“I know I need a succession plan, but where do I start?”
For many business owners in family enterprise, “generational succession planning” can feel like a single, looming transaction administered on the day you hand over the keys, sign the documents, and step aside. Framed this way, it’s no wonder the topic can feel confronting.
A more helpful approach is to recognise that succession doesn’t have to happen at a single moment in time. In reality, it can unfold across four related layers, employment, management, directorship, and ownership.
In first generation, founder-led family enterprises, this approach works best when the founder’s blended role (owner, director, CEO/manager, employee) are separated into distinct roles, each with clear rights and responsibilities. This way the four succession pathways can be planned and implemented effectively.
If each layer is treated as a deliberate pathway and gradual transition, with clear communication, planning and governance, then succession becomes less about an “event” and more about achieving strong business continuity and family harmony.
Employment Succession: Introducing the next generation
Employment succession can happen well before anyone is talking about “taking over the business.” In many cases, the least confronting entry point is simply introducing the next generation to the organisation through low-responsibility roles that let them see the business as a whole.
This might mean holiday work, basic operational support, administrative help, entry-level customer service, or project-based tasks. The point isn’t to “fast track” the family member, it’s to build familiarity, work ethic, and context. Done well, it also helps the younger generation decide whether the business is part of their future career pathway.
Management succession: capability + credibility
Management succession is arguably the most challenging pathway to navigate. Leading people, setting direction, and being accountable for results requires capability, and just as importantly, credibility within the organisation.
For the next generation to step into management roles successfully, they need the right mix of experience, skills, education, and maturity of leadership. They also need to earn respect from non-family employees within the business along with family owners outside of the business. That typically comes from a deliberate development pathway which includes education and training, progressively larger responsibilities, coaching and mentoring, and transparent accountability for outcomes. This may include working outside the family enterprise to improve knowledge, skills, capabilities, and to bring new learnings back into the organisation.
A family member’s management ambition within a family enterprise is likely to form part of their long-term career path. Any promotion should be benchmarked against the best alternatives available both internally, externally, and from family members and non-family members. The other challenge is that the number of management positions available generally decreases with each level of seniority, and there may be difficulty accommodating all family members. The key consideration should always be what is in the best long-term interests of the business.
Directorship succession: continuity, capability, and fresh perspective
Directorship succession is often easier to approach when it’s framed as continuity of the board rather than a single moment of “handing over control.” Boards work best when they are renewed thoughtfully over time, preserving corporate knowledge, while introducing new perspectives.
In practice, this can mean the next generation of family members joining first as board observers (where appropriate), investing in director education (duties, governance and financial literacy), and taking on committee or project-focused responsibilities under the tutelage of experienced directors. It’s also often worth considering independent or non-family directors to strengthen skill gaps and balance family or factional influence. Ideally, boards of family enterprises will operate in line with best practice corporate governance, with decisions made collectively, accurate minutes kept, conflicts declared, and directors acting in the best interests of the company as a whole.
Ownership succession: continuity first, control later
Ownership doesn’t have to move in one dramatic transfer, it can shift gradually over time in a way that aligns with family goals, risk, fairness, tax planning and the cash flow needs of both generations. In fact, the transfer of equity in a staged process can have the benefit of developing engagement, understanding and responsibility in the next generation, and provide time to manage expectations as to future control of the business.
In circumstances where the fear of relinquishing control too early can stymie broader succession planning, bringing in the next generation via minority ownership can lend itself to a more successful transition.
Treating the “transfer of equity” as a separate conversation to the “transfer of control” can reduce surprises and protect relationships, whilst ensuring continuity.
Role clarity: owners, directors, managers and employees
One of the biggest sources of confusion in family enterprises is often that the same person can hold multiple roles in the enterprise across multiple layers. This is particularly common in founder-led businesses. For example, someone might be a majority owner, sole director and CEO all at the same time. Those roles come with different rights, responsibilities, and ways of making decisions. Before meaningful succession can happen across the four layers, and other members included in the structure, this blended leadership role needs to be separated into its individual layers and each layer considered separately.
The practical discipline is to make sure people know when they are taking one hat off and putting another hat on. This also includes understanding the forum in which certain matters are discussed, decisions are made, authority is delegated and accountability tracked.
At the top, shareholders set the ownership agenda, including what return they expect, how much risk they’re comfortable taking, and approving the long-term vision. The shareholders also appoint directors through formal shareholder forums such as the AGM. The board then governs on shareholders’ behalf, setting strategy, overseeing risk and performance, and reporting back to owners.
From there, the relationship between the board and senior management plays out mostly in the boardroom. The board appoints and holds the CEO and senior management accountable to strategy, budget and KPIs, focusing on oversight and governance. Management executes strategic objectives, escalates material issues, and reports results through to the board via board meetings and senior management reports.
Day to day, management and employees work through practical workplace forums, team meetings, 1on1s, performance reviews and policies. This leads to clear priorities being set, performance managed fairly, and issues and feedback raised early.
It’s a straightforward process of delegation down the chain and reporting back up the chain. When delegation of responsibility and reporting expectations are clear, succession discussions become less personal. You’re not debating someone’s favoritism as a family member, you’re clarifying rights, responsibilities, and accountability of each member.
Once roles are clear, compensation should be clear too. A practical rule in family enterprises is to compensate each layer, or role, separately, so people are paid for the role(s) they are performing, regardless of their surname, their seniority in the family, or their shareholding.
In practice, employees and managers are compensated via salary and, where appropriate, incentives tied to performance. Directors are compensated via director fees (reflecting governance responsibilities and time commitment), and shareholders are compensated via dividends and distributions reflecting ownership and risk.
Separating compensation in this way allows different family members to play more active or more passive roles across each layer of the business, without creating resentment. One family member can be a purely passive shareholder and receive dividend distributions accordingly, while another could be a shareholder, director, and CEO, receiving dividends as a shareholder, director fees for sitting on the board, and a market-based salary for the executive role. This also allows for consistency of treatment between family and non-family members within the business.
Making succession feel manageable
In summary, to make succession less confronting, treat it as a series of small, planned moves across the four layers (employment, management, directorship and ownership), rather than a single handover moment. Start by introducing the next generation through employment in low-risk roles, then build management credibility through capability, education and accountability (often including experience outside the family enterprise). In parallel, refresh the board over time and consider bringing in next generation of family members with support and education. Finally, plan ownership transitions gradually and deliberately, being explicit about when control shifts and the responsibilities that come with that change.
Finally, name the different “hats” family members wear (owner, director, manager, employee) and keep decisions and conversations in the right forums. When roles, authority and reporting lines are clear, family members can contribute at different levels (actively or passively) without tension, and the business gains continuity and confidence across generations.
When succession is treated as continuity across these four pathways, the conversation changes. It becomes less about a single confronting handover, and more about creating a stable structure where responsibility, authority and ownership transition is in step with competence, governance, and trust.
By South Australian based Family Business Accredited Advisor
Tim Collin
Family Business and Family Office Advisor
Tim is a Family Business and Family Office Advisor at Catapult Wealth, combining 20 years of unique personal experience in Family Business and Family Wealth to help deliver holistic business and investment solutions for clients.
Tim is passionate about helping families and individuals establish structures and strategies to maximise the preservation of their legacy through good governance, long-term planning, and well-executed strategy.
As a former business owner and experienced investor, Tim has expertise in governance, strategy, investment, and capital allocation.
Tim is an Accredited Family Business Advisor, a Graduate of the Australian Institute of Company Directors, and holds a Diploma of Financial Services (Financial Planning).
