It will not be news to the readers of FOG that succession is a perennial and acutely personal issue for family-run organisations. The challenges involved in passing a business on to the next generation – as well as stepping up to take control – are archetypal, as anyone who has seen The Godfather, Downton Abbey or indeed Succession will know. Whether it is a transfer of ownership or control within the family or a change of family office manager / chief executive, the intimate ties between the parties concerned make succession a profoundly difficult topic.
Nevertheless, it might be reassuring to readers that succession is as challenging for corporate boards as it is for families: the prospective succession of a Chair or CEO is often identified as a key issue in the board reviews we conduct at Lintstock, and oversight of this area is ranked in the bottom quartile of the board performance metrics ranked in the Lintstock Governance Index, our benchmarking tool that draws on the data collected in our evaluation exercises.
We felt it would be interesting to find out why corporate boards struggle so much with succession, among other people issues, and surveyed the boards of FTSE All Share companies to seek their views. The feedback received, analysed in our People Oversight study, provides some insight for family businesses and offices thinking about succession. It has become a truism that succession is ‘not an event but a process’, but the responses to our survey underlined the need to have clearly defined structures for discussing and then planning succession. Agreeing on the process early on makes succession more objective and less personal; establishing a regular rhythm for addressing the topic (once a year is a typical cadence in our experience) means that succession does not grow to become the proverbial elephant in the room. Members of the next generation who find succession a hard topic to bring up might be heartened to know that there are many highly experienced FTSE directors who find it difficult to make the journey down the office corridor to ask a Chair or CEO about their plans for the future.
There was a spread of opinion among our respondents over who should be involved in the succession process. Some felt an incumbent should never be involved in choosing their own successor, a stance most family-owned businesses would disagree with. Many principals will – rightly – feel strongly that they should have the final say, but our sense is that there is value in running an inclusive process. Enlisting the support of trusted advisors or family members in choosing and preparing a successor will make the process more open, avoiding potential miscommunication or conflict.
Succession will never be straightforward. One respondent to our survey, the CEO of a FTSE 250 company, stated that CEO succession has always been the ‘thorn in the side’ of every company they had worked in. But it is, in many ways, the primary job of a FTSE board and a family business principal alike. Choosing a CEO is the only area that a corporate board directly manages, rather than overseeing, and successfully handing a business or family assets on to the next generation is often the main aim of an incumbent principal.
Succession is often challenging and emotive, but it is imperative for all involved
to embrace this task in all its difficulty as a process that will shape the future of the family and organisation concerned, secure the legacy of the incumbent and – hopefully – ensure ongoing success.
