1. Succeeding at succession: establishing
your goals and objectives
October 2011
What they don’t know goals that take the needs of all your Similarly, as the owner of a family
stakeholders into account can lead to business, your primary goal may be to
might hurt you. Flexibility. disputes and business disruption. maintain ongoing family control of the
Nimbleness. Creativity. To avoid these consequences, you need company. Your lenders may think your
These are the traits that to create well framed succession planning family successors lack the skills required to
goals and objectives, align them with your maintain or enhance business value. For
differentiate many privately business strategies and goals, and their part, your intended successors may
held businesses from their communicate them with both your wish to engage in other pursuits entirely
larger competitors. business and personal stakeholders. By and may not be interested in assuming the
focusing everyone’s activities on reaching reins of ownership.
Surprisingly, these same traits can mask a
clearly defined targets, you do more than Notably, these examples are just the tip
critical weakness. Very often, owners and
motivate your leaders and managers. You of the iceberg as owners of privately held
managers of privately held businesses,
also establish a basis for evaluating the businesses often struggle to reconcile
which include family enterprises, investor
success of your ongoing activities. Only in conflicting personal and commercial
and entrepreneur-owned businesses and
this way can you ensure that your objectives. This challenge becomes
professional firms, base their decisions on
successors have the knowledge they need particularly prevalent in succession
personal experience and intuition. While
to maintain your legacy. planning because a retiring owner’s
this may foster innovation, it also inhibits
financial welfare frequently hinges on the
transparency. As a result, you don’t leave
Different leaders, different goals company’s financial success. If ensuring
only your competitors guessing about
Many privately held business owners fail sufficient cash flow in retirement leaves the
where you plan to go next, you also leave
to engage in formal goal setting because company with inadequate resources to
your management team in the dark.
they believe their stakeholders share their fund expansion, this does more than
When it comes to succession planning,
vision of the future. In truth, this is rarely compromise your ability to provide for
this “lone wolf” tendency can wreak long-
the case. An entrepreneur, for instance, future generations. It also can prevent you
term havoc. In some cases, owners may
may place primary importance on ensuring from safeguarding the jobs of key staff
assume that their partners, management,
continued employment for key staff—an members and even can put the company’s
staff, shareholders and family members
objective that may conflict with the survival at risk.
understand their intentions for the future
intention of investors or potential
even if they have not been articulated. In
purchasers. The managing partner of a
other cases, owners may rely on their
professional services firm might hold the
personal judgment to such an extent that
goal of expanding internationally, while
they implement succession plans
his or her partners are more interested in
unilaterally, without consulting with the
building community roots.
affected parties. In either case, this failure
to establish clearly defined and measurable

2. Goal setting challenges privately held businesses also frequently
One would imagine that privately held worry about the personal repercussions if
businesses would be eager to articulate they fail to treat both current and future
their goals and resolve any conflicts that generations in a way that is perceived as
arise. At the very least, business owners fair. All of these scenarios can make it
should take the time to define where they exceptionally challenging for privately held
would like to take the business, what business owners to set clear succession
personal goals they hold and how to planning goals.
reconcile their own objectives with those Keep in mind that the goal-setting
of their key stakeholders, such as process itself can create obstacles if it is not
employees, shareholders, outside investors, approached effectively. According to Dr.
lenders, management and family members Marshall Goldsmith, best-selling author
involved in the business. Too often a range and global leadership authority, people
of barriers hinder owners from engaging in tend to give up on goals when they:
“When it comes to this process. • lack buy-in or commitment to change
succession planning, In some cases, owners are simply • underestimate the time needed to reach
hesitant to retire, despite stated intentions. targets
privately held businesses Perhaps they have failed to build a life • realize how much work is required to
must set goals designed to outside of the business and fear losing their effect change
reconcile potential conflicts social network, or their identities are • become distracted by competing
meshed too closely with the business and priorities
between their business needs they are struggling to surrender control to • fail to realize short-term “rewards”
and their personal/family their successors and staff. Perhaps they (higher profits, greater recognition,
needs. Only in this way have too much of their wealth tied up in etc.)
the business, making retirement financially • approach goal setting as a onetime
can they facilitate a smooth
unfeasible. Whatever the cause, these project rather than a lifelong process
transition.” factors can hinder business owners from
honestly sharing their plans for the future. Ultimately, it will likely be harder than
David White
Family businesses face particular you expect to define and articulate your
Grant Thornton, United Kingdom
challenges of their own. If family members succession planning goals. Navigating
perceive the business as a family heirloom competing priorities, confronting your
to be preserved for future generations, they stakeholders and your own potential fears,
may object to an owner’s goal of bringing engaging in honest self-evaluation and
in professional management, attracting addressing complex financial and
external investors or retaining capital by emotional issues requires real work.
reducing shareholder distributions. If too However, these types of efforts tend to
many stakeholders are involved, owners of produce the best long-term results.

