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Six Steps for a Successful Succession Process


Over my 25 years of practice, I have seen businesses close their doors because they did not know how to draw up a winning succession plan and procedure. Improvisation and lack of structure, tools and expertise all too often result in failed handover of a business. When I coach a business through its succession process, I use a six-step approach based on winning business transfer practices.

The recommended approach for a successful succession process

1. Am I ready to hand over the operations and ownership?

The crucial factor in any succession process is to ensure that I am ready to let go of the reins of my business. Michel Aubry, a corporate director and private investor who has coached many businesses through their succession process, says: “If the outgoing CEO doesn’t let go of the helm, the new management team will never be able to steer the ship.” For one to step up, another must step down.

I have in fact had to coach people who were not really ready to stop managing operations or hand over ownership of their business. They wanted to continue managing some of the finances or even daily operations after the business transfer had taken place. Yet this situation is fraught with risk. The outgoing entrepreneur has to let go at some point, and especially accept that the business can go on without him!

2. Identify the talent needed to ensure the company’s sustainability.

As outgoing entrepreneur, I have to think about what the business needs to implement its orientation and strategic plan, to achieve sustainability. I also have to ask the right questions to identify the talent needed to ensure the continuity of what I have built. The needs will vary depending on the business’ stage of development, the market conditions and the type of mission (service, distribution, manufacturing production, etc.). It is also vital to recognize that the talent required now may be quite different from when I started the business. The necessary talent actually evolves along with the development stage of the business (start-up, recovery, growth, IPO, etc.).

This exercise should be conducted through a structured approach that involves both the outgoing owner and the new management team, as the latter must have their say since they, not the person leaving the business, are the ones who will build the future!

3. Assess the current talent.

To ensure that the operational leaders are the people best suited to contribute to the company’s succession, the potential of the various existing resources must be assessed. This is what we call their contribution value. We must also question whether the “right talent is in the right place.” In a family succession, this is one of the most complex stages, because assessment of the owner’s children may reveal that none have the potential to step into their mother’s or father’s shoes. Or only one has the relevant experience but the others are opposed. Having a process in place to facilitate and reconcile trade-offs between the needs of the business and those of the family is critical, especially to ensure the best match possible between the talent and the key positions in the business (job fit).

Where outside resources are considered, it is vital to alsogauge the culture fit between the values conveyed by the potential candidates and those of the organization. I have often found that new managers brought in from outside who seemed to have the “right job profile” failed to integrate into the business because of serious gaps in key values.

At this stage, it is also crucial to be guided by an outside facilitator such as a business psychologist, because this person will not have the same emotional involvement and thus may be able to provide objectivity and reframe the discussions of needs and sustainability of the business whenever necessary. A facilitator can also support you in finding the best resources for the roles you have defined. Outside resources may also be brought in to round out your succession team.

Assessment of contribution value by a business psychologist specifically ensures complementarity in the team and a good fit between the people assessed and your organizational values or culture.

4. Define the roles and responsibilities.

It is important to place value on the outgoing entrepreneur’s role, as people handing over their business sometimes find it hard to let go of the reins. I have heard such people say: “I’m the one with the secret to earning profits!” in the mistaken assumption that the new management team will have the same vision of how to run the business. That is why clearly defining the new roles and responsibilities of everyone is crucial, so everyone’s turf and tasks are clear and respected. This also gives the new owner greater latitude in decision making, thus ensuring a better transition. In family succession situations, I am often not brought in until war has broken out between the parent stepping down and the children taking over. These situations are very trying and can often deteriorate into a nightmare, even jeopardizing the family’s integrity if not properly managed.

A clear distinction must also be drawn between the role of shareholders and that of the operations managers. Clearer, more well defined roles mean less ambiguity, confusion and conflict.

5. Develop the financing strategy and determine the steps in the transfer of shares.

At this stage, an effective financing strategy must be developed to ensure transfer of ownership of the business.

An outside facilitator is always available at this point to support the team of accounting, financial and legal professionals helping you prepare the transaction.

6. Set up the transfer for operations and ownership.

Once the financing strategy has been determined, it is time to implement the succession plan you have built in steps 1 to 5 above. As a business psychologist, I guide and support my clients by facilitating communication between the various people and providing them with practical tools to make this transition a success. 

One of these tools checks that the new people have a clear understanding of their role and have mastered the key skills to perform that function effectively. If they need to upgrade certain skills not yet fully mastered, a personalized development plan can be drawn up and they can be coached through its implementation, which makes a significant difference in a successful handover of operations. Coaching is an effective strategy to ensure a successful transfer.

Best practices 

Mentoring by a business psychologist or coach is also very important, since this person can provide the following support in the succession process:

  • Guide the outgoing entrepreneur’s questions and considerations, and provide coaching, especially where this person is the father or mother of the new management team;
  • Be objective and sometimes say things that the new team is are afraid to say;
  • Dial down the drama and place matters in perspective, especially in a family succession where “love of the family may clash with love of the business”;
  • Facilitate communication between the outgoing CEO, the new management and the employees;
  • Reframe situations (in terms of relationships, operations, family or finances);
  • Assess the skills sets of the resources available (contribution value) to ensure their talent is applied in the right position;
  • Implement personal development plans and conduct a team alignment exercise to ensure the best possible handover and succession, thereby securing the company’s future;
  • Explain and ensure that the new team understands certain business concepts to which they have never been exposed, such as how to appraise the value of a business, the shareholders’ agreement, the concept of building equity, etc.).

The importance of recognizing and accepting generational differences

My practice over the past 25 years has forced me to acknowledge a few generational differences as well as many similarities between those leaving the business and those taking over.

A president’s profile generally remains the same, with certain similar traits such as:

  • Drive and passion;
  • Ability to take the business further;
  • Desire to create value;
  • Global vision;
  • A liking for risk;
  • An interest in developing new solutions and teams.

Each generation’s challenges will differ, however, because a business that used to be owned by just one person is now run by a team. Parental roles have changed and the new managing owners must consider the family factor in addition to piloting their business, unlike the previous generations. That is why in 2019, the business must rely on a complementary team instead of just one individual.

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Alain Reid BSc, MPsych, Organizational Psychologist
  • Partner | Organizational Transformation & Strategy

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