It can be hard to let go. Whether it’s your own business, or you’ve been entrusted with the responsibility of leading a business, you invest time, energy, and so much more to ensure its success. When it’s time to move on, you want to not only make sure the impact of all your hard work carries on after you leave, but also that the transition in leadership is as seamless as possible for all stakeholders involved.
At First Bank’s Center for Family-Owned Businesses, succession planning best practices are one of our areas of expertise. With First Bank’s multiple generations of independent, single-family ownership, we uniquely understand the importance of a smooth transition to ensure the continued viability of any business.
As a fourth-generation family-owned business, First Bank has had many successful transitions from one generation to the next. Through the years, during any periods of change, we’ve leaned on our 100-plus years of experience to help ensure important transitions are a success.
“We have been through four successful ownership and leadership transitions in our 100-plus year history,” stated Ed Hart, Director of First Bank’s Center for Family-Owned Businesses. “Each transition is as unique as the people involved, but with our own transitions, and those we have seen in our most successful clients and family business friends, there are common denominators that can be seen.”
Below are four key considerations to help businesses ensure a seamless transition of their own.
Leadership must demonstrate there is an openness and willingness to communicate with employees. A transition brings with it a lot of questions, and employees need to be given the opportunity to understand what changes they can expect from new leadership. In order to make its transition as transparent as possible, business owners and leadership should plan to meet with individual employees or groups face-to-face and take time to address their concerns. Encourage employees to actively participate and ensure everyone has a chance to make their voice heard. Outline the philosophical and strategic positions of both the outgoing and incoming leadership, and explain what, if any, changes employees can expect. Having an open, honest dialogue with employees helps them feel better prepared to transition, along with leadership.
“As we have all heard about planting a tree, the best time to plan for your leadership and ownership transition was 20 years ago. The second-best time is today,” Hart added. “We need to have open and honest communication throughout the entire process, and everyone impacted by the transition should be in the loop in one way or another. Even if employees don’t have a say in the transition, they should be kept informed of the process so that, when it eventually happens, they have had time to prepare.”
This same level of transparency should apply to clients. Make time to meet with clients independently to allay their concerns and address their questions as well.
A strong partnership between the new and outgoing leader is critical to an effective transition. The relationship between the two sets the foundation for new management. The incoming leader must be prepared to take control of the company and understand the corporate culture, organizational politics, and internal decision-making process. The outgoing leader is best equipped to provide this support as well as gain organizational buy in for his or her successor. The absence of a symbiotic relationship between leaders can create fear of change and lead to a hostile view of new leadership within the organization.
Positive relationships and mutual respect between the new and outgoing leader helps to instill confidence across the organization. Although there won’t always be a well-established relationship between the incoming and outgoing leaders, the outgoing leader must be invested in the transition and set an example for employees by supporting the internal or external candidate throughout the process.
With change also comes opportunity. A leadership transition offers the chance to address issues within the organization that may have been overlooked and an opportunity to demonstrate a commitment to employees’ interests and concerns. It’s also another way to make employees feel they are part of the transition.
One way to do this is by leveraging change communication to solicit feedback from employees on ways to improve the business. Conduct roundtable discussions in an open setting and encourage employees to be honest and forthcoming. Ask how management can address their concerns, not just about the transition, but also about day-to-day operations. Be sure to also include vital feedback from your employees on any processes or procedures that need improvement or increased efficiencies. Following these meetings, consider recapping the meetings and how any concerns will be addressed, where applicable.
By executing two key components to feedback, including creating a comfortable, open environment and demonstrating a commitment to action, employees are more likely to come forward. In addition, if they doubt management’s ability to act, they lack incentive to participate.
A transition presents the perfect opportunity for an incoming leader to establish their own unique identity and management style. As important as it is for a new leader to establish their own identity, they must also ensure they are not detracting from what the company has worked so hard to establish up to this moment. When applicable, a smooth transition requires solidarity in staying true to the company’s already established vision.
Whether incoming leadership is in complete lockstep with outgoing leadership or not, in most instances family businesses should consider implementing changes in gradual shifts rather than making any sudden, sweeping departures from the norm. What’s going to change is equally as important as what will remain the same.
If you or your family business is preparing to go through a key leadership change now or in the near future, reach out to the First Bank Center for Family-Owned Businesses for any assistance or questions.
As you continue building your family business legacy, we’re here to help you prepare how to transition your business with a solid succession plan.
Originally published on September 5, 2019. Article has been updated.