The NextGen takeover formula

Succession planning is a major issue for Australian businesses, family businesses in particular. It’s my experience that most business owners spend more time planning their holidays than they ever do planning their business. So when it comes time for a changing of the guard and the next generation takes controls, many issues can arise that have either not been planned for or not even considered.

In 2010, KPMG and Family Business Australia undertook a major survey of the Next Generation of Family Business. (You can read the results of the survey in detail here). The conclusion was that more than 60 per cent of the NextGen felt that their leadership style was different from the present or former leader.

One of the challenges I see business owners experience is pushback from team members because of the changes they are implementing. This can be exacerbated when there is a change of leader, particularly where the former leader has been around for a long time, as is the case in many family businesses.

Here are some problems that a NextGen family member might experience as result of change they propose or make in their organisations:

-       My team doesn’t like the new system we have put in place to manage inventory.

-       A couple of customers have said they don’t understand why we want to change our pricing policy, and we’re feeling the brunt.

-       Everyone is behind what we are doing in this business except for one person – he has been here for 25 years, stuck in the old way of doing things, loyal to my Dad and won’t change.

The most likely reason you may face these challenges and others like them is that you have not explained WHY you are doing something.

There is a real difference between implementing a new inventory system, and explaining the reasons for such a strategy. Some firms I have worked with have used this simple script and found it to work well:

“Team, I’d like to introduce you to our theme for the quarter, Customer Delight. Our customers have consistently told us that when they order a particular item, they expect us to supply it quickly. So with that in mind, we are setting an internal performance standard to ensure we carry sufficient inventory to satisfy our customers’ demands, but without holding so much inventory that we run into cash flow problems. That way, our customers will be delighted, we will be more efficient and we’ll be hoping to get some great testimonials from our best customers that we can use in our marketing.”

See the difference? It’s clear as day. (Of course, if you say these words, you need to mean them.)

Key points to remember:

1.     It is your business. Irrespective of how long the prior generation has been in control and the loyalty your team may have to them, it’s your show now – run it the way you wish to run it. Counter team objections by articulating why you are implementing changes or doing things a certain way.

2.     Motivation comes from within. Your job is to create an environment where the right people will turn up ready to give 100 per cent every day.

3.     Isolate individual team challenges by asking if the problem is a skills or attitude issue, and address it accordingly.

Finally, look at yourself and ask yourself this confronting question: Would you like to be led by you? If you are new to the leadership game, you may need some help or coaching in this area.

Colin Dunn is a Director of Proactive Accountants Network.