The Importance of Succession Planning

Succession planning is not an event, but a long and continues process that is all too often overlooked by the founders and owners of enterprises.

As seen in our work with Namibia’s entrepreneurs, especially in family-owned enterprises, when the firm’s founder is incapacitated or dies, an absence of succession planning will often result in a decline, or even the demise, of the business.

Planning for succession is a journey best carried out during all stages of a firm’s life cycle and by doing so, ensures continuity of operations, eliminates risks associated with leadership transition and helps to identify and address competency gaps.

The saying “he who fails to plan is planning to fail” is attributed to Winston Churchill who served as prime minister of the United Kingdom from 1940 to 1945 and again from 1951 to 1955.

Known as one of the world’s longest serving politicians, he served as a member of parliament for 62 years, but what is not so well known is that Churchill was a Noble Prize-winning writer, historian and an accomplished visual artist.

Planning is important for all entities, including the public sector, as it ensures that the leadership baton passes smoothly from an incumbent to a successor.

At a family-owned business, it facilitates a hassle-free leadership transition from one generation to the next.

It is estimated that in the United States, the world’s largest economy, that there are over 10 million family-owned businesses contributing over 50% of that country’s gross domestic product (GDP) and creating 75% of all new jobs.

Family-owned businesses are prevalent and important to economies across the world, including Namibia.

Although the GDP and job creation contribution level of family-owned enterprises in Namibia might not match that of the US, they are significant.

First generation owners of a family business start and grow the enterprise.

When founders are asked who will take over the business, inevitably the entrepreneur’s finger points in the direction of the children.

A follow-up question about the existence of a succession plan to prepare the children for the task ahead then draws a blank stare.

Undoubtedly, not planning for management and ownership succession places the continuity and even the survival of a family-owned enterprise at risk and will result in the demise of the business.

Consequently, the family is torn apart and employees lose their jobs.

There are exceptions, but, unsurprisingly, few businesses in Namibia continue operating beyond, at best, the second generation.

Management guru Tony Balshaw wrote in his book titled ‘Thrive! Making Family Business Work’ that succession planning and implementation is the ultimate challenge and test for family businesses.

This book remains relevant and a recommended read for owners of family-owned businesses in Namibia.

Balshaw made a name for himself in the late 1990s as an expert and respected consultant on family-owned businesses.

A corporate leader who has demonstrated the importance of succession planning for business continuity is Philip Krawitz, who joined the family business as a third-generation family member in 1970.

The firm has consistently grown and now has a presence across southern Africa with its established Cape Union Mart, K-way and Old Khaki brands.

Churchill was right – the consequence of failure to plan holds disastrous consequence.

• Danny Meyer is reachable at danny@smecompete.com