Unlike a corporate, succession planning for family managed businesses (FMBs) is very different and critical. In a corporate, a CEO might step down if he is unable to perform but in an FMB what does one do if the heir cannot run the business well? The stakes are huge, and a lot is on the line, making succession planning even more important in today’s age where millennials and Gen Z have varied interests and a strong will to do something different in life.

For an FMB, the son or the daughter or someone from the family becomes a natural successor for heading the business. This natural succession order ignores the most important factor in screening the next head of business – fitment for the role. The actual problems start with this factor not being in order and the rest to follow like a domino effect.

An internal study of FMBs we work with has led us to create this 8 step Succession Planning Process. There could be a few steps taken away or added depending on the nature of the business but largely this process outlines a direction one can take.

1. Education – Is the second generation’s (SG) education, importantly higher education, planned based on their interest and aptitude, also with a vision to join the family business?

2. Exposure – Has the SG worked professionally for a year or two in an external business or is directly set to join the FMB? External exposure at an operational level with accountable goals helps one to get an employee’s view on the system. 

3. Induction – After entering the FMB, is there an induction plan for the SG to learn across departments and then enter a leadership role? Rajiv Bajaj worked for 15 years as an employee across all departments and then he was inducted into the management role.

4. Coaching – During the induction process, is there a Coach assigned who can observe his interests, likes, strengths and the natural flair of doing things? The coach could be his father, uncle, a senior professional or an experienced qualified external Business Coach who has a good understanding of people and an unbiased perspective.

5. Assignment – Once his strengths are identified he should be assigned a role in a domain of his interest with measurable, accountable goals at the execution level.

6. Involvement – Important senior-level discussions can be shared with him parallelly to start explaining what happens at the management level and how things operate in the board room.

7. Shadowing – After having spent sufficient time understanding the ground realities, he can be elevated as the EA to a senior member to improve his understanding of management decisions and develop his leadership capabilities.

8. Designation – And finally after all these roles, if the SG is able to prove his worth, he can be assigned an important role in the management team of the company.

This process not only helps to choose the right successor in the best interest of the company but also allows the SG to evaluate if he can do justice to the role and is it of interest to him. 

More often these days, we have seen the SG hesitating to step into the shoes of the father. If this is the case, a program like this can help them evaluate what’s in store for them inside as well as in the external world.