In preparing for succession, families have a lot of issues to consider. Who is at the table? What do we want to achieve? Who will lead in the future? And how do we stay together? Families cannot always choose their ingredients but they can take a holistic approach that avoids getting hung up on any of the components.

The challenge for ultra-wealthy families in thinking about succession is that so many different interdependent and interrelated issues come together. Our recipe for succession integrates the elements in a logical sequence in order to create a coherent plan.

Who is at the table?

The first task is to define the family and its current leadership. This mapping should encompass two levels: the larger family circle who have a stake in the communal agenda and the small circle of current family leaders or ultimate decision makers.

What do we want to achieve?

What are the important businesses, assets and activities controlled by the family? What will endure after succession? In other words, define the family enterprise and set a common agenda.

Life needs purpose. What is the shared vision for the family, business and wealth? Importantly, this vision must be translated into pragmatic goals for the family enterprise with concrete outcomes over the short, medium and long term. In crafting a strategy, the following areas are key:

  • Consumption – What level of cost in running the family enterprise is sustainable?
  • Growth – What growth rate is required to sustain the family enterprise?
  • Resources – Which family (or other) resources can be utilized?
  • Investment – What is the proper mix of business and other investments?
  • Liquidity – How can the family secure key liquidity streams?
  • Support – What is the best organizational structure to support the family enterprise?
  • Implementation – What is the plan for implementing concrete and measurable goals?
  • Review – How will we evaluate performance and establish a formal review cycle?

Who will lead in the future?

The family needs to secure its future leadership and decide who will lead the succeeding generation. This decision and goes to the heart of the issue. Families fixate on the final result, but succession is a process rather than a singular event.

Families need to identify talent, draft individual development plans, consider measures to retain family talent and plan the eventual succession. Formalizing expectations for entry into the family business can help the next generation plan their own development and reduce tension.

How do we stay together?

All of the above is academic if the family is not able to maintain their bond as a family. Without a common agenda, it is just a question of dividing the spoils. A cooperative framework will enable inclusive decision making whether a family is steering a business or overseeing shared financial assets.

The value of family governance is to create just such a framework. Family governance systems create a predictable process, a sense of fairness, and the ground rules for healthy communication and the transparent flow of information, fundamental for family harmony and cohesion.