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Letting Go



There comes a point when the pivotal leader of the business takes a step back, leaving the business to capable people who share the company’s values and understand its mission. What next?

While many New Zealanders choose the path of small business ownership, only a small percent of these will become leaders of growth businesses.

Fewer again will go onto become ‘inspirers’ — people who go on to become ‘kaumatua’ in their respective industries – called upon to serve on boards in different businesses, speak on industry issues, mentor the up-and coming, and generally re-tool their lives to find different passions and interests.

While the ‘inspirers’ may not be involved at the coal-face of a business any more, they are still an invaluable voice on a company’s direction and strategy, and possibly even more importantly, have worked hard to ensure the business is future-proofed. That means a succession plan is in place, and a strategic vision has been set.

Succession planning in any business is crucial – so crucial that ratings agency Moody’s now uses a metric to score companies for how they manage ‘key person risk’.

The agency's advising companies to mitigate the loss of their key people with more widespread knowledge-sharing. Within the company, more emphasis on transparency and ‘team culture’, and an equity ownership by past leaders, can help ease the process of change.

In family businesses, succession planning is more complex again. Several of the entrepreneurs we spoke to detailed stormy intra-family relationships that revolved around issues of control in a business. Their advice was overwhelmingly to have formal agreements, well defined areas of control and responsibility, and a spirit of flexibility to deal with the specific difficulties that can arise with family-owned concerns.

This can be a painful process. One Wellington entrepreneur told us the remarkable story of a family business that was losing its relevance in the marketplace. The children of the founder could see how and where the business needed to change, but any such moves were resisted. In the end, the children had to force their father out of the business.

“He wouldn’t let us make the decisions that we needed to make,” one of his children told us. In the end, my mum said ‘if you don’t let them take over, I’ll leave you’. That was hard.”

“We have learned one really important thing – make sure you have clear shareholding and employment agreements.”

Starting to formalise the process of succession sooner rather than later is important. It starts with a strategy that, as Moody’s says, builds infrastructure, policies and procedures that “focus on proven investment processes that are transparent to investors and in turn, significantly reduce their exposure.”

Finally, for all owners who have grown and nurtured the seed of a business, letting go's a phase of taking stock. This can lead to changing relationships with family and friends as well as employees, as new roles and ambitions are realised. But these changes need not be negative. In fact, many of the leaders we spoke to talked of a renewed sense of excitement around new challenges. For the entrepreneurial leader him or herself, the letting go stage is a time to take a wider perspective on business, view new horizons and take new paths.

Download the full KPMG Enterprise Report to find out more.