A systemic view of the succession process

Gerald Watts is professor in entrepreneurship at University of Gloucestershire.  John Tucker is head of UK Family Business Services at Grant Thornton.

Succession is widely believed to be the central management issue in family business. The very idea of succession rests on the notion that a set of generic concepts underlies the planning process. In the UK, the issue of succession, and the inevitable link to exit from the business, is in danger of becoming a packaged industry. It is reliant on figures, legal agreements, share value and other administrative issues. Furthermore, it is moving towards becoming a product to be bought and sold.

One unintended consequence of this packaging of family business succession is that it fosters superficiality – a kind of pseudo competence in both professional advisers to the family business and the family business members. It seems perfectly acceptable to use ideas and concepts straight from the business textbook, without an acknowledgement or understanding of the powerful emotional forces at work within the family. It is as if entrepreneurs and their advisers feel safe when dealing with financial or legal matters but lose their perspective when confronted with the associated emotional issues.

Confronting the issues
The alarming number of transitional failures is causing concern within ­government circle for future employment prospects and the protection of existing jobs. In the UK, the issue of succession is inevitably linked to the retirement plans of existing family business owners, with many not having any defined exit strategy.

Historically, succession has been seen as a handover of management and authority that takes place, if not at a specific moment, over a defined period.  

Lloyd Steier, a family business expert at the University of Alberta, has conceptualised succession as a process of transfer of financial, human and social capital. Meanwhile, Tim Habbershon and Mary Williams, the US academics best known for their unified systems theory of family firm performance, have developed the concept of 'familiness' in a bid to embrace the complex variety of resources contributing to the performance of a family firm.

Our main premise is that a richer, more holistic view of the succession process not only reveals much higher levels of complexity but has profound policy and practitioner implications. We need a multi-dimensional understanding of succession and exit, with a clear distinction between the hard dimensions of formal role and authority and the softer, less tangible dimensions embracing elements of human and social capital such as relationships, networks, leadership and commitment.

Given the complexity of the attributes of the incumbent and their emotional attachment to the organisation, it could be argued that complete succession is impossible. Instead, partial succession takes place to different degrees across various dimensions. The duration of the process depends in part on the processes of personal development of the successors.

Ask any group of family business people at seminars to name their number one concern and the answer is invariably succession planning. "I will never inherit this business; dad thinks he's never going to die," laments the son of a first generation family business owner. "It's impossible to work with my brothers and sisters in this business. It is all too painful," adds the eldest sibling of a well-established family business. "My father founded this business and I can't hand it over to my son, he's just not capable of running it" concludes an exasperated second-generation managing director.

Letting go of the reins
The succession issue could be seen as being rooted firmly in the reluctance of the founding family entrepreneur to let go of the reins. Most research concentrates on the psyche of the entrepreneur and in particular issues of immortality and fear. Both obstacles are probably the greatest barriers to a successful succession in a family business. These two linked themes challenge the whole creative process of building and nurturing the business. They often force the question "What have I done this all for?"

The fear is in facing the inevitability of failing powers and accepting the need to hand over the reins, followed closely by the fear that the founder is irreplaceable and that to do so would destroy everything that had been built. And finally the fear that the next generation might be more successful than the first, thus diminishing the standing of the founder. The struggle that then ensues may not be directly related to parent and child, but be a replay of struggles the parent had with his own parents and which now come back into focus. Emotional capital and the 'emotional ledger' sometimes have longer histories than the protagonists realise.

Kets de Vries, a director at the French business school INSEAD, sees succession as fraught. "Given the difficulty many people have in coming to grips with their own mortality, succession is never going to be an easy issue to deal with." He goes on to paraphrase Dylan Thomas. "Many entrepreneurs and family business owner managers clearly do not go gently into that good night."

Ivan Lansberg, a family business expert at the Kellogg School of Management, describes a 'succession conspiracy' whereby individuals within the family business conclude that it may be in everyone's interest to avoid the issues altogether. All of this has profound implications for professionals working with the family business client, as it is highly likely that the reluctance to have an exit plan is linked to believing the founder will never need to exit.

Planning for success
Whether the issue of succession in a family business is approached from a more traditional angle by putting together a well thought out plan; or whether it is approached from the psychological perspective of the interpersonal world of the founder; neither fully explores or explains the complexity of colliding and conflicting systems. Even when the approaches are combined it is often actioned as a cross referral from one profession to another and not viewed as a fully integrated appreciation of the issues.

Succession in a family business only succeeds when it is prepared for as a joint commitment. Many owners and founders are reaching the age when mortality becomes a reality and they have to face the inevitable truth – succession to the next generation of management and their exit from the business is not an option. When a family head believes they are immortal by avoiding a planned succession, he is only being true to the drive which is part of the secret of success but becomes his Achilles heel. It is therefore all the harder to realise that the final consummation is to bequeath.