• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 9/12/2012

Focusing on key roles first with replacement planning 

Focusing on key roles
You might think that succession planning in a family-owned business is straightforward enough. After all, the eldest child automatically inherits the business from the founder, right? Not necessarily. In fact, successfully handing over a family business to the next generation is often fraught with difficulties. Some of those difficulties include:
  • A founder who refuses to delegate responsibility to other members of the family who work in the firm, or to ‘let go’ of the business
  • In-fighting and politics as family members clash over who’s entitled to what
  • The successor earmarked for the job is refusing, or unwilling, to step up to the mark.
  • Worse still, the designated successor is unsuitable for the job.

According to Halloran & Sage, a US legal firm, 65% of second-generation family businesses fail. In short, if you own a business which you would like to pass down to a member of your family – and see it thrive in their hands – you need to plan for its success now.

Replacement Planning vs. Succession Planning

Succession planning is the process of identifying, then training and developing, key personnel with the view to having them succeed you when you’re no longer around. Think about how the Heir Apparent to a Royal Throne succeeds the current Monarch upon his/her death; the position is guaranteed, no matter what.

Replacement planning on the other hand is the process of identifying, then training and developing, key personnel who can step in and replace you, the family business owner or CEO, or your senior management team, when unavailable, or in the event that any of you take an extended break from the company.

The difference is subtle but important – identified individuals are ‘backup’, but are not promised the role of successor. Think of how the Deputy President is there to step in for the President in critical emergencies; however he may or may not actually succeed (permanently replace) him when the time comes.

The Replacement Planning process

Good replacement planning is a process, not an event. Rather, it’s is the first step in successful succession planning. Here’s what is involved:

  • Identify the key roles in your family business which would benefit from having back-ups assigned to them
  • Define the qualifications, skills, and experience levels required of each of these key positions
  • Identify individuals in your company who have the potential to be up-skilled and nurtured to take on the role of back-up to identified key players
  • Invest in the development and support of your talent pool and commit to giving them greater responsibilities over time

Remember, talent pools are filled from the bottom up, so don’t neglect to find back-ups for your back-ups. In this way, there is an upswell of talent across the board. Replacement planning needs constant review to remain relevant.

Reaping the rewards

When the owner or a senior manager is away, staff may defer answers or solutions to them, waiting for their return for business as usual to continue. While this may make the owner feel needed, it leaves customers frustrated. Replacement planning will:

  • Ensure that there’s always someone on the job who can do the job
  • Empower staff members to take the initiative and engage with the business
  • Ensure business proceeds smoothly when you’re not available
  • Help create an atmosphere of stability for staff and customers
  • Help customers get used to dealing with other members of staff when you’re not available.

Replacement planning has helped to ensure that companies like Microsoft Corporation, Pepsico, and Proctor & Gamble have remained competitive, despite the changing of the guard. Reap the rewards of good replacement planning by following their lead.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.

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