Founders and leaders should think of succession planning not as their impending retirement but as an essential passing on of vision and ideals. From the interests of shareholders and the board to maintaining investor faith, succession planning has many advantages.

Every time we hear of a legendary founder or businessman stepping down and making the way for his children to take over, we wait with bated breath. Succession plans mostly cause headlines, impact the stock market, and change the very course of history.

But as many leaders will tell you, these are periods marked by collaboration, foresight, and mentorship. Whether it is the result of unforeseen circumstances or an executed plan, succession roadmaps are no longer an option for us — they have become essential to ensure business endurance and continuity.

Data tells us that 20 per cent of Indian family-led organisations now invest thought and effort into creating roadmaps for succession — this is an encouraging start. In the near future, we should not be surprised if private equity players look into a business’ succession strategies as part of their due diligence.

Past examples show us that succession planning has contributed to business continuity while keeping in mind the founder’s family members and their wealth. It can also be instrumental in decisions about retaining top talent. The plan must consider vital aspects like voting rights and management control, but it should also be flexible to change.

If we think of succession as part of corporate governance, we will be more open to communication among heirs. Research suggests that the resilience of family businesses across geographies is more evident as they continue to lead in job creation and opportunities. Most family businesses have a long-term view, focusing on decades and generations and deploying back into the business what in PE parlance is often called ‘patient capital’.

A plan driven by purpose

In the Industry 4.0 phase, disruptions and innovation exist alongside traditional family business values. As times change, we also hear of next-generation family members opting for unconventional businesses and careers or as non-executive board-level representatives. In such cases, when a professional needs to be appointed and family members continue in strategic roles, a succession roadmap ensures a smooth takeover that protects the organisation.

According to a 2023 E&Y Family Index highlights, the significant contribution of the world’s largest 500 family enterprises to the global economy cannot be ignored. In fact, their contribution is so massive that if they were a national economy, they would be the third largest among the club of 19 “trillion-dollar economies” that exist in the world, after the US and China.

Family businesses are still the norm in our country and the world. Those in the founder’s family and management can be hesitant to discuss the way forward because it concerns the founder’s mortality. At such moments, the captain must step forward and remind them that succession planning is not a matter of the leader’s retirement but rather the vital process of taking the company’s legacy forward.

It is common for leaders both in the Indian and global business community to work well into their senior years; some remain active in executive board-level positions even in their 70s and 80s.

The vital question to ask ourselves is: are we ensuring the company’s best interests by being personally involved or by preparing the next generation to step into our shoes?

Strong leadership is a constantly evolving set of values. Nurturing it is a continuous process, and a leader’s final work years are an opportunity to train the next generation — to handhold them through challenges today so they are better equipped to lead tomorrow.

The writer is the Founder Chairman of AM International, Singapore, and a third generation business leader. Views are personal

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