In Family Managed Business houses (often referred to as Chalak – Malak company) the generation in command who are in their Mid fifties and new in coming generation who are in their thirties often get at loggerheads as far as decision making is concerned. Typical conundrums like “generation gap” , “immature to handle money” and “first get trained and ready to handle decisions” are often seen floating around tables of such families.
Let me share some tips with SME CEO owners which will help them in their succession planning for their Family Managed Business houses.
1. Appoint Successor today
- It is never too early or too late to appoint your successor
- Irrespective of the age of the proposed successor, the appointment much be clear in everyones mind and due training must be silently given to the proposed successor
- Plan B, in case the proposed appointment does not work out, should be a professional who is continuously being trained for the job as if the Plan A will fail
2. Training Syllabus
The training of the appointed Successor must follow a structured syllabus. Some points that must be noted here are as follows
- The syllabus should be in writing just like a college syllabus
- The syllabus must cover all functions of management
- There should be predefined periodic examination which must be conducted by outsourced consultants and not by the SME CEO ( e.g. The best surgeon does not operate upon their own child)
- Hire professionals to form syllabus and examinations. In-house resource persons can train the successor
3. Value Intellectual Property
All ideas and similar intellectual property must be registered, trade marked and valued in the books of accounts. If this is done suitably,
- Valuation of ideas are not shared amongst stakeholders as IPR remains the property of the entity called “company”
4. Appoint Family Board of Directors
Just like you have a BOD in a pvt ltd or a public limited company , it is important to enroll members of extended family in a Family Board of Directors.
Following care must be taken:
- A documented Family Board Constitution will govern the Family Board
- Share all non classified information in family boards
- Hold predefined periodic meetings and share Minutes of meeting with every member. Make it as official as possible
- Mould all family decisions towards your chosen decisions so that there is minimal dispute
5. Build Family Safety Net
As a SME CEO it is of paramount importance that you use the concept of Corporate Social Responsibility (CSR) towards building a financial safety net for each and every extended member of your family.
There is no law for this but it is proposed that one does this voluntarily.
6. Upgrade Self to Advisor Status
Whenever this proposal is made, most owners say that if they hand over their business to their successor, what will they do since they are mostly healthy and still feel that there is a lot of input that they can give to their business. While this is fully true, it is important to understand that the successor also needs to sit on the decision making chair to be able to become a full fledged owner.
The process for this is proposed as below :
- Owner should apportion a budget of Rs X for a period of 3 months to the successor
- Owner should review the successors financial decision once every 3 months and renew budgets
- Owner can increase this period of 3 months to 6 – 9 and finally 12 months as the successor keeps on gaining the owners confidence
- Once the successor is able to perform over a period of 12 months for 2 consecutive years, a grand ceremony to anoint the successor should be held
All owners who are SME and run family managed business services are requested to get in touch with the undersigned to participate in a live theatre titled “Kissa Kursi Ka” whenever it reaches their city. This theater of one hour will shade light on the above mentioned 6 points in a mode of Experiential learning.