Author name: Sara Pantaleo

Author: Sara Pantaleo

Family businesses are vital to the global economy, accounting for over 60% of all private-sector employment and generating over 50% of global GDP. However, only about 30% of family businesses make it to the third generation, and only 10% to the fourth generation. One of the biggest challenges that family businesses face is succession planning.

Succession planning is identifying and developing the next generation of leaders for a family business. It is essential to start succession planning early, even if you are not planning to retire for many years. This is because it takes time to identify, train, and develop a successor.  Creating a family business that will continue for generations takes more than wishing it to happen. 

When developing a succession plan for a family business, it is vital to consider three key factors:

Family governance

This refers to the structures and processes that are in place to guide the family business. Family governance should be designed to promote transparency, accountability, and fairness. It should also be flexible enough to adapt to changing family dynamics and business conditions.

Family dynamics

Family businesses are often complex systems with various relationships and interests at play. Understanding the family dynamics when developing a succession plan is essential to ensure it is fair and considers all stakeholders’ needs.

Legacy

Many family business owners want to preserve their legacy for future generations. A succession plan can help to ensure that the family business continues to thrive and that the family’s values are upheld.

Here are some tips for developing a successful family business succession plan:

1. Start early – at least 5 to 10 years before succession
   • Succession planning is not a one-time event. It is a continuous process that should start as soon as the business is founded.
   • Develop your successor’s skills
2. Involve the family
   • Succession planning is not just about the business. It is also about the family. It is essential to involve all family members in the succession planning process, even if they are not directly involved in the business.
   • Understand the next generation’s interest – do the children and grandchildren want the gig? 
   • Involve the children early and be a positive role model.
   • Eliminate entitlement – set expectations about how kids will participate in the business and set guidelines about how the business will employ them.

3. Be transparent
   • Succession planning can be a sensitive topic. Being transparent with family members about your goals and expectations is essential.
4. Be flexible
   • Family dynamics and business conditions can change rapidly. Developing a succession plan that is flexible enough to adapt to change is vital.
5. Prepare to let go; do not hold on too tight
   • Let go and let the successor make some mistakes while you are still around, and gently let go
6. Get professional help
   • Succession planning can be a complex process. It is often helpful to get professional help from a qualified advisor.

Family governance and dynamics are essential when developing a family business succession plan. Family governance should be designed to promote transparency, accountability, and fairness. It should also be flexible enough to adapt to changing family dynamics and business conditions.

Legacy is another critical consideration. Many family business owners want to preserve their legacy and see themselves as stewards for future generations. A succession plan can help to ensure that the family business continues to thrive and that the family’s values are upheld.

Challenges and Pitfalls

It is a delicate balance between business interests and family harmony.  A lot of conflicts may arise when the discussions commence, and it is crucial to consider processes on how a conflict will be resolved.  Open and transparent communication within the family is vital, and conducting family meetings and fostering effective discussions will be beneficial.

Here are some specific tips for incorporating family governance, family dynamics, and legacy into your family business succession plan:

1. Develop a family constitution
   • A family constitution is a document that outlines the family’s values and principles, as well as the rules and procedures for governing the family business. It can be a helpful tool for ensuring that the family business is managed fairly and transparently.
2. Create a family council
   • As the family becomes more extensive, you may consider a family council.  A family council is a group of family members responsible for overseeing the family business and ensuring the family’s values and principles are managed. The family council can also play a role in succession planning by identifying and developing the next generation of leaders.
3. Establish a family foundation
   • A family foundation is a non-profit organisation that can be used to support the family’s values and legacy. The family foundation can be used to fund charitable activities, as well as to provide scholarships and other educational opportunities to family members.

By incorporating family governance, family dynamics, and legacy into your family business succession plan, you can increase your business’s and your family’s chances of success.

I worked in a family business for over twenty years and developed my skills through experience.  When I work with family businesses now, I do it from a more objective lens as I am not emotionally invested, which helps families get more clarity and direction.

