Retaining Key Employees During Family Business Succession: What Advisors Should Assess

Succession Planning Resource Author

Learn how advisors assess whether key managers will support a business succession plan, including role fit, authority, and timing.

An owner assumes a key manager will still be there after the transition, playing the same role he plays today. No one has confirmed it with him. In one family business, the owner plans to retire while the successor still relies on the finance manager's guidance, and the plan assumes that manager will keep handling cash flow and coaching the successor once the owner leaves, but nobody has asked the manager whether he intends to stay in that role. Retaining key employees during business succession starts with testing that assumption before it becomes a problem.

Quick Summary

Retaining key employees during business succession requires understanding which responsibilities the transition depends on and whether managers are willing to fulfill them. Advisors should examine each manager's future role, decision authority, and intended period of involvement. The findings help the owner and advisory team determine what needs resolving before the next transition commitment.

Whose support does retaining key employees during business succession depend on?

The transition depends on any manager whose daily responsibilities or successor coaching the plan assumes will continue after the owner leaves. Their responsibilities might include running part of the business while helping the successor prepare to lead it. Both contributions belong in the assessment.

In the finance-manager example, filling the finance manager's position and replacing the guidance he gives the successor are two separate problems. Hiring a new finance manager solves the first. It does nothing for the second, because the successor still needs someone walking through financial decisions with them. The family needs to understand how the loss affects its proposed transition before deciding how to respond.

Ask the owner and successor what they expect each manager to handle after the owner steps away. Where their answers differ, clarify which responsibilities the plan requires. Give priority to the roles whose loss would force a change in the successor's responsibilities or the owner's departure schedule.

The International Succession Planning Association® (ISPA®) uses the Succession Matrix® to connect Leadership and Management Continuity with Successor Preparation. Applying those areas together helps advisors identify where a manager supports both daily operations and the next leader's development.

ISPA®'s successor readiness assessment provides a closer look at the future leader's capabilities. Use that assessment alongside a clear understanding of the people expected to support them.

Does the manager want the proposed role?

Whether a manager wants the proposed role depends on how much authority they're being asked to hand over, and the only way to find out is to ask them directly rather than assume based on tenure. A manager who helped develop the successor faces a change in the working relationship as that person gains authority. The future role might involve coaching and advising someone the manager previously supervised.

That change deserves a direct conversation with the manager about which responsibilities they expect to keep and how the proposed position fits their career plans. Compare their answers with the family's expectations, particularly where continued coaching is assumed.

An owner may expect a longtime manager to stay based on their history together. To assess that expectation, ask the manager to discuss the proposed responsibilities and reporting relationship, including how long they would be willing to serve. Record what they are prepared to accept and any conditions still unresolved so the owner can see which parts of the plan depend on further agreement.

Compensation belongs in this conversation alongside the conditions affecting performance. In Creating Win-Wins for Non-Family Executives, family-business consultant JoAnne Norton describes the tension when a family retains an underperforming relative while the executive's bonus depends on profitability. Her guidance also addresses the difficulty of receiving conflicting instructions from family members.

These concerns give the advisor something specific to investigate: whether family decisions allow the manager to meet the expectations attached to the job. Establish what the proposed incentive needs to address before discussing its size or terms.

Who will direct the manager's work?

The family needs to agree on who assigns responsibilities and approves decisions during the transition. If the successor gives the manager an assignment while the departing owner gives different instructions, the manager needs a clear way to resolve the conflict.

Trace a decision through the proposed reporting arrangement: who directs the finance manager's work, which decisions belong to the successor, and which still require the owner's approval. Then ask how the family will handle a disagreement without leaving the manager to choose whose direction to follow.

A manager receiving incompatible instructions faces a problem with how the role is defined. Before interpreting hesitation as unwillingness to support the successor, determine whether the manager has the authority to perform the expected work.

This discussion should end with a specific clarification, such as who approves a financial decision or settles competing instructions. The owner and successor then have a decision to make, and the manager has a clearer role to consider.

How long will the business need that support?

The business needs that support until the successor can independently handle what the manager currently covers, which often extends well past the owner's departure date. If the owner retires before the successor has that experience, someone with the manager's knowledge still has to be in the room.

Determine what someone else must be able to handle before the manager reduces their involvement. For the finance manager, that might mean the successor leading a financial review independently or another qualified person taking responsibility for cash flow. Compare those needs with how long the manager intends to stay.

A commitment to remain through the ownership transfer gives the business time to prepare. During that period, the family needs to confirm who will carry the responsibilities afterward and whether they are ready. If a qualified replacement is unavailable, the end of the manager's involvement leaves work uncovered.

Retaining key employees during business succession requires a workable period of involvement. If the manager's intended departure leaves a gap in support, bring it to the owner and successor while they still have time to reconsider the schedule or arrange additional management support.

What needs to be decided before the plan moves forward?

The plan needs three answers before it can move forward: whether the manager accepts the role, who directs their work, and how long they'll stay involved. Each unresolved issue points to the same follow-up: who has the authority to settle it, and what part of the transition depends on the answer.

Return to the opening question: will the finance manager provide the support the plan assumes? Suppose the manager is interested in continuing but needs to know who will direct the work as the owner steps away. The owner and successor must resolve that reporting question before the manager can evaluate the proposed role. Until then, the plan's reliance on the manager remains an assumption.

Use the same approach for other findings:

This gives CPAs, attorneys, financial and wealth advisors, insurance professionals, exit planners, and consultants a defined client decision around which to coordinate their work.

For a broader view, ISPA®'s guide to succession planning areas advisors should assess explains how these issues connect. Retaining key employees during business succession becomes part of deciding whether the family's proposed transition has the management support it requires.

Key Takeaways

• Retaining key employees during business succession starts with identifying whose departure would change the plan.

• A manager's future role deserves a direct discussion, including whether they want to continue as responsibilities and reporting relationships change.

• Conflicting instructions require a decision about authority before the manager is expected to act.

• The period of support must match the business's preparation for the manager's eventual departure.

• Bring the owner a specific issue to resolve, the person responsible for deciding, and the transition commitment affected by the answer.

Evaluate the management support behind your client's plan

Before recommending a retention arrangement, consider management continuity alongside the other issues affecting your client's succession readiness. The Succession Planning Assessment™ (SPA™) provides a step-by-step assessment with an evaluation and action agenda. Review the sample report to evaluate how this approach would support your client conversations.

See how SPA™ flags the management gaps that put a transition at risk: Review the SPA™ sample report

Ready to use SPA™ with clients? Join ISPA® for access to assessment tools and ongoing advisor education.

For help opening a client conversation, download 12 Questions to Create Client Opportunities and explore the owner's motivations before moving into a broader assessment.

FAQs about retaining key employees during business succession

How do advisors identify the key employees a family business succession depends on?

Key employees carry operating responsibilities or successor-development work on which the proposed transition depends. Advisors identify them by examining those contributions with the owner and successor, then evaluating what would change if each person became unavailable. The consequences for timing and continuity establish which roles deserve priority.

What should an advisor assess before recommending a retention incentive?

An advisor evaluating options for retaining key employees during business succession should first clarify the manager's proposed role and willingness to accept it. Examine whether the manager has authority to meet expectations and how family decisions affect rewards. These findings give the relevant specialists a basis for evaluating an appropriate arrangement.

How long should a key manager remain involved during the transition?

The appropriate period depends on the work requiring support and the preparation of the people taking it over. Compare those needs with the manager's intended participation. The owner's retirement or ownership-transfer date alone does not determine when the business will be ready for the manager to reduce involvement.

Categories: : Leadership and Management Continuity, Successor Preparation