Succession planning & the senior generation: Time to act
Succession planning & the senior generation
"Focusing on the next generation does not remove the need for the older generation to play their part”.
When families start to focus on their succession plans, there are many helpful options available for those who are interested in developing the next generation. However, this process inevitably raises the question of balance between the generations. This was clearly stated by a next generation member who asked: ‘Why is succession always about us?’ She continued: ‘Why are we always the problem when, let’s face it, no matter how well educated I am or how many next-gen courses I’ve attended, succession isn’t going to happen until the seniors let go of power? I cannot take what has not been offered. At worst, my generation is only half of the problem.’
She has a point. The seniors need to decide, for example, if they are financially secure independent of their stake in the family enterprise. If they are not, they are unlikely to let go. But, even if they feel they have enough in financial terms, they also need to decide what they will do after they stop devoting so much time to the family enterprise, including enjoying whatever reputation and status this bestows.
These challenges cannot be solved entirely by investing more time and money in preparing the next generation to take over. At least as much effort needs to be invested in helping the seniors face up to the emotional and financial challenges they will encounter in the next stage of their lives. In reality, family members will often find that the answers they need in succession planning depend on what the other generation decide to do. Often:
- Seniors feel they cannot plan retirement until the next generation make up their minds about whether they want a career in the family enterprise.
- The next generation wants to settle down but can’t get an answer from seniors who are not yet ready to commit to succession and retirement planning.
- The next generation are too young to make choices but feel under pressure to do so because this suits older parents who want to know what is happening.
Age and adult development trajectories add to the inter-generational dynamics of an enterprising family. Transitions tend to be smoother when both generations are in sync, meaning each generation is at the age and stage to make the personal changes in their lives that are at the heart of succession planning.
For example, the transition between seniors aged 60-70, who are looking to build a structure for retirement, and a next generation aged 35-45 is likely to be easier than if the next generation is 19-25. The 19-25 stage of life involves exploring options for the life you want (where to live, relationships, career options), so settling for a role in the family business may seem unattractive when there are still many other avenues to explore. However, as mid-life approaches (35-45), there is a stronger inclination to make choices and have a more established life structure.
Transitions in a family enterprise are easier if well timed and family members and advisers should pay heed to the demographic reality of a family when planning the succession conversation. If the different generations of the family are not in sync it might be better to nudge the process along, rather than putting people under pressure to have discussions and make decisions prematurely.
It also helps both generations ease into the conversation if they understand the wishes of the other. On the basis that a problem shared is a problem halved, here is an agenda for the generations in a family enterprise to start the discussion – together:
- What do you enjoy about your current stage of life?
- What do you find tough or dislike?
- What would you like to ask the other generation?
- Is there any advice you would offer them?
- What do you think the other generation are concerned about, given their age and stage?
- How do you think they feel about the succession process?