluations could take place during the process.

Finally, stick to the criteria when you are making your final choice. At this point, you should answer the following question: is the person who was initially identified still the most suitable given the circumstances? Should you select someone else, or maybe even replace some members of the management team in place?

4. Establish a training plan for the successor

Starting with the list of criteria that you drew up in point 3, you should determine a strategy that will allow the successor to reach the level required for the position he is targeting.

Although the methods for acquiring knowledge and experience may be easily identified, the acquisition of the skills often represents more of a challenge. On this last point, several strategies can be used to train the successor. The help of a coach or a mentor (PDF) can turn out to be very useful and might also help the successor develop throughout the process. A mentor could also help you step back in delicate situations and bridge the gap between you and the successor if communication issues arise. You can also identify special mandates that will allow the successor to transition from an executing role to the role of a decider and a manager. Look to the growth strategy of the company and the successor’s or successors’ personal interests for inspiration on this last point.

Do not forget that the training strategy should include introducing the successor to those who have a stake in the company: members of the management team, employees, clients, suppliers, bankers, etc. The successor must build his credibility with these people. Accordingly, you must give him plenty of space to do this.

Be creative: internships and participating in assignments abroad are good proving grounds for the successor. Be attentive: many other opportunities could arise that would be as effective for proving himself. Most of all, allow your successor to make mistakes. You have also made mistakes along the way. Learning by trial and error is creative. With your support and your presence, potential damage to the company will be kept to a minimum.

Take another look at the list of requirements and establish a timeline and a calendar for each of the identified activities.

Factor in evaluations and debriefs throughout process. Make adjustments to the plan if necessary.

If the successor must undergo one or more formal evaluations prior to taking up the position, the timing of these evaluations should also be determined in advance. These evaluations are important and should be treated as such. There is no point in going through the motions if they will have no bearing. The more rigorous and formal the training and evaluation process is, the more your chosen successor will earn credibility in the eyes of everyone concerned.

5. Determine your exit strategy, including a target date for your withdrawal from management

Now you should think about yourself. You need to think about your exit strategy, to make your choice, and to settle on as precise a date as possible. In addition to making the process more concrete, this will help prepare you for one of the most challenging steps for the owner-manager: exiting the company.

The exit strategy is yours alone. What do you feel like doing?

• Would you like to completely retire from the company?
• Would you like to keep a role, such as president of the board of directors or special consultant to the successor? In that case, you will still be implicated in the company, but with a certain distance; not with the day-to-day but at a higher level.
• You might also decide to keep an active role in another position, such as business development, public relations, or research and development.

The choice you will make on this front will first depend on what you want. For example, some people find it difficult to play a secondary role and should retire completely. In this case, they absolutely must pick a date to exit. This date should not be too early in the process because the period of co-management facilitates knowledge transfer. But the date should not be too far away either, as this could have a demotivating effect on the successor.

6. Be aware of the issues related to the transfer of management

Handing over the management of a company is a big challenge for the owner-manager. Rest assured that even if there are a lot of challenges, they are not insurmountable.

The first challenge is selecting and putting in place a competent successor. If several children or family members are interested, how are you going to choose? After you choose, how do you make the announcement? How will the others react? Will they stay with the company? Will they accept a brother or a sister as a boss?

Many owner-managers ask themselves these questions and the answers are sometime far from obvious. The work you have done to identify the criteria for a successor will help you. In addition, remember that a clearly explained choice that is well justified, combined with a solid strategic plan and evidence that selection criteria have been met, communicated at the right moment, can calm tensions.

If the owner-manager is more inclined to hand over management to several family members, the questions to ask will be of a different nature. Will the children be able to co-lead management? Do they have complementary skills? Will they be able to get along and work together? Will one of them emerge as a leader? Who will it be? Will the others accept this?

Sometimes the owner-manager’s functions are divided into two or more positions, which gives all concerned the chance to fully develop while the company benefits from their complementary experience. Sometimes the company is split into separate entities so that the children each have their own space and run their own companies. The succession plan could provide avenues to explore these options.

Using a family council (PDF) could help the owner-manager manage the expectations of the family members regarding the company and vice versa. Awareness of the three-circle system (PDF) that characterizes a family business will also prove to be a valuable tool. Finally, the board of directors of the management committee could assist the owner-manager in thinking about and making these decisions.

Remember that communication is a major asset. Encourage transparency. In the case of a family succession, open discussions allow everyone to hear all the opinions and will give all the interested parties the chance to deal directly with all the participants. Discussing the issues helps to clearly identify them and allows everyone to get involved in gathering information and looking for solutions. These direct discussions will also have an effect on harmony within the family, which you will certainly want to maintain.

Co-management is also a big challenge for the owner-manager. It can be difficult for a parent to work with a child, especially if the family relations were tense to begin with. Once again, a good plan to train the successor, including activities specific to co-management, is a key asset. Having set out periodic debriefs will afford you and your successor the opportunity to exchange regularly. Finally, do not hesitate to seek assistance. There are people who can bridge the gap between you and the successor. These people have the experience and the distance necessary to make sure your successor learns the most from your experience.

Developing the loyalty of key employees is also a big challenge. Any major organizational change can incite worries, especially among the current members of the management team. It is important to identify those among the team judged to be essential to the company’s operations and take advantage of means to retain them. Profit sharing for key employees can take several forms: a bonus plan, an employee trust, a retirement savings plan, a stock option plan, etc. The agreements should be concluded fairly and transparently.

Communicating with employees is another challenge in the success of a transfer. Changing management also generates fear among the employees, fears that can lead to a loss of efficiency. Communicate your decision to the employees; introduce your successor to them, as well as the intended plan for the transfer of management. Approach it so that the employees become stakeholders and participants in the transition.

Finally, exiting the company is also a challenge. It is not easy for an owner-manager to leave the company, especially if he founded it and spent a large part of his life in it. An owner-manager’s difficulty in stepping down is one of the reasons successions fail.

If it is not easy for you to imagine your exit, it is possible that it is not easy for the people around you either. Several of them might prefer that you stay on as head of the company: your spouse, certain employees who have been loyal to you over the years, certain suppliers, the bank, etc. It is possible that they will pressure you to delay your exit.

However, you must leave. Prepare yourself to leave. Slowly reduce your level of activity in the daily operations of the company. Come up with a retirement project and new interests. Follow the plan that you started with. Make adjustments if necessary, but remain firm in terms of the decision you made at the beginning of the process. Accept that your company will, at some point in time, be in someone else’s hands.

7. Do not hesitate to call on experts that can help you

Becoming involved in the transfer process is demanding. You should seriously consider calling on experts who are specialized in this area.

As a first step, think about a consultant specialized in strategic planning. He will be able to help you contemplate the future of the company. When the time comes to draw up the list of competencies and skills required to take over running the company and establish a plan to train the successor, the help of a consultant specialized in human resource management will be most valuable. This person will, among other things, be able to establish a successor profile that will complement the skills of the co-managers or the management team already in place.

In addition, do not hesitate to involve someone you trust, especially at the beginning of the process, when you start thinking about the continuation of your company. This person does not necessarily have to be an expert in a specific field, but if he or she knows enough about transferring a business, he or she will be able to guide you toward the appropriate experts.

Most of all, be wary of packaged solutions from an expert who claims to do it all himself. Skilful people know how to work as a team and rely on one another.