Keeping it in the family: how succession planning can protect the business and future generations
As the old saying goes, there are three certainties in life - change, death and taxes. And let's face it, we don't get up every morning looking forward to the middle one. Nor are you likely to see advertisements for funerals with special offers, a summer sale or promotions. A funeral is a distress purchase.
The reality is that undertaking is a commercial business. In order to provide an incredibly important and professional service at probably the most vulnerable time for families, funeral directors need to make profit to develop their businesses for the long term.
Like every industry, their world is going through significant change. Since 1965 it is no longer a 'sin' in the Catholic church to be cremated. That coupled with the cost of graves means that the number of cremations has increased from 3pc to 40pc in Dublin. The national average is 15pc.
Another significant change is the renewed focus on healthy living. Our lifespan has extended from 70 years of age for men and 74 for women to a current average of 83 and 85. While there are around 30,000 deaths per year in Ireland, there are more than 60,000 births. So apart from the obvious long-term opportunities in the sector, what does all of this mean for the industry?
Fanagans Funeral Homes
Founded in 1819, Fanagans Funeral Homes is family owned and operated. Through acquisitions it now has 11 funeral homes across Dublin. Made up of four families, the Fanagans, Nichols, Carnegies and Kirwans, it is the leading group of funeral directors in Dublin.
I have always been struck by the solemnity and the decorum of funeral directors. They always do what they do with a level of respect that comes across more as a vocation than a business. The industry is dominated by families looking after families. "We are actually in the events management business. This is often the single most important occasion for a family and it is our job to ensure that the family is a priority," said managing director Jody Fanagan.
That family culture is paramount and when recruiting, Fanagans looks for candidates that are 'people-focused' and empathetic. That sense of caring extends to how the Fanagan family approaches the issue of family succession.
While every business faces typical challenges, there is an added dimension in family businesses - how to navigate the complexities of family itself. As family trees expand, some of the family might work in the business while others might not. Emotional issues can dominate, leading to conflict. One issue is the legal framework around ownership. The other is the ongoing management of the business and who is best fit to fulfil key roles at different stages.
Having been around for such a long time, Fanagans is keen to remain as a family business for years to come. Management is, however, very conscious of the alarming statistics about family businesses and have been very proactive in preventing such disharmony.
Fanagans recognises that the company's core skill is as funeral directors, so it brought in experts to fill gaps in its skill set. At a functional level, it recruited experts in finance and HR. For the first time in the family's history, through the Institute of Directors it recruited a non-executive director to the board.
It also engaged Francis Martin, a partner in BDO Northern Ireland, as an expert in family succession. "Succession management is a journey that requires a proactive approach to its planning. Look after the business first and the business will look after the family, as the other way around may lead to bad decisions," said Francis. Here are the practical steps to consider regarding planning for succession management.
1 Build consensus in the family regarding the purpose of the business and clear governance around the relationship the family has with the business. Is the purpose to build and sell it? Or, as with Fanagans, is the role of the current generation to protect it for future generations?
2 What are the core family aspirations and values? How can they be preserved through the generations?
3 What is the best mechanism to support governance of the business (such as a board) and the day-to-day management structure. Who is best fit to fill those roles?
4 What are the core competencies required for each management role? Do these competencies exist in the family? If not, how willing are you to bring in professional managers?
5 How will family matters be discussed and issues resolved (even for those not involved in the running of the business)? Fanagans has formed a family council and constitution as a structured platform to discuss issues. It's also designed to protect the heritage and relationships across the family tree.
The survival rates for first-generation family businesses is 56pc. For second generation, it's 27pc and for third, 11pc. As family trees expand, tensions rise, opinions differ, power gets distributed, obstacles develop and so on. Take the time to plan for succession. You'll protect your business and your family through the generations.
Alan O'Neill - The Change Agent www.alanoneill.biz. Contact Alan if you'd like support with your business. Business advice questions for Alan can be sent to firstname.lastname@example.org
Sunday Indo Business