Succession in family business needs consideration of every part of the business and proper planning for the transition of each component of the business that contributed to its success. The first consideration is: Business Leadership.
Leadership within the family business
Great founding leaders create great results for their organisations. They have a vision. They make a plan to achieve the vision. They adjust their vision as new levels are reached. They motivate employees to high levels of performance. They influence others to 'buy in' to their vision for the company. And they create an environment of mutual respect and trust so that the business will prosper when they are gone.
Where leadership has played a major role in the development of a family business, it is essential that proper planning also be given to the transition of leadership when the first generation family business owner must inevitably retire from the leadership role.
Owners depend on their employees and operational leaders to carry out the business's operations in order to achieve the goals of their business. The manner in which employees do their work depends on the total management leadership provided. There are different levels of business leadership, from the CEO, to finance managers, marketing and sales managers, and many other leadership people depending on the size of the operation. Poor leadership shows up in high staff turnover, in poor sales or financial performance of the company or in an inability to exploit new opportunities. Good leaders seek to do all the things necessary to overcome and avoid the de-motivation often experienced by employees that report to them, particularly when business is difficult, so that goals will still be achieved.
What is Leadership?
Business Leadership is the process of focusing the activities of structured groups of people towards the setting and achievement of commercial goals. It necessarily involves clear focus, specific time-bound goals and harmonious groups of people.
Studies on leadership in business
There have been many studies of leadership to try to understand its importance and to provide insight and training to those appointed to take on leadership roles. Many of the attributes of good leadership can be achieved by proper training. A variety of aspects of leadership have been studied to try to answer the question of what makes a good leader and what are the benefits of good leadership.
Characteristics of a good leader
TThe characteristics of good leaders have been identified as: physical (appearance, height, posture), abilities (intellectual ability or communication skills), personality (extrovert, self confident). Many political leaders exhibit some of these traits.
We can also observe different leadership styles. One might emphasise getting the job done efficiently. Here the emphasis is task focused. Another may be the ability to get people on side to perform the tasks necessary to achieve the goals. This style is person focused. Some leaders exhibit both styles.
Because business is always changing, it is desirable to vary leadership style and focus to better suit circumstances. Some companies have recognised a person as having leadership capabilities, but the work environment has not been suited to the particular characteristics exhibited by that person. In those circumstances, the company may change the work environment to assist the leader to achieve the desired outcomes using the leader's particular skills to better advantage.
One of the changes that should occur is the development of employees in their work. In their learning days, they will require a lot more guidance and supervision. And they may contribute less to their activities for the achievement of goals. However as they develop there is a lot more that they will contribute and that development and contribution is encouraged under good leadership.
The behaviours of leaders may include directive (telling others what to do and how to do it), supportive (being friendly to followers), participative (seek the suggestions of the followers as to the best method of achieving goals), and achievement (setting challenging goals for the followers and letting them get on and achieve the goals in their own ways with limited guidance).
Charismatic leaders motivate people and lift them to higher levels of performance. Their communication style is different to the rational thinker. They are able to communicate at the level of the worker, and gain their trust and loyalty. They have an ability to be transformational leaders. There are times in the life of most businesses that this type of leadership is required. They are able to stimulate their followers to change their motives, beliefs, values and capabilities so that the followers' own interests and personal goals become congruent with the leaders' vision for the organisation.
There is another style called the servant leader. This person quietly works with the followers by seeking to serve them and thereby to influence their behaviours and performance to achieve the goals. These people see themselves as the 'servants of their followers', willing to go to extraordinary lengths to assist the follower to achieve his goals and thereby to earn the follower's respect and trust.
There is no perfect model for good leadership. Personality, behaviour and circumstances always differ. What we do know is that most people respond positively to 'good leadership'.
Respect and trust
One of the important outcomes of good leadership is the mutual respect and trust that is generated with the followers. This outcome is not indicative of a leader seeking to further their personal goals to the exclusion of the followers' goals or without regard to the success of the business.
Stewardship
Similarly, good leaders accept a stewardship responsibility for the organisation. They recognise that the business needs to survive the leaders' tenure of office. In any form of succession of a business, whether to the next generation or to a new buyer, better outcomes necessarily follow a period of formal stewardship for the business.
What Type of Leadership is Required for your Family Business?
In developing strategic goals for your business, and having regard to the resources available, what leadership characteristics (individual or team) are required for your business? Listed below are a number of the characteristics of leadership discussed above. If this list is unsuitable for you, prepare your own list of required skills.
Here is an exercise. Decide which leadership characteristics (individual or team) are desirable for your business to achieve its strategic goals by giving each characteristic a score out of 10. Ask your key personnel to undertake the same assessment. (If there are significant differences, then there are probably some issues around your strategic goals and plans that need to be investigated.)
Having reached agreement on the desired leadership characteristics for the business, then assess the skills and characteristics brought to the job by the incumbent key leader(s). You might ask all key leaders to also make an assessment of the others. This process is effectively moderated with the assistance of specialists in business succession planning like Coleman Greig.
Where there are gaps in the desired characteristics and/or the resources available, decisions may need to be made as to whether to change the leadership group or functions, implement appropriate training to develop skills, or to change the environment to better use the people/resources available.
- Physical appearance
- Intellectual ability
- Extrovert personality
- Self confidence
- Technical skills
- Task oriented
- People oriented
- Directive
- Supportive
- Participative
- Challenge oriented
- Charismatic
- Servant leader
- Develops respect and trust from the followers
- Recognises the importance of stewardship
- Good communicator
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
