This question reflects most consultants’ and advisers’ assumption that a definition of success for family businesses is having next generation management and control in place. So why is it that the responses to the question are often disappointing to family business consultants and advisers?
Planning for the long-term and succession
In Australia, the latest KPMG Family Business Australia survey suggested that in 2011, only 39% of respondents had a ‘succession’ plan. To my mind, this level of response suggests one of two things: that many businesses may not be planning, either for the long-term, or for succession.
As PwC’s 2012 global survey of private companies indicated, only 41% of participants intended to transfer the ownership and control of their business to the next generation. In my view, 39% of Australian family businesses having a succession plan in place does not reflect badly after all.
With so many competing demands on the next generation, it should not be surprising that despite an increase in awareness around best practice, the number of family businesses that are still successful under the third generation remains relatively low. If succession was a symbol of achievement for owners of family businesses, I would suspect that the number planning for that eventuality may be far higher.
A plan for future success
What I think may be a better indicator of success is the extent to which the planned outcomes or milestones are achieved over time. In which case, a better primary question may be, “Do we have a plan for our future success in place?”
This may be a question not just for the owner of the business to address with business management, but also the family (or families) involved as stakeholders in the business. Having a framework act as an enabler for a family business to frame answers to these questions is not necessarily that easy.
A set of milestones as part of a robust business plan
It is also a matter of timing; I’m not sure that an entrepreneur of a fledgling business needs to ask themselves that question, rather they need a set of milestones as part of a robust business plan. I believe that for family businesses the answers to these questions start with an understanding of what they see as constituting ‘success’.
What represents “success” changes over time, and means something different for different people. If a family, as owners of a business, can agree collectively what it means, it is a great start to developing a plan for their business including its succession, or perhaps maximising its value on realisation.
Perhaps future surveys should ask, “Is your success plan for the future in place?”