Top 10 principles of family business succession: part one of two
Family business successions are often framed in an unsophisticated way: that there is one business, for which you nominate a successor, and plan the handover, says Gry Osnes, editor of Family Capitalism: Best Practices in Ownership & Leadership.
She supervised international research which found successful family enterprises act very differently. They take a strategic and entrepreneurial approach, exploring new opportunities.
The first five of 10 core disciplines are summarised by Osnes in part one