The Benefits of Good Governance and Succession Planning for Family-owned Businesses
Mid-market perspectives blog: Growth enterprise services
Posted by Tom McGee June 5, 2013
I recently participated in the Private Company Governance Summit (PCGS) in Washington, D.C. and had the opportunity to meet with founders and senior executives from dozens of family-owned businesses. I’ve always felt that family businesses are the backbone of our economy – a view reinforced by the 130 PCGS attendees who represented a broad range of industries across the country.
Conversations with the executives I met made it clear they take the topic of good governance seriously and were there to learn more about best practices they could apply to their own companies. Similarly, on the related issue of succession planning, these executives see the importance. They were candid about some of the challenges that their businesses face when it comes to identifying successors, from dealing with the family dynamics of the next generation, to founders who can’t bring themselves to let go.
The summit attendees proved to be a great sounding board to test the findings of our latest Deloitte survey about governance and succession planning for family-owned businesses. Among the key findings of our survey:
- More than a quarter (28 percent) of respondents from family-owned businesses indicated that they do not have a board of directors.
- Close to half (49 percent) of respondents say they only review succession plans when a change in management requires it and 41 percent do not have leadership contingency plans.
- A significant majority, more than 80 percent, say their boards have no term or age limits on membership and one-third do not evaluate board members’ performance.
Interestingly, some of the executives I talked to at the summit did not see the lack of term limits as an issue for two reasons: people are retiring later and the fact that boards have to re-elect members can be a regulating factor.
My conversations with the summit attendees, as well as the findings from our recent survey, support the premise that by creating a stronger governance and succession strategy, a family-owned business is much more likely to preserve the founder’s long-term vision for many generations.
Click here to read survey results in our new report, Perspectives on family-owned businesses: Governance and succession planning.