Why Succession Planning Fails…… Despite Mostly Good Intentions

We’re all familiar with expressions like “failing to plan is planning to fail”, which might lead one to believe that families experience poor outcomes because they never got around to planning anything.

While there certainly are plenty of those examples one could point to, that view is actually pretty simplistic, because there are in fact many professionals who are kept quite busy working with and for families in these important endeavours.

Yet despite the amount of time and expense that goes into these activities, the results are often sub-optimal.

This week I want to dig into some of the main reasons that continues to be the case.


“We’ve Already Done It – It’s Taken Care of”

For people like me who toil in the world of the “family circle”, where the relationships and human capital are key success factors, a common refrain we get when we speak to people from family enterprises about succession planning is “Oh, we’ve already done it; It’s done!”.

These well-meaning family members truly believe that because they’ve taken some structural and legal steps to address legal ownership and tax issues, that there’s no more work left to be done.

And because that work itself was long, costly, boring, and took them away from other important activities, the last thing they want is to revisit any part of it.

The professional advisors they worked with to get that important stuff done likely also led them to believe that they were now finished with this “unpleasant” work.


Making Plans for People Without Involving Them

So we’ve seen that thinking the work is all done is a common pitfall, but it’s often combined with an ever bigger misstep, which is not having all the right people at the table from the outset.

See: “Continuity Planning: Who’s at the Table?”

I know that this can sound like heresy to some, but when you’re making plans that will directly affect the next generation of your family, and in a very significant way, after all, it’s kind of crazy to me that so much of this work is being done without even so much as a discussion with those whom it will affect the most.

I wish that these situations could be the exceptions, but they are very much the rule.

Having the professional advisors of the parents draw up all the plans and agreements for the rising generation without even asking them what they want (or do not want) or telling them what they can expect, is very much the tail wagging the proverbial dog

But maybe that’s just me.


Not Keeping Everyone Involved as Things Evolve

Another reason that succession planning fails is again a variation of those noted above. This is where some plans were made, long ago, and even though many things have changed and evolved, those old plans remain on the shelf and are deemed “still good enough for now”.

Revisiting what was done way back then sounds like it makes sense, but we’ve got more important things to do now, and we will get to updating those plans when we get around to it. Stop me if you’ve heard this one before.

The business enterprise whose succession you planned for years ago is quite likely a very different business today.

Even more importantly, those heirs to whom you were leaving things when they were teenagers have also (hopefully!) evolved and grown into much more prepared adults, and their abilities, potential roles and expectations have also surely changed.


People & Relationships, Not Structures & Legal Documents

If you’ve noticed, there is a thread that runs through the problems I’ve outlined above, and that’s the fact that structures and legal documents, although important components of succession planning, are insufficient by themselves.

The people and the relationships between them, are a far bigger part of the picture, and always will be.

I know the subject can be delicate and having conversations about it can seem scary, and so most people want to avoid them.

But not having the discussions is even scarier. Making assumptions about your offspring and how they’ll handle what you leave them is fraught with potential traps and situations that can be avoided.

Family leaders who’ve achieved a lot of success expect to leave some sort of legacy, but too often they forget that this involves the people more than the financial wealth.

See Is Your Continuity PAL in Danger?