Total Systems Total System

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1 Total Systems Total System Succession Succession

2 This handbook was designed for Founders and Leaders of Small Medium Enterprises (SME), at any stage of their evolution. We have used our experience and learnings from building an SME over a 22 year period, and integrated with significant additional research, to develop Total System Succession.

3 Where did it all start? The SME we built was a technology company working in the highly cyclical resource industry. In 22 years we went through many boom and bust cycles, and we learnt to design the business to consider all future market conditions, ensuring we maintained our healthy culture. We were driven to seek fair outcomes for all stakeholders. We did not want shareholders taking dividends at the same time that employees were being made redundant. By designing for bust during a boom, we were able to mitigate our risks, retaining our employees and sustaining our culture. We also acknowledged that people face life-changing events. There is no work and then life. There is just life, and part of that life is work. Knowing that the company has your back during challenging times allows great contributors to deal with those events. Building culture as a connected system that prevailed across departments, geography and time greatly enhanced the resilience of our company while aligning with our philosophy.

4 Your organisation as a complex system People often assume that organisations are a complicated system, like an aircraft. That it can be taken apart and put back together and engineered with specific parts. Most Founders and Leaders discover over time that their organisation is more like a bowl of spaghetti. If you tug a strand of spaghetti, you cannot predict what will happen inside the bowl, just like you cannot predict every impact within an organisation. The foundation of any organisation is people, and those people have dynamic aspirations. Perpetually integrating their aspirations with the organisation s is not easy.

5 Designing for Succession Succession planning is a well-known term in the business world, but its definition often has a limited focus. It tends to look at the succession of a person, specific roles or share capital. By viewing your organisation as a complex system, you consider the succession of its many parts with a holistic mindset. How will a change you make in one area affect another, and the organisation as a whole?

6 Succession is not an event in time Succession isn t only triggered by a life-changing event like key people leaving, economic down turn or illness. It is perpetual, and the work is never done. We know life (and the economy) will inevitably throw us curve balls. As your system grows in people and geographical locations, and there are changes in leadership, we have to adapt as the curve balls come. To do this, we need sense-making and feedback systems.

7 What is organisational resilience? Riding the waves of economic cycles, the ever-changing demands of customers, technology advancements and attitudes towards work and career can result in many challenges. The ability to harness your organisation s strengths and address your weaknesses will set you up to bounce back from adversity and move forward as a united front. We believe small to medium-sized enterprises are best equipped to build organisational resilience because they can harness the benefits of tightly held decision rights, scale and loyalty to all stakeholders. The challenge is to innovate capabilities within the organisation that provide the capacity to deal with change. By doing this we can increase the adaptability and agility of our organisations.

8 Introducing Total System Succession So what is our solution to enabling organisational resilience? Total System Succession is the integration of three branches of knowledge. Healthy Culture The pursuit of a healthy culture enables the development of trust and intrinsic motivation. To execute a team project and collaborate effectively there must be trust. To be able to build resilience by handing over accountabilities there must be a high level of trust. By having a healthy culture that can prevail we have a platform to enable the succession of the system. 49% of full-time workers have a great deal of trust in those working above and alongside them HARVARD BUSINESS REVIEW, 2016

9 Systems Thinking Peter Senge defined Systems Thinking as a discipline for seeing wholes and a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static snapshots. As business leaders, we are trying to deliver on our purpose while balancing the aspirations of all our stakeholders. We need to make sense of this system and also be able to manage the feedback from it. Designing for Succession If parts of the system have succession, but others do not and are overlooked, then we believe poor outcomes will result. Founders have an aspiration for the business they have created. If organisations do not develop a culture of succession, the founding owners and leaders will most likely not meet their aspirations. However, if businesses are built on this idea, they will naturally reduce their key people risk, loss of knowledge and their financial risk. The most effective people are those who can hold their vision while remaining commit ted to seeing current reality clearly Only 27% of family businesses have a succession plan for the current leader FBA & KPMG ENTERPRISE 2017/18 FAMILY BUSINESS SURVEY PETER M. SENGE

10 The Total System Succession principles 1 Develop System Leadership Each of these four principles is interconnected and impacts on the complex system that is your organisation Founders of organisations are empirically trained System Leaders. They have had to deal with the spaghetti challenge throughout the building of their organisation. Having to solve whole of organisation challenges is different to the leading of a function within the organisation. By explicitly defining system leadership and then developing capabilities to support it, leaders of tomorrow will be better 4 equipped to deal with complexity and adaptability.

11 2 Develop Culture as a Connected System 3 Enable Sense Making and Feedback Systems How does the culture of an organisation remain strong and not become corrupted? Often there is a foundation culture that was implicit and not well documented or communicated. That culture slowly gets damaged with growth and change, and there can be sub-cultures that are contradictory. With the growth in departments and geography and changes in leadership tenures, this can be compounded. If a culture is nurtured as a connected system across department, geography and time, we believe the organisation can continue to flourish as the Founders had intended. System Leaders want to maximise trust and intrinsic motivation, so they will want to source feedback from all stakeholders, beginning with the employees. To be able to collect valuable data the feedback needs to be connected to a common picture of the organisation. This picture requires the leaders to develop sense-making capabilities so that the feedback is not disordered or chaotic. This also supports transparency which is critical to building trust. This feedback from stakeholders often leads to observations and assertions that form the basis of the organisation s strategy.

12 4 Develop a System Handover Capability A significant challenge in the world today in all spheres of leadership is the abrupt nature of transitions. If we can consciously handover organisation leadership, being mindful of the whole system, we believe resilience can be increased. Handover is vastly different from delegating. Those currently accountable are highly engaged in the handover process and are driven by empathy for their successors. They have been successful if the successors flourish.

13 We have empathy for founders and next generation Our purpose is to help founders and leaders build resilient businesses that harness their strengths and address their weaknesses, enabling them to flourish in times of adversity and move forward as a united front. Ones that continue for many generations to come With an explicit and authentic culture

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