Successful Succession in Family Business

TLDR: In this article, the authors present a framework integrating the factors affectingsuccession and focuses on those factors that can be controlled by core players in a family firm, and use it to indicate directions for positive change.

Abstract: Successful succession of CEOs is a crucial goal for family firms: without the next generations leadership and direct management, the firm cannot survive as a family firm, let alone maintain its character. When owner-managers retire, more than two-thirds of family firms cease or pass to new owners; less than one-third are continued by the next generation (Beckhard and Dyer, 1983; Emshwiller, 1989; Lansberg, 1988). If the owners of the firm want it to remain under family ownership and direction, then succession becomes a crucial strategic issue. For roughly nine out of ten U.S. businesses that are familyowned and run (a higher proportion in the rest of the free world), continuity is an issue. For family firms, successful succession begins many years before an offspring takes over as CEO. It is the lengthiest strategic process for family firms. It is a time when the old must help the young with educational and operational challenges, for potential successors must learn to take advantage of their families' values and special competencies as well as to develop their own expertise. The succession process in family firms involves numerous participants. The behavior and expectations of the CEO parent and employed offspring are affected by other family members, other executives in the firm, suppliers, bankers, and customers (Figure 1). For the succession process to unfold smoothly, key participants must come to feel comfortable with one another. This article presents a framework integrating the factors affectingsuccession and focuses on those factors that can be controlled by core players.1 Keyplayers must also deal effectivelywith uncontrollable environmental factors that influence the firm, but they should 110t pretend to manage them.i Our framework can be used as a checklist to help parents and offspring assess their succession process and identify major conflicts. Use it to indicate directions for positive change.