Is the right successor to be sourced externally or internally in a family business ? That is the debate many a family business deals with. The outcome to such a question will vary depending on a variety of factors, from the cost of an external compared to an internal hire, the downtime, training and whether they would be a right fit.
£25,181 is the average cost to a family business of the downtime period between a family business-critical employee leaving and their new successor (hired or promoted) reaching their optimal performance, according to a study by Oxford Economics.
This means that you’ll very rarely get a smooth transition no matter how perfect your family business succession plan is, nor whether you internally or externally fill the position.
The costs of hiring a new employee varies based on a several factors. Studies have shown that the average cost of hiring a new employee is £5,433 (Oxford Economics). This means that there will always be a cost of bringing in someone fresh to fill the role, whereas the promotion or pivot of an employee may save you some money in the short-term.
The importance of a hire being someone who is the ‘right fit’ for your family business is huge. In a market where people swap job roles more frequently and businesses experience higher levels of churn, it’s a priority that a business makes the right cultural fit. Not only is it vital to hire someone who is the right fit for the business, but they also must be the right fit for the role, which is not always easy. Behavioural, aptitude and personality assessments can help with this as they will give a more in-depth overview of a person than interview questions alone.
Building internal talent to be prepared to fill a family business-critical position can still be expensive and time-consuming. Whether you send them on courses or hire an internal trainer, you’ll still incur some high costs to get them ready for the role.
Talent management programmes ensure that the right quantity and quality of people are in place within companies or organisations for their current and future business requirements and it is the ‘future’ part of that statement where succession planning comes in. Planning for the future with a talent management programme should link in with the business’s strategies, otherwise it’s easy to lose sight of the main goals and destination.
Ultimately every job role will be different and every company’s situation will be varied, so there is no one-way to effectively fill a role. So when it comes to internal versus external, the best piece of advice is to be prepared, and build a solid succession plan for each business-critical role.
( All factual and statistical information presented in this blog has been obtained from an extract of an article from the Family Business Consulting Group, Chicago ) Follow us on our Facebook page and Family Business Office website at www.familybusiness.org.mt
At the Family Business Office we can offer you assistance in dealing with family business succession planning issues through incentives supporting advisory and mediation services. Contact us today on [email protected].