3. Embarking on the goal setting process 2. Plan for contingencies
Despite the challenges inherent in setting One of the most effective goal setting
succession planning goals, it is critical for methods involves answering the following
privately held business owners to engage question: if you had died yesterday, how
in this process if they hope to avoid would your business be doing today? This
conflicts that can result in deteriorating exercise frequently helps the owners of
business value. Although there are no hard privately held businesses uncover critical
and fast rules for establishing effective gaps in their succession plans. Perhaps you
goals, certain best practices exist. lack key person insurance. Perhaps your
processes are not sufficiently robust to
1. Involve all stakeholders enable your successors to assume the reins
As they begin to plan for succession, it is of control or your share ownership
essential that owners keep their managers, structure will lead to family rifts in your
customers, suppliers and other absence. Perhaps your successors require
stakeholders informed of any changes that more extensive training. Uncovering these “A lot of business owners
may affect them. Owners of closely-held process gaps enables you to do more than are unfamiliar with the
businesses should consult with both their strengthen your succession plan. It can
business partners and shareholders to also help you better clarify the vision you
process to take in setting
brainstorm ideas, gain agreement and hold of your company’s future. their succession planning
resolve potential conflicts. It is also goals. Working with a
generally recommended that owners of 3. Frank and honest dialogue
privately held businesses consult with their Many privately held business owners fail
trusted facilitator can
family members—even if those family to establish effective succession planning provide them with the
members are not involved in the business. goals because they hesitate to engage in perspective they need to
An owner’s succession planning decisions honest communication with their
very likely will affect the financial welfare
align their personal and
stakeholders. This is particularly
of their spouse and children, which is why problematic in family business settings business objectives.”
it is important that they share their where business stakeholders fear hurting
Bobby Stover
intentions. This is particularly critical for each other’s feelings. Rather than telling an
Grant Thornton, United States
owners of family businesses, whose elderly founder that his role has become
decisions ultimately may dictate their redundant, a business may expend
children’s career paths. Finally, in gaining significant resources, and engage in
buy-in to their objectives, executives uncomfortable subterfuge, to create a false
should ensure their stakeholders go position for him. Rather than advising a
beyond tacit agreement and fully accept family member that her job has been
the stated goals. automated, a business may allow her to
create lengthy manual reports that it
ultimately plans to ignore.

4. To overcome this challenge, it is 5. Make your goals measurable
imperative for business stakeholders (and, Once you go through the effort of
where relevant, family members) to come defining your succession planning goals,
together to discuss their roles, intentions it makes sense to ensure they are being
and plans for the future. This includes adhered to effectively. In addition to
admitting to successors that you don’t plan attaching specific timelines to the
to retire or that you don’t feel they are accomplishment of each goal, consider
ready to assume control. Only by identifying specific actions or behaviours
broaching these challenging topics can you that your stakeholders should adopt to
hope to obtain buy-in for your succession encourage the realization of your stated
plan. Admittedly, this process often can be objectives. Although the metrics you
fraught with the potential for conflict. For adopt will vary depending on the goals
this reason, it is important to adopt a you are trying to achieve, good
conflict resolution process that allows you performance measures should be explicitly
and your stakeholders to work through defined in terms of owner, unit of “Open and honest
the rough spots without damaging long- measure, collection frequency, data communication with all
term relationships. quality, expected value (e.g., targets) and
thresholds. This will allow you to measure
stakeholders, especially early
4. Consider your personal needs actual accomplishments, not just work on in the planning process,
To ensure the success of their corporate performed. is critical to ensuring that the
succession planning goals, owners of
privately held businesses need to align
right succession plan is put
those goals with their personal objectives. in place.”
This includes considering a wide range of
issues related to your exit strategy, your Grant Popowich
Grant Thornton LLP, Canada
desired retirement lifestyle, your pension
planning and your plans with respect to
passing on wealth to your heirs. It also
includes ensuring that you have access to
sufficient funds to support your retirement
without depleting corporate assets. Setting
goals around these issues in advance and
communicating those goals across the
organization can help you avoid significant
hardship following your succession.

5. Asking the right questions • Have you taken steps to reduce estate Simplifying the goal setting process
Although setting goals for succession is a taxes? There is little doubt that goal setting can
highly personal exercise, the process can • Do you have sufficient health and/or be an exercise fraught with tension and
be streamlined by answering some of the life insurance? discomfort. This is especially the case for
following questions: • Do you have a process for resolving privately held business owners who fear
• How long do you want to stay active partnership conflicts? disclosing their true intentions to their
in the business? managers, successors, family members and
• Do you want to remain involved in the Owners of family businesses should other stakeholders. Yet, in this process
business following your formal exit? consider an additional range of above others, honesty is unquestionably
• In how many years do you plan to questions: the best policy. To ease the discomfort,
transfer management and/or • Does the family have an agreed resolve potential conflicts and arrive at a
ownership control? statement of principles (or a family consensus, however, it is critical to work
• Is it clear who your successor(s) will creed) regarding the operation of the with experienced specialists who can help
be? business? you put programs in place to achieve your
• At what age would you like to retire? • Is equity ownership considered a succession planning goals. Grant Thornton
• What annual income will you require birthright? LLP can help. From estate and tax
during retirement? • Do family members working in the planning to transaction advisory and
• How do you plan to finance your business have the necessary skills to wealth management, we can help you
retirement? assume control? build an effective transition strategy. With
• How significant of an asset is the • Do you even want your children (or our global reach, proven track record,
business relative to your overall net other family members) to work in the integrated suite of services and in-depth
worth? business? knowledge of privately held businesses,
• Do you want to contribute to • Do you know your children’s our practitioners truly act as your trusted
charitable or philanthropic causes? aspirations or plans? guides to help you navigate the succession
• How much money do you plan on • Is there an education policy for family planning process.
transferring to your children? members? To find out how our professional
• Do you have predetermined criteria for • Are you prepared to treat your advisers can help you establish and
selecting a business successor? children “fairly” upon succession— articulate your succession planning goals,
• Have you mapped out career paths for even if that doesn’t mean treating them contact your local Grant Thornton LLP
your key executives? equally? succession and estate planning specialist.
• Do you have any shareholders who are
not involved in the management of the
business?
• Is your will up to date?

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