If you want to discuss this further, contact me for a non-obligation discussion.

Author: Sara Pantaleo

ESG stands for Environmental, Social, and Governance. It’s a set of criteria that businesses and investors use to evaluate an organisation’s impact on society and the environment, as well as its ethical and governance practices. Small businesses need to understand the growing importance of these factors and how they can benefit from incorporating ESG principles into their operations.

Here’s a simple ESG breakdown of each component:

Environmental (E)

This aspect focuses on an organisation’s impact on the environment. It includes factors such as energy efficiency, waste management, carbon emissions, water usage, and pollution.
For a small business, it means considering ways to reduce its environmental footprint, like using energy-efficient appliances, recycling, reducing packaging waste, and sourcing eco-friendly materials.

Social (S)

The social component of ESG looks at how an organisation interacts with its employees, customers, suppliers, and communities.
For a small business, this involves promoting fair labour practices, ensuring a safe and inclusive work environment, fostering positive relationships with customers and suppliers, and engaging in philanthropic activities within the local community.

Governance (G)

Governance refers to the structure and practices that guide an organisation’s decision-making processes, including its leadership, board structure, executive compensation, and transparency.
For a small business, good governance means having clear roles and responsibilities, avoiding conflicts of interest, having transparent financial reporting, and respecting the rights of shareholders and stakeholders.

Why is ESG important for small businesses?

Reputation and Brand Value

Embracing ESG principles can enhance a small business’s reputation and brand value, appealing to socially conscious consumers who prefer to support responsible companies.

Access to Capital and Investors

Many investors, including institutional funds, are increasingly considering ESG factors when making investment decisions. A small business with strong ESG practices may find it easier to attract investment.

Risk Mitigation

Addressing environmental and social risks can reduce potential legal liabilities and financial risks. For instance, adhering to environmental regulations can prevent costly fines.

Employee Attraction and Retention

Organisations that prioritise employee well-being and diversity often attract and retain talent more effectively.

Market Opportunities

Adapting products or services to meet sustainable and ethical demands can open new market opportunities and drive innovation.

Circularity – one of the solutions for ESG

Circularity is an essential concept that can significantly contribute to addressing ESG challenges. It refers to an economic model designed to minimise waste, promote resource efficiency, and ensure products, materials, and resources remain used for as long as possible.

The circular economy aims to break away from the traditional linear model of “take, make, dispose” and instead emphasises the following principles:

Reduce

Circular economy encourages businesses to design products with a focus on longevity, durability and reduced environmental impact. By creating products that last longer and are easier to repair, businesses can reduce the overall consumption of resources and decrease waste generation.

Reuse

The circular economy promotes reusing products and materials whenever possible. This involves refurbishing, repairing, and repurposing items to extend their lifespan and avoid unnecessary disposal.

Recycle

Recycling plays a crucial role in the circular economy by diverting materials from landfills and reintroducing them into the production process to create new products.

Regenerate

This aspect involves designing products and processes that positively impact the environment. It includes practices like using renewable energy sources, regenerating ecosystems and investing in sustainable agriculture.

How Circularity Addresses ESG Challenges

Environmental Impact (E)

Circularity reduces the consumption of raw materials and decreases waste generation, resulting in lower carbon emissions and a reduced ecological footprint.
It encourages the use of renewable resources and the adoption of eco-friendly practices, promoting overall environmental sustainability.

Social Impact (S)

The circular economy fosters local job creation in repair, remanufacturing, and recycling industries, supporting economic development and social well-being.
It can also lead to better working conditions, especially if businesses prioritise fair labour practices and ensure the well-being of their employees.

Governance (G)

Adopting circularity as part of your strategy often involves transparency and cooperation across the supply chain. Businesses can enhance their governance practices by ensuring responsible sourcing and tracking material flows.
Engaging in circular economy initiatives showcases responsible leadership and long-term thinking, which can attract responsible investors and stakeholders.

