Ask the family business experts

How do I let the family know which of my kids will be the next CEO?

Question: “I’ve identified which of my children would make the best CEO after me, how do communicate this decision to my other children?”

Robert Powell, Partner, Grant Thornton Australia

This is a potentially sensitive situation, and how to handle it depends on the answers to some key questions. Has the family developed agreed policies regarding employment in the business, including benchmarks relating to experience and qualifications; and if so, does the chosen successor satisfy those requirements? Was there an opportunity for all interested family members to apply for the job? Is it transparent that the chosen successor is the best person for the job, including non-family applicants, and that the decision process was fair and objective? Is it known for certain that the chosen successor is willing and able to take up the role? If the answers to these questions are yes, you can be reasonably confident that the decision will be embraced by the successor and the family unit; if not, you might be heading for trouble and you would do well to re-consider your decision.

Pamela Low, Pamela Low and Associates

Three main aspects to consider:

1. Ensure a transparent process of selection that clearly defines the skills and capacity of each child matched against the CEO performance criteria and organisational strategy. Define the more nebulous qualities such as charisma and chutzpah as well.

2. The decision should be supported by an objective board and/or owners, not arbitrarily decided by the one owner.

3. There should be a one-on-one with each child before having a completely open and honest forum utilising a structured discussion process to present the decision and to flesh out the issues and challenges, so everyone can be heard and validated. It’s best to use a skilled and trusted mediator to conduct the one-on-one meetings and facilitate the forum because it objectifies the process and prevents harbouring of resentment towards the parent.

If any of these steps are missed then you risk losing the heart of the children, including the ‘chosen one’.

Doug Munro, Munro Group HR Management

Have you really given your other children the chance to make their case as successor?

Given the risks associated with forcing a leader on the business, which can lead to potential family breakdowns, I recommend the following:

  1. Engage an accredited family business adviser to assist with and monitor the decision making process
  2. Call a family meeting to advise of your wish to appoint your successor and that the family be involved in the process
  3. Give all children a copy of the position description, key performance indicators and selection criteria for the CEO role, with the selection criteria to be completed and returned to you
  4. Conduct one-on-one discussions on the responses and CEO KPIs to achieve clarity
  5. Call a family meeting and collectively discuss individual potential for achieving the CEO KPIs.

This process will enable the most appropriate successor to surface, most likely being the initial choice.

Process has been followed, the family has been included, the adviser added credibility, and the decision has been unanimous, not imposed. Make sure everyone gets their chance.

If you have a question for the Brains Trust (all accredited FBA advisers) please send it to familybusiness@businessspectator.com.au

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