How to keep an open dialogue

How to keep an open dialogue: Navigating family business succession

Navigating the complexities of family business succession is never easy. As our latest report shows, maintaining an open dialogue is crucial to ensuring a smooth transition. Yet, the conversation around succession often proves challenging, marred by emotional undercurrents and unspoken expectations.

Understanding the challenges

One of the primary challenges lies in the disconnect between the desire for succession and the lack of a concrete plan to facilitate it. Many parents wish to see the next generation take over but struggle to let go, often holding too much sway on the business's vision, operations and decisions. This reluctance can stifle the next generation's ability to innovate and grow, and ultimately stifle the business in the long-term.

Furthermore, the pursuit of international education for the next generation can inadvertently distance them from the family business, making future transitions less likely. The next generation may want to pursue opportunities in the market they studied and may be reluctant to return home to a business they have no involvement in or awareness of. 

The importance of building trust

Adding to this complexity is the common overvaluation by parents of the quality and depth of their discussions with their children regarding the business's future. A staggering 81% of entrepreneurs trust the next generation to uphold the values and culture of the family business, yet 41% believe their successors lack interest in continuing the legacy¹. This dichotomy underscores the need for trust and open communication. Parents must engage in candid discussions, addressing the ambitions and interests of their children without fear of dictating their choices. Informal conversations over dinner can help progress the conversation, but by formalising plans you can avoid any misunderstanding and ensure that everyone is in agreement on the future roles and responsibilities.

Strategies for keeping the dialogue open

1. View succession as a process, not an event: Recognise that succession is an ongoing dialogue. Just as you wouldn't plan a business strategy for a decade in a single meeting, succession planning requires continuous engagement. Selecting a successor is merely the first step in a series of decisions and agreements that need to be made.
2. Define milestones together: To prevent the next generation from feeling perpetually unprepared, establish clear milestones for both generations. Involving both sides in drafting these checkpoints can ensure progress and prevent the responsibility from resting solely on the current generation.
3. Regular alignment meetings: Schedule regular check-ins to ensure that all parties remain aligned on the succession plan. These meetings should encourage honest sharing of aspirations, concerns, and expectations, fostering a jointly agreed purpose.
4. Document the agreement: Miscommunication can lead to future rifts. Documenting discussions and agreements ensures that everyone is on the same page. 64% of multi-generational entrepreneurs find managing a family business stressful, often due to a lack of clarity about the business vision. Documenting the agreement can avoid misunderstandings, assumptions, and in the worst-case scenario, disputes amongst the next generation if you are incapacitated earlier than planned.
5. Seek external support: Engaging independent advisors can provide valuable insights and help maintain an open dialogue. These advisors can assist in setting objectives and ensure that communication remains transparent and productive.

Keeping an open dialogue is not just about talking—it's about listening, understanding, and evolving. For family businesses, where generational differences add layers of complexity, maintaining safe spaces where trust can grow and open communication can happen, is essential. By recognising the challenges and implementing strategies for continuous dialogue, families can navigate the intricacies of succession with confidence.
 

¹ HSBC Global Private Banking, Global Entrepreneurial Wealth Report 2024 ↩