I must say that I never get tired or bored reading research on succession planning in family business. Succession is the main challenge for Family businesses for various reasons, including the need to address the question of transfer between generations, this being an adjustment of the mutual function between founder and the next generation of family members (Cabrera-Suárez, et al., 2001; Corbetta & Montemerlo, 1999; Handler, 1994; Royer et al., 2008).

In essence, succession is characterised as a set of actions and events that lead to the transfer of a family member’s leadership, involving the transfer of capital ownership (Breton-Miller, Miller & Steier, 2004; Sharma, Chrisman, Pablo & Chua, 2010). It is a multi-stage process, extending from before nomination of the successor to their growing involvement and effective management of family dynamics, where simultaneously, the predecessor reduces their participation, and various family members may be included in the process (Aronoff, 1998; Cabrera-Suárez, 2005; Cabrera-Suárez et al., 2001; Handler, 1994; Morris et al., 1996).

However, Inter-generational succession is a complex process, and should ideally be initiated, planned and executed during the entrepreneur’s life. Problems arising can include the lack of a successor, their lack of interest, preparation or even the legal system, legislation and taxes related to inheritance (Bjuggren & Sund, 2001; De Massis, et al., 2008; Handler, 1994; Royer et al., 2008). Internal succession can simplify communication processes and build greater trust, with it being important that the chosen element is the most promising member among the set of potential candidates (Royer et al., 2008; Verbeke & Kano, 2012).

One question when considering the succession process is the option for a family member or someone outside, with the issue of nepotism emerging as a serious problem that may not be in potential shareholders’ interest (Lee, Lim & Lim, 2003; Royer et al., 2008). Succession should also consider the perspective of the various stakeholders who interact with the firm at different levels (Cabrera-Suárez et al., 2001). Miller, Steier & Le Breton-Miller, (2003) emphasize that successions can be

• conservative (the new generation continues to depend on the old one),
• oscillating (characterised by indecision, respecting the predecessor’s policies, while wishing to exert influence) and
• rebellious (the new generation rejects the previous legacy, and there is a break with the past).
  

Generally, founders try to extend their legacy and the firm’s continuity, encouraging business behaviour, helping their children to develop their skills, values, confidence and learn to accept responsibility, hoping that family members will reach the highest levels of executive professionalism (Aronoff, 1998; Dyer & Handler, 1994; Miller et al., 2003). The incumbent generation’s wish is to leave the business for the next generation, normally children keen to work with the family (Constantinidis & Nelson, 2020). The study by Lee, et al. (2003) shows that the family prefers to nominate its children to lead the business, even though the children may be less competent than non-family managers, unless the successor is very poorly qualified. The family may not have a successor with the capacities, competence and talent required to manage the firm (Royer, et al., 2008), as academic training (e.g., management and leadership) is essential to promote that knowledge, as well as gaining business experience in companies outside the family (CabreraSuárez et al., 2001; Royer et al., 2008). External directors of Family Business can be useful in training and enabling successors to enter the firm, having a positive influence on this process and being determinants of the firm’s growth, through new visions (Corbetta & Montemerlo, 1999; Sharma et al., 2003), while education in Family Buniness and specific consultancy favours the scenario (Aronoff, 1998).

The successor’s willingness to take over the business and the relationship with the founder are important factors influencing the succession process and its success, above all if successors feel fulfilled and rewarded, but it is important that parents do not pressurize their children to enter the business, especially if they do not have enough qualifications (CabreraSuárez, 2005; Venter et al., 2005). Compared to an external owner, a family member is believed to have a high degree of family loyalty to the family, the firm and the local community, with this benefiting the business greatly, besides the advantage of effective transmission of essential knowledge to obtain a competitive advantage (Bjuggren & Sund,
2001; Royer et al., 2008). Bjuggren & Sund, (2001) conclude that besides inter-family succession, business people can make other decisions regarding the transition of firm ownership, namely, selling
to someone outside the family.

Miller, et al. (2003) point out reasons for successions failing, namely the lack of clarity in succession plans and the successor’s incompetence or lack of preparation. In Family Business, it is common for the matter of succession not to be dealt with in good time, although the lack of formal succession plans does not necessarily mean the absence of planning (Bjuggren & Sund, 2001; Morris et al., 1996).

De Massis, et al. (2008) show factors of failure that concern individuals, relations, context, finance or processes, and firm owners should establish a basis of family governance so as to reduce conflict in family businesses (Tan et al., 2019). Tension and conflict usually destroy Family businesses, which can establish clear guidelines and policies regarding members’ involvement in business, their career progression and remuneration, etc. (Ibrahim et al., 2001).

Family governance mechanisms help in the relational component, stimulating dialogue, transparency and trust, and open communication, with a view to inter-generational orientation between family members (Lambrechts, Voordeckers, Roijakkers, & Vanhaverbeke, 2018; Martin, 2001). Dyer & Singh, (1998) refer to these mechanisms as relationships of trust or reputation. The family governance process is centred on solid parenthood, as this involves the early transmission of family values, attitudes and beliefs (Martin, 2001). Shortcomings in configuring these mechanisms are another obstacle to effective succession.

In a recent research study by Paço, Fernandes, Nave, Alves, Ferreira, João & Raposo called
Succession planning and strategies in Family Business: a multiple case study published in May, 2021, various matters where identified as to whether a succession in family business will be successful or otherwise. The successors’ knowledge of management, together with market experience, were considered as the foundational determinants in ensuring the family business would continue in the future. Other identified determinants where:

• The successor’s willingness and the relationship with the founder.
• The ability of the new generation to adapt to new scenarios.
• The agreement of the old & new generation on a a strategic plan and then to know if the second and third generation will be interested in maintaining the business and the same
  principles and values.
  

In conclusion this research study makes it clear the most critical competencies needed from the next generation for a successful generational transition are management skills and market experience.

As outlined above, research show the great usefulness of the accredited Award in Leading a Family business course offered by EMCS Academy. This course would be an excellent step as part of any preparation for succession planning in a family business. The next cohort for this course will now start on the 1st October, 2024 and there are the last few spaces available. Click HERE to REGISTER. We can also help you gain funding for this course and this course is also offered online for those that cannot attend physically at our training centre (preferred method).