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Succession Planning Essentials: Navigating the Complex Intersection of Family and Business

By Jill Shipley Published September 29, 2023

Families, on their own, are complex systems. They are lifelong connections typically striving for equality and unconditional love. The nature of a business is quite the opposite. Involvement is not guaranteed and is typically conditional. That’s what makes family-run businesses so challenging. To have success mixing these two systems requires a foundation of trust, transparent communication, and thoughtful, proactive planning. Being in business together, while often ultimately successful, can put a family’s well-being, their relationships, and their wealth at risk. Despite these challenges, there are many unique opportunities and benefits that can unfold with proactive attention to overcoming obstacles.  

Transparent communication

Many of the challenges of succession planning within a family business stem from the difficulty of talking about money or thinking about and planning for death. Business founders start out making all the decisions, and for many years, the success of the business rests on their shoulders alone, often with great sacrifice, blood, sweat, and tears. The thought of retiring or handing over the reins can seem unfathomable. But not having a plan, and not clearly communicating the plan to all stakeholders, is worse. Without clear expectations and qualifications for a future leader, family members can end up destroying relationships fighting for their voice to be heard – just picture the recent hit television show Succession.

To avoid this outcome, it is important that a family business puts a governance framework in place to ensure the right people are in the right place at the right time to make the necessary decisions, and that there is a structure to how these decisions are made.  

When ‘passing the baton’, so to speak, it helps to designate a period when the founder and successor can hold the baton together. This engages the founder in a process of knowledge transfer conducted on their terms; it allows the successor to develop a deeper respect of their mentor’s founding principles; and it enables both to develop a mutual understanding of how the business can evolve.

Just in case planning

Not only should every business have a succession plan, but they should also have a just in case plan. A just in case plan is like insurance – while we hope our house does not burn down, we proactively plan that it might just in case. In the same vein, it is critical to have a plan in place just in case the founder or other key leader and decision maker becomes incapacitated, suffers a rapid health decline as they age, or even just decides to suddenly quit or retire.

An agreement written in good health should outline how to protect the enterprise from a crisis. This could include a clause that leaders over a certain age are subject to annual health assessments by a trained physician, or if capacity is in question, a second opinion is required. If confirmed by a doctor that there are signs of significant declining capacity, the leader agrees in writing to step down and move forward with the predetermined succession plan. While it’s uncomfortable to speak about such things, it’s ultimately best for the business to engage in a ‘fire drill’, in other words, scenario planning and testing for if the worst should happen.

Conflict management

Conflict is normal in families and in business, and can even be healthy, but only if it is done respectfully.

A foundation of trust is required for a family business to be positive both for the family and the enterprise. Trust requires empathy, active listening, positive intent, and, in some cases, a commitment to put the good of the group above the individual. Relationships take work – especially with family members. 

I often encourage families to explore their core and aspirational values. Shared values should be at the heart of how decisions that impact the family and the business are made. An agreed upon shared purpose can also be very helpful in guiding decision making.

Having a conflict management policy in place allows the family to come to a shared agreement on communication – how they will talk about each other publicly, and what is kept confidential. Agreements on protecting reputations can avoid damaging conflict or lawsuits, and having non-family board members mediate these agreements can be helpful to avoid potential power struggles. 

Avoiding entitlement with an employment policy

Another key challenge in family business and succession planning is nepotism – giving high power positions in the company to family members that may not be capable or deserving puts professional competence and reputation at stake.

To this end, an employment policy is a key governance document, ideally introduced before anyone in the next generation begins working for the business. It has many facets, but the basic principle is this: the standard for family employees must be higher than that of a non-family employee – not the opposite.

The employment policy defines the eligibility requirements for family members to work in the business. I recommend it includes a preference for employing someone only if they work outside the business for a few years to gain external experience and validation, and that they are ultimately hired for a position because they are the best candidate for the role.

When working with family businesses, I often like to ask what legacy they truly want to leave behind. What do they want their children and grandchildren, and the community, to say about them after they are gone? How do they want the business to impact the family? How should ownership be transferred? Often families pass down equal ownership to their children regardless of their involvement in the business but decide the decision making and board roles should be held by those working in or involved in the business on a day-to-day basis.

Fairness and equality

It may seem counterintuitive, but treating someone fairly is not always the same as treating someone equally. Parents strive for equality and work to avoid favoritism by treating all children the same. However, this approach can cause problems when it comes to defining roles and leadership in the business, transferring ownership of the business, or defining who should benefit financially from the success.

One family member may be the CEO of the business, while another might be a part-time receptionist. Should they have equal compensation and ownership? How about those family members who have no interest in working in the business at all?

There is no right or wrong way to determine what is fair and what is equal. Every family must decide what is best for their family, legacy, and business. The key is to have open, ongoing conversations, ideally giving family members a voice in how the business impacts them today and in the future.  With generational transfer of ownership and leadership, the objective should be for there to be no surprises and to set reasonable expectations.


At its core, succession planning is about overcoming the initial discomfort of discussing the future, so that family members can communicate openly and honestly about what they want that future to look like – and oftentimes, the future is more aligned than one might think.

Having an understood and agreed upon succession plan for preparing and involving next generation leaders can ease worries when an ownership transition occurs. We have all heard heartbreaking stories of families torn apart due to the quest for wealth and power that can contaminate even the best family relationships. In the absence of clear expectations, family members are left to make up their own rules. 

Prioritizing thoughtful succession planning sets the foundation for assuring the future success of the business and promoting harmony within the family, rather than leaving it to chance.

About the author
  • Jill Shipley

    Jill Shipley is AlTi’s Head of Governance and Education Practice. She helps families and family enterprises navigate the impact of multigenerational wealth. She brings over 20 years’ experience in family systems, preparing rising generations, communicating about wealth, transition planning, governance, and philanthropy.

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