New visions, transformation, efficiency - these are often constantly replayed in the minds of our 2nd generation (2nd gen) business owners' mind. However, whenever we meet up together with the founders who have always been holding the helm, it is not uncommon to see some confusion over the purpose of these. Nevertheless, this is surely understandable as afterall, they have had a great past with the way they have managed their business.
In this post, we thus highlight a few things for both generations to take note before these vision gaps get wider over time or even before the 2nd gens are introduced into the business to continue to build on the legacy created.
Crafting a Formal Succession Planning
It is usually more of an emotion-thing when we talk about succession with SMEs. The worse that we have come across would definitely be 'It sounds like I'm dying!' and perhaps due to this, businesses typically avoid this difficult but necessary conversation. However, in reality, succession planning involves more than handing over the decision-making role to a family member. Succession should involve a clear progressive action plan in order to have everyone on the same page to reduce misunderstandings. This plan should detail areas alike understanding the products / services, connecting the 2nd gen to existing networks, hands-on experience with internal functions and so on where the effort should also be reviewed conscientiously base on changing circumstances. Proper training should also not be ignored. While most 2nd gen would have had some exposure before even joining the business, a clear formal plan can undoubtedly ensure clarity to succession and set a foundation for fitting the right person to the right leadership and knowledge for the 2nd gen before they realise their visions for the company.
Opportunity Cost for the 2nd Generations
The median pay for a fresh graduate for Singapore in 2019 was S$3,600 according to a report by CNA and this is expected to grow progressively and leap over time. Can the company ensure the same progression potential is given to the 2nd gen? This is usually possible if there is a clear strategy to bring the company to another scale, not forgetting the intangibles like work satisfaction and limitless personal career growth that can come along. However, it is also worthy to consider questions like how many of the 2nd gens can the company support at certain moments? Are they as utilised as an average employees? When not planned in advance, this could mean that a 2nd gen who does not have enough work could be losing the opportunity to develop his / her skills out in the market. Can the company support the 2nd gen financially in the long run considering his / her potential? However, these are not signs of saying 'no' to having a 2nd gen in a business. The main consideration is whether the timing to join the business is right when one compares the opportunity cost for the 2nd gen.
Engaging an Independent Advisor
It is never more typical to have a scenario of conflict when a 2nd gen puts in hours to formulate a new direction for the business and walks into the room of the founder excited but walks out disappointed (or even upset at times). The perceptions built up by both for the business and of each other (maybe literally since birth for the business and the 2nd gen) could often be a hurdle to cross before a strategy or transformation work can be properly reviewed. Therefore, sometimes issues and opportunities are overlooked or missed because of the manner they are delivered than being unreal issues or opportunities. This can potentially be avoided by engaging an independent qualified person to constantly be the one who evaluate various perspectives to provide a fair voice. Further, a third-party to fairly evaluate plans can also ensure the drive of the 2nd gen to take risks and innovate is better balanced to avoid any missteps.
The introduction of 2nd gen can definitely add a fresh blood to a business and potentially bring it to another scale altogether. However, resolving matters like a normal employee-employer relationship is usually challenging and unavoidably comes with more emotions when families work together. Therefore, a formal plan, and always going back to the plan as a 'rulebook', can definitely serve as a referee when issues arise, even when either party ultimately chooses to agree to disagree. This is important as family will always be part of our lives and we believe the aim for good business is ultimately for a good life for the family.
Nevertheless, not all owners have the time or resources to build a plan even when they are aware of the conflicts which could be avoided. Hiring a CFO could be an option to resolve this but could be beyond a SME's budget and further, you may not really expect one to be 'fully utilised' 8 hour a day. Yet, you should never be alone and a part-time CFO can be a valuable partner. Have a chat with us on how we can tailor a suitable solution for your business, at fraction of cost.