“Good governance is key to long-term success, especially in family-owned business, where stakeholder relationships are often complex,” says Sonny Iqbal, co-leader of Egon Zehnder’s Global Family Business Advisory.
In an interview with Livemint, Iqbal explained why governance and succession planning have often not been a family business’ strongest suit and how businesses can set themselves up for perpetuity if they use good governance as a baseline.
“In order to establish good governance, we must first understand the nuances that define family business dynamics,” says Iqbal. One of the key characteristics of a family entity is what Egon Zehnder defines as “family gravityTM”: the values and priorities that endure across generations. Family gravityTM affects everything from strategic direction to everyday operations, and therefore significantly contributes to what makes each family business unique.
When companies are looking to prepare for smooth leadership transitions, they first must ask themselves a number of questions. First, is the present leadership truly prepared to hand over control? Second, is the outgoing leadership clear on their role once the transition has taken place? Lastly, is there a succession process? The common refrain is: “We didn’t start planning until the chief executive officer (CEO) announced his intention to retire,” says Iqbal.
For good succession planning, Egon Zehnder has identified six best practices that include:
- Clear role specification for the CEO
- Assessment of the CEO on the basis of performance and potential
- Proactive development of internal leadership talent
- External scans of potential CEO candidates from the market
- A robust CEO integration process
- Emergency planning to provide for a sudden or unexpected situation.
Full Story: Sonny Iqbal: “Most family businesses could improve upon succession planning” in Livemint (28 January 2018).