Succession Planning in A Large, Diversified Group of Companies

This diversified family owned farming operation covered dairying, cropping, investments and end users. It was time to pass on the entire business to several members of the next generation. This was a large and complex farming operation which the father had been running successfully for 40 years.

As with most family run businesses, there were some family challenges. There needed to be a period of handover, to ensure the successful short, and long-term operation of each business unit, as well as the group of business units together.

With various members of the younger generation ready to step up, the group of businesses needed the right governance structure. Each business unit was to be the responsibility of individual family members with overall guidance and direction from an overarching body of shareholders. Each business unit needed to operate in its own right and become a self-sustaining, independently viable operation, each underpinning the long-term success of the whole group.

The family aimed to ensure:

  • A gradual and effective succession and handover
  • The autonomous operation of each unit
  • Engagement with interested family members
  • The business is kept as a family business
  • The growth of each business unit

The Solution

With some support from Advisory Boards NZ, the key shareholders and family members learnt about the value and potential role of Advisory Boards.

Coaching sessions showed a pathway to succession planning and full governance. Even the simple process of getting the key family members together, online, allowed them to discuss key issues, the various options and agree on the steps to take.

The Result For The Generations

For the retiring generation the structure enabled them to start letting go of the businesses and for other family members to step in, taking full responsibility. However, they remain engaged in the business and control of the groups at a Governance level. This also enables them to provide ongoing support to each business unit’s CEO.

For the younger generation they can operate their unit autonomously, select their own Advisory Board and make a positive contribution to both their own unit, and the total group. Together they also learn and understand the process, practice, and value of a well defined governance structure.

The Issue of Control

As with most transition projects, the issue of maintaining control is important. In this case, the father was concerned about the CEO of each business unit selecting the ‘wrong’ Advisory Board members. No one wanted to lose control. This is a common concern. But the structure of an Advisory Board provides a very practical and easy solution. The Group Governance Board provides oversight of the whole business and should any issues arise, it can be discussed openly in this forum. The flexibility of the Advisory Board structure for each unit means that in such instances, it is easy to simply change out an Advisory Board member should they not be making the contribution required or expected.