Succession is a journey, not a plan

By Dennis T. Jaffe, Stacy Allred
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Why you need a new mindset

Succession is not a simple choice or decision; it is a far broader task of envisioning the future and taking steps to realize this vision. It fulfills two essential tasks for sustaining the enterprise across generations:

* Creating a process to develop new leaders and pass ownership and control to successors.

* Keeping the family as well as the enterprise vital and successful across generations.

Succession involves more than naming next-generation business leaders and dividing ownership. It is about change: defining the best enterprise for the rising generation and clarifying roles of family members as they become adults and owners.

Family members have different questions and concerns about the future; all of them must be treated seriously. The elders want security and to see their handiwork continue to thrive. Rising-generation owners must become knowledgeable and responsible as they prepare for their new roles and develop their own reasons for continuing the enterprise.

Succession might be better labeled “design for family and business continuity.” It involves the thoughtful, collaborative building of a framework for a complex and growing family with multiple assets and enterprises that wants to continue to thrive and develop with unity.

The whole family must know, understand and accept the principles, intentions and practices to guide their future. The decisions are not just about future business leadership but also about the future family and what family members want to create. Rather than  appointing a new generation to continue the work that has been done, the family must prepare itself for a new generation and a new economic world, one that the older generation may not clearly understand.

After the first generation’s success, the second-generation successors must answer three basic questions:

Purpose: What is our business/ financial capital for?

Continuity: Do we want to remain partners for another generation? 

Focus: What sort of business or shared family entities do we want to have?

Pivoting to Continuity

Succession begins when a business founder or wealth creator enlists the family to sustain and build a family enterprise for the future. This journey involves several tasks:

PURPOSE: Finding shared purpose and values for the unified family enterprise

VISION: Creating a vision for a future that everyone can commit to

STRUCTURE: Creating governance structures to organize and make decisions

CAPACITY:  Developing skills, commitment and direction of new generation leadership

LEADERSHIP:  Get new leaders in place to implement the new direction.

These tasks are too complex and too important to be avoided or deferred to the indefinite future. A family that wants to remain a family enterprise must prepare to continue their success along a new path.

As part of these discussions, a family must consider tactics and practices as they create a strategy for different levels of staakeholders.





• Do we want to sustain, renew or reconsider the businesses we are in?

• Who will the owners be?

• What sort of control do they want?

• How can we best involve non owner family members (e.g., spouses) as stewards?

• How will decisions be made? • Who will make them (e.g., who has control)?

• Who will run the business or shared family entities?


• How much do we save for the future and reinvest in our business, and how much do we use to enjoy our lives?


• Should we give discretion over wealth to our children directly, or do want to limit their choices with oversight by trustees?

• How do we grow the next generations of leaders?

• How can family members work for or within the business in a way that is fair to others?


To prepare for the succession journey, a business family must adopt several new mindsets. They help orient and guide the famiy to the tasks that they must undertake together as they move across generations.

Mindset 1: Succession is a journey that takes a family from their familiar, comfortable place into the unknown.

The journey begins where you are now. It is always too late, but you must start somewhere.  It happens because, owing to the biological realities of human life, the successful ways the family has been operating can no longer continue. The  family has many choices:

* Do you want to wait until there is a tragedy or disruption, or do you want to prepare in advance?

* Do you want to leave the planning to others, take a few token steps or prepare yourselves as best you can?

Succession is not a plan — it is an outcome of activities that take place over time in which members of each generation redefine and adjust their roles, responsibilities and relationships with each other. It is not one event or step but many. If the earlier changes have not taken place, the effectiveness of later changes (or changes that are too little, too late) decreases.

Preparation does not guarantee any outcome, but planning and shared conversations can create an environment that makes success and collaboration more likely. At first, owners imagine that this involves a simple choice: Who will inherit the family’s assets and wealth, and when? But the choice is more complex than that. It involves a revision of what the family’s purpose is and how the family does things.

Succession is uncomfortable and creates anxiety. You can expect that this disruption —even if it is just imagining and planning —will raise difficult issues about emerging differences. The comfortable, predictable, settled practices of the first generation must give way to diverse views, new possibilities and different visions of the family future. What has been hidden and often unspoken now surfaces within the family, as they create a new way of working together.

Those who want to prepare must consider, “What will happen when I leave my comfortable current reality, to pass on ownership and turn to new leaders who must redefine or renew the family’s business?” They must face their fears of losing their place, hurting their children, letting go of control or adopting an inflexible plan that is not working.

Succession is not a linear journey from one generation to the next. It is at least a three-generational evolution. The traditional view of succession is that the founder finds the person closest to him in the family and passes leadership for him to largely continue what he has done. More realistically, succession includes a founding couple, their children and their grandchildren, who are also adults. In addition to passing ownership to two new generations, succession involves planning for many households and many leadership roles.

Mindset 2:  Ownership is not a prize or a reward; it's a complex responsibility.

By the second generation, ownership is largely held not by individuals but in a variety of trusts that establish controlling and beneficiary roles. The emerging family owners must understand what it will mean to become an owner and the nature of the role they will be assigned. Each new owner must understand the complex nature of ownership and what it entails. Every owner does not have the same level of control and authority, but every owner has certain rights and responsibilities that they must learn and be aware of. Owners must learn what it means to be an owner, something that is not always clear to inheritors who are just focused on the rewards.

Trusts and other vehicles divide ownership so that the person who has the responsibility for decisions and control over how the asset is used is not the person who receives the benefits. In a family, a trustee can have that control, or one sibling can have the control or majority vote while others share in the benefits. Different assets can be passed on and owned differently. There are roles and responsibilities that must be learned. Succession involves setting up a system of roles, decisions and benefits that everyone in the family must be part of.

Mindset 3: Succession entails a deep shift a change in the whole family and business culture.

The rising generation usually consists of more people than the controlling generation. These people must make decisions together and manage their differences. Power and control cannot be delegated to just one person; other family members who share ownership have their own rights, responsibilities and desire to be heard. Therefore, the rising generation must develop practices enabling them to listen to each other, make shared decisions and create a common vision that inspires them.

The shift that takes place in succession is the transition from  a paternalistic culture centered on one person to a partnership among several households and families. Since the founder did not face this situation, this is something that the founder can find it hard to envision. Therefore, the work of culture shift often falls on the rising generation. They create and revision new ways to work together, sometimes redefining their business and financial entities. They must learn and practice cooperation, define fairness, listen to each other, and make shared decisions, practices that can seem quite foreign to the wealth creator.

Mindset 4: Succession must balance the family and the business (or enterprise).

You are not yet a family business until you deal with succession. When a business leader has created a successful business, it is not yet a family business. They may have the intention of passing it on and starting a multigenerational family enterprise, but that is just their wish. This intention must be matched by execution. The wealth creator has the power to decide for the future. But to do this effectively, the current owner must realize that the adult children (or soon-to-be-adult children) have a voice and own the future. Here are a few insights to begin the process.

It takes a family to prepare for the future, not a just an adviser. Succession takes place gradually, with the passing of ownership, authority, influence, and control from the elders to the rising generation in small steps. For many years, generations work together with gradual shifts in roles. Since everyone in the rising generation is concerned about the future and where they will fit, the process must be transparent and inclusive. Unless there is a tragedy or catastrophe, it does not happen quickly, and the best path forward is to take the time to prepare.

Succession is a conversation in which family elders balance their needs with those of others. The path by which the resources are shared by each family member in the future must be developed. Many business owner-managers assume that for the business to continue, the future must mirror the past to the greatest extent possible. The model of one business leader who is in charge, with the rest of the family as beneficial bystanders, is probably not one that is desired or expected by the rising generation. The family must first look ahead to what it wants to become and then determine what sort of leadership and ownership activities will be needed. Succession involves planning with the family, not for the family. This is an approach that may not be comfortable or familiar to the wealth creator.

Family relationships are eternal and must be respected. Succession decision-making takes place amid the emotional history of people who grew up together as a family. The decisions are not just about sharing assets. They are also about power and control, and this is more than an emotional issue — it is an existential one.

Both family and business roles and practices must be re-envisioned. The family enterprise is both an extended family and a business partnership. Each one runs by different rules and has different priorities and goals. A business cannot run like a family, nor a family like a business. Succession means changes in the business and the family. Succession must work on both levels.

Business and family each have questions that must be answered:



·       What sort of business will it be?

·       Do we want to work together as partners?

·       Who will be in charge?

·       What do we want to do with our wealth?

·       How will ownership be distributed?

·       What do we want to do as a family?

·       Do we want to continue?

·       How can we engage the rising generation?

·       Sale to family or buyer? Should we remain in business together? 

·       What will be the role of spouses, other stakeholders and influencers?

With all this change, it is no wonder that a family business founder avoids or puts off planning for succession. Too often, that leads to a tragedy. To move forward in the succession journey, the family must redefine itself and establish a path for continuing to create wealth for the benefit of generations to come.

Dennis Jaffe is Senior Research Fellow at BanyonGlobal Family Advisors. Stacy Allred is Senior Managing Director, Head of Family Engagement & Governance at First Republic Investment Management.
Audio Sound Duration: 
January/February 2023

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