Resilience and Risk Management

Embracing a circular economy can help businesses diversify their supply chains, reduce exposure to raw material price volatility, and become less dependent on scarce resources. Circular practices can appeal to environmentally conscious consumers, boosting brand loyalty and reputation.
Adopting a circular approach can also drive innovation, as businesses may need to rethink their product design and production methods.

For small businesses, incorporating circularity into their operations can be a cost-effective and practical way to address ESG challenges. By considering the lifecycle of products and materials and implementing measures to reduce waste and resource consumption, small businesses can contribute positively to sustainability and their bottom line. Moreover, adopting circular practices can align a business with the increasing demand for sustainable and responsible products and services in the market.

Incorporating ESG into a small business doesn’t necessarily require a complete overhaul; instead, it can be a gradual process of identifying areas for improvement and taking steps to implement positive changes. Small businesses can align their values with those of customers and investors, creating a more sustainable and responsible business model.

Article by: Sara Pantaleo

When an unforeseen negative event occurs, crisis management is the application of specific strategies by an organisation to prevent further damage.

Every organisation will inevitably face a significant crisis at some point, and plenty of minor obstacles often occur. This means having an effective response strategy for when things go wrong is crucial to ensuring your company remains calm during difficult times or when faced with adversity from outside sources such as natural disasters. Preparing for a crisis is the key to getting through a significant crisis to the other side.

Maintaining stability on both sides: internally between employees while externally towards clients/customers, helps avoid potentially more significant problems than the ones faced during a crisis or even lawsuits down the line.

The company’s CEO is getting hired away by a competitor. The floods shut down your factory for a month. Getting orders from suppliers that are far away during COVID and sometimes impossible to fill. A social media post has been made in poor taste. Any of these things and more can put your company strategy at risk.

A plan before these things arise will help you navigate uncharted waters. Here are our top crisis management tips:

Have a crisis communication plan  

In an emergency, the need for communication is urgent and essential. The best way to handle a crisis is with a practical and well-thought-out communication plan ready to roll out at a moment’s notice when an emergency strikes. When a business is faced with an emergency, it needs to be able not only to respond promptly but also accurately and confidently. The information must be shared in a way that is tailored to each specific audience.

How a business handles an incident can have lasting effects on its public perception. A crisis communication plan will help you navigate communications effectively.

Anticipate the worst        

When planning your crisis management strategy, anticipate the worst; this will have you extra prepared. Outline all the scenarios your company could face. You need to foresee and plan for these potential occurrences because they may happen. Having a more specific sense of them will guide your planning. Make sure to cover a broad range of risks in your planning, such as natural disasters and cyberattacks.

Have a management plan

Having your team part of developing the crisis plan will help them identify potential threats and know what steps they need to take in response and when these responses are triggered. Developing crisis plans is a great way to help your team feel more confident and in control during difficult times. Being prepared will also give you peace of mind, knowing that if something happens, there’s an action plan ready for use.

Article by: Sara Pantaleo

Many companies fail to plan for crisis situations because doing so takes time and effort.

But what happens when you have no idea how your company will react in an emergency? It can be devastating! That’s where scenario planning comes into play – it allows businesses to prepare for scenarios such as natural disasters or technical outages… Assessing potential threats that may occur will help us have a plan in place so that your company is prepared to react fast if a crisis should arrive.

Anticipate threats   

When a crisis strikes, organisations that have planned for threats are better able to react quickly and efficiently.

By identifying what vulnerabilities might exist, we can hopefully prevent any future incidents from happening.

Avoiding threats     

The benefits of crisis management scenario planning are many. It’s not just about being better equipped to respond when incidents happen effectively. Still, it can also help teams identify potential threats before they arise so threats can be eliminated before becoming something that impacts the business.

Improve outcomes

Confidence in your organisation’s ability to handle incidents is critical. Planning for them reduces the chance that you’ll be caught off guard, which means better crisis management solutions and, ultimately, more successful responses and outcomes.