THE FAMILY COMPANY IN THE EVENT OF SUCCESSION
By Borja Arrizabalaga

www.arrizabalagauriarte.com

The family business facing the succession

Succession is undoubtedly the issue considered as the main problem of Family Business. The statistics come to our aid at the time of considering it as there is no article that does not mention the difficulty of overcoming that moment as well as the high and alarming mortality rate of this type of companies. Given this importance is also the most debated and studied issue of how many affect the Family Business. Despite this, there are still many Family Companies that simply do nothing to anticipate this situation. The succession or substitution of the business leader, family and majority owner still surprises many Family Companies without adequate preparation. And this because the succession tests all the elements and protagonists that come into play in a Family Business. It affects the business organization itself, the family owner, the ownership of the company to be transmitted and the individuals who interact both the company and the family, both family and non-family.
In many cases the founder delays consciously or unconsciously to face this last problem. The reasons for this are manifold; Some of them legitimate, others without any foundation, but the consequences of an unplanned succession are usually extremely serious for both the company and the business family. It is not possible to avoid risk but to minimize it so that these problems do not give up with the effort of years of work and illusions. The first of the recommendations that we have to make to deal with these processes is precisely this, to think of succession as a process, not as an event or simply to change one person to another. A process that expands over time so it is advisable to start planning it in time. In fact, the sooner the better.

The preparation of the succession begins with the preparation of the successor or successors, professional, human and business preparation. The incorporation of the children into the Family Business must be free and voluntary. It is highly desirable that prior work experience has been obtained prior to incorporation. This perspective is irreplaceable and very valuable for the future heir, since on the one hand it has served to prove itself outside the protected or controlled environment that supposes the Family Business and, on the other hand has allowed him to commit the errors of inexperience In another organization. Once the future successor is incorporated he must be provided with a training program appropriate to the needs of the business and that allows him to extract his greatest potential in it by gradually assuming responsibilities.

When choosing a successor, it is important that he / she has the support and recognition of the directors of the company, both family and non-family. Planning the succession soon gives us enough time for the founder to provide all possible support to his successor when he is still active but also to correct the progress of events if a mistake has been made in the election or any other Situation. It is important for this reason to have not only a succession plan but also a contingency plan. Solutions such as the appointment of external, transitional or permanent, and even more drastic directors such as the division or sale of the company should not be ruled out.

They are certainly hard decisions that can cause family and business tensions but the founder must face as one of the most important decisions of his career.

Support from external sources is extremely valuable on these occasions. These people can contribute from imaginative solutions based on their experience opening the field of the options handled by the founder to serve as a contrast to the founder’s opinions that, in many cases, he is not able to sufficiently separate his roles as father, owner and entrepreneur.

This is especially true when it comes to distributing to the brothers their patrimony of which, often the Family Business constitutes the greater part. Is being fair and equitable means leaving everyone the same?

Many times the opinion of the children has not even been investigated. Leaving everyone the same can be bad for the company, for them and for the family or not. Also for this an external consultant can bring a new and different vision that without making undue distinction between the children satisfies their individual and collective aspirations. Finally, when planning a succession, it is important to trust the chosen successor. A common mistake is to think that children must be cloned, identical to their parents.

This belief is nourished and strengthened in the experienc

THE FAMILY COMPANY IN THE EVENT OF SUCCESSION

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