The emotional component in dealing with differing personalities and managing their expectations is often one of the most difficult aspects of any succession planning process. Depending on an individual’s role within your business, or their position within your family, their aspirations and desires for the business may be very different to your own. Communication is key in assessing their perspective and in determining how you manage that in light of your own wishes. Awareness of the perspectives of other stakeholders is important in trying to manage a harmonious transition. Below are some of the perspectives that may arise in a family owned business:
The Three Circle Model
Source: Taguiri and Davis (1982) 'Bivalent attributes of the family firm'.
- Family: all family members will have some attachment to the business and there may be a future expectation of owning a share in it or working in it. They may also be interested in the wealth it generates in providing for their lifestyles.
- Owners : people who own the business but do not work in it and where they are not family members would be concerned with the return on their investment and liquidity.
- People employed in the business would be primarily concerned with career prospects and job security. They may feel sidelined as to opportunities for advancement where the business operates on a family first basis.
- Family members who have shares in the business but are not employees may have expectations around their shareholding as a source of wealth, on which they may rely for dividend income. They may aspire to future employment in the business and ownership may be tempered by family responsibilities including an obligation to pass shares on to the next generation.
- Non family working owners – this is usually where equity has been given to management. They would be concerned with the financial return on their shareholding.
- Family employees who are concerned with career development, expectations around future ownership and whether they are rewarded appropriately financially, unlike family members who may own shares but do not work in the business.
- A family member who is involved in management and owns shares in the business. This is usually the owner of the business. Having an interest in all the various segments may result in them facing conflicting choices, especially in a succession situation.
As you can see from the above, there is potential conflict around issues involving control, management, leadership, who should be employed in the business, what they should be paid, who should own shares in the business now or in the future and whether individuals should receive dividend payments or not. Obviously a range of views and opinions can exist. Being aware of the potential differing perspectives can assist you in recognising problems and dealing with them before positions become entrenched. It will give you a considered view of the interests of all stakeholders as part of any succession arrangement.