The Impact of COVID19 on Succession Planning
6th August 2021
Billy Andrew from Family Business Solutions looks at the impact the pandemic has had on succession planning.
Some family businesses have faced immense challenges as a result of the pandemic, despite standing the test of time for generations. These unique pressures have highlighted the great strengths of family businesses in their collective resourcefulness, and ability to adapt. Crisis situations of course, can make or break companies because that’s often when they learn their true strengths and vulnerabilities.
I’ve noticed one subject in particular coming under the microscope: succession planning. Understandably, owners and successors have been looking more closely at the when and how of the business and family future.
There are those who learned the true strength of their succession teams as family members rallied round, stepped up, and proved their worth and their leadership abilities.
Where founders may have had reservations about the next generation’s commitment or ability, they have instead found themselves surprised and impressed.
That doesn’t mean those at the helm can take a back seat and step down immediately, but it does mean some are approaching the topic of planning, exit and succession more readily and with confidence. And indeed some may opt to accelerate the process.
Others, meanwhile, discovered a real development need and it has become apparent that any succession plans may need to wait for a while.
That’s not necessarily because their successors can’t do the job, but rather they’re not quite ready yet. The pandemic has thrown up such immense challenges that in some cases, it makes more sense for the current leaders to stay in place while the next generation further develop their skills.
But while family businesses are split into these two very opposite camps, there remains something that both have in common. Neither tends to know the full scope of all the exit options available to them.
And why would they? While some family businesses are big multinational firms, many are smaller and don’t have the luxury of counsel from legal or HR departments.
Quite simply, people don’t know what they don’t know. Often there are many more options than they realise and many different ways these options can be implemented.
I like to encourage family businesses to consider the trilogy of performance, exit and succession together because each part is crucial. Unless a business is performing there’s no exit value and it’s important to consider not only commercial performance but also family needs too.
That’s where the advice of a neutral party with no agenda can be especially valuable, because within family businesses there are emotional relationships – both positive and negative. So bringing in someone objective to chair discussions means the right questions and topics can be raised and discussed openly and honestly without fear of causing offence.
I like to work with families over a period, to assist self and supported help – including a list of things they can do themselves, allowing them to consult more effectively with one another.
It’s amazing what can be achieved over a period, in some examples looking at how families can manage together, and where this is not workable, where they can be owners or stakeholders.
Even when families don’t have a successor and assume their only option is to find a buyer, there are options they may not have thought possible. They may wish to consider other routes such as a management buyout or where the family business is a strong legacy, perhaps consider the establishment of an employee ownership trust.
It’s a really positive exercise that can provide families with hope and often more choices than they ever thought possible.
I’m proud to help family businesses secure their future. A recent report from charity the IFB Research Foundation revealed more than 100,000 new family businesses were established in the year before the pandemic.
The are around 5.2million family firms, employing more than 14million people, and they accounted for 30 per cent of the UK’s income pre-pandemic.
The importance of their rebound to the economy simply cannot be underestimated.
This article first appeared in The Scotsman