Lachlan Murdoch has emerged as the likely candidate to take over the family business after yesterday evening’s announcement he will take on the position of non-executive co-chairman of News Corp and 21st Century Fox.
Rupert Murdoch’s younger son James has also been welcomed back into the fold, being appointed co-chief operating officer at 21st Century Fox.
Lachlan has stepped down as non-executive chairman of Ten Network Holdings to take on the new position.
Rupert said in a statement Lachlan’s appointment is a “sign of confidence in the growth potential of News Corp and a recognition of Lachlan’s entrepreneurial leadership”.
“In this elevated role, Lachlan will help us lead News Corp forward as we expand our reach and invest in new technologies and markets around the world,” Rupert said.
It is no surprise Lachlan was Rupert’s choice to eventually head the company. However, Lachlan’s acceptance wasn’t anticipated, as he’s previously said he had no interest in taking over the media empire.
Rupert, now 83, is expected to be positioning himself to hand over the company to his son, but Succession Plus chief executive Craig West told SmartCompany Rupert should have implemented this plan years ago. Here are five key lessons in succession planning.
1. Get the timing right
West says timing is crucial in succession planning.
“We say this all the time to our clients, you can never start preparing too early,” he says.
“The longer you have to communicate the succession plan and embed it in the company in terms of the structure, the better it will be for the employees, the board, the stakeholders and the company.”
West says Rupert should have implemented the plan sooner, and while it’s not too late to start, he’s “minimised the chances of benefit”.
“The best plan would have been if it was announced 10 years ago and then spent that time transitioning Lachlan into the business. In a small business it’s a massive challenge, let alone News Corp,” he says.
“We’ve been in talks with business owners who think they need three weeks to put a succession plan in place, when the new owner wants two years.”
2. Be prepared for challenges
Succession planning is complex and even more difficult in a family business.
West says family businesses face unique challenges because the family dynamic also comes into play.
“Usually there will be family issues to consider which cloud the business issues,” he says.
“If you’re handing over to someone who’s not in the family then it’s effectively a commercial transaction, but when it’s a family member you have to consider things like sibling rivalry and emotional factors which play a part.”
Rupert’s latest move appears to leave daughter Elisabeth out in the cold.
3. Communicate clearly
West says it’s important for business owners executing a succession plan to communicate clearly with all staff and stakeholders.
“Allow enough time for the transition plan to be effective and ensure to communicate clearly about what’s happening and why,” he says.
4. Develop a transition strategy
West says a good transition process will allow the business to prosper under its new leadership, but without a well-considered approach, the business can be left floundering.
“You shouldn’t take a ‘good luck, here you go approach’ to succession planning. There’s two sides to a good transition plan, the technical skills side and the softer side,” he says.
“On the technical skills aspect, you have to spend time getting the person up to speed with areas of the business which aren’t their expertise. Say, for example, you’re handing over to the CFO, they’ve got the financial qualifications, but possibly not the sales and marketing skills.”
West says the softer side of the transition plan involves effectively passing on business relationships and networking capacities to the new owner.
“Rupert Murdoch couldn’t just say, ‘Hi Lachlan, here you go’,” he says.
“These relationships can’t be carried over easily. If the process is too short and not well done, they will continue to ring the old business owner and some clients could be left wondering if their business deal is still in place.”
5. Execute strategy effectively
West says there are two big issues with a poorly executed strategy – the previous owner will unsuccessfully exit and the value of the company will decrease.
“A person will think they’ve exited, but they’ll keep getting calls when there are problems, staff will ring them and key suppliers will contact them with issues. If this is the case the transition hasn’t been effectively managed,” he says.
“There needs to be a clear handover. It’s not as simple as the royal family where when the Queen dies everyone knows what will happen. The Murdochs need to announce what’s happening, when the transition will be complete, and if James and Lachlan will work together or not.”
West says to execute a strategy well, there needs to be clarity throughout the whole company.
“A lack of clarity can lead to a lack of trust and uncertainty about what will be carried forward,” he says.