A few weeks ago, I met a businesswoman who told me about her succession plan. When her father passed away and she and her siblings took over the family business, three resignation letters from long-time employees were waiting on her desk the very next day.
Question: Why do such resignations happen—even in cases of planned succession, where they’re not uncommon? And what can we learn for planned successions to avoid such resignations? That’s what this post is about.
Lesson 1: Understanding the Employee’s Perspective
If we, as business owners, want to prevent employees from leaving the company, we must understand how this subjective decision comes about.
Depending on personality and personal circumstances, personal motivations—such as security, a sense of belonging to a group, status, recognition, independence, personal growth, and so on—serve as drivers for the decision to stay with or leave a business, with varying degrees of importance. Depending on what alternative opportunities currently exist that are expected to better fulfill these motivations, the likelihood of resignation increases.
For example, if personal growth and independence are strong motivations for an employee and a business owner ignores these motivations by failing to meet the employee’s development needs and, through micromanagement, dictates exactly what the employee must do and how, the employee’s motivation to stay with the business will drop dramatically.
Particularly relevant motivations for employees in skilled trades businesses are autonomy and security. Security—especially in the context of business succession—means, above all, having clarity about
o how the business will proceed in the future,
o whether the employee will continue to have a place there with their skills,
o whether their salary or wages can continue to be paid in the future,
o whether the successor is even capable of running the business.
This means that a business succession is associated with a high degree of uncertainty and anxiety among employees. The last point, in particular, should not be underestimated: Can the successor even be trusted to run the business and thus provide a secure outlook for the future?
These fears, uncertainties, and ambiguities can lead employees to look for alternatives that they perceive as more secure.
In the case of a family succession, there is an additional factor to consider: Employees may know the successor from earlier times. Perhaps the child was around the business and left a certain impression on the employees. If the successor has not yet been able to establish themselves as a leader, employees may subconsciously still see that child, which in turn leads to uncertainty about the successor’s competence as an entrepreneur.
If, on the other hand, the successor is already known for their leadership style, this uncertainty does not exist. When employees leave under these circumstances, their assessment is based on their actual experiences. In other words, the successor’s competence, leadership style, and the values they embody may not align with the employee’s expectations.
Learning 2: Measures to Avoid Uncertainty
If uncertainty is a key factor in employee resignations, then it is essential to address it proactively. Unlike the unexpected departure in the opening example, a planned succession allows for a longer process in which communication with employees plays a central role.
The new business owner must provide their future employees with a clear picture of how the business will move forward and what the implications will be for each individual employee’s position and work practices.
This communication must take place early on in the business succession process so that unclear expectations do not turn into rumors and further exacerbate uncertainty. In order to be able to communicate a clear vision at all, the new business owner must first gain clarity on how he envisions the company’s development over the next 5, 10, or 15 years. The vision and strategic cornerstones (market positioning, growth, pricing strategy, digitization of processes, etc.)—along with the resulting implications for work processes and teamwork—must be carefully considered and developed, ideally with support.
Ideally, in addition to presenting their vision to the team, the successor should speak with each employee individually to value their individual perspective and, as a leader, to “meet them where they are.” These one-on-one conversations provide an opportunity to assess each employee’s current status and potential. In other words, the successor gains a clear understanding of which employees are working in the company, along with their motivations, fears, and expectations. These conversations can also reveal what corporate culture has prevailed thus far, as well as what is going well and what is not. Last but not least, they offer the chance to address individual personal fears and concerns. Early, in-depth conversations are therefore a key component of employee retention—especially in the context of business succession.
Call for Participation
Are you either a business owner or a business successor in the skilled trades and would like to talk with me about your successfully completed or ongoing handover/takeover?
We are currently conducting a research project at the FBH on business transfer processes and are looking for interview participants who would like to reflect on their individual development processes and support needs in a conversation. Please feel free to contact us at rolf.rehbold(at)uni-koeln.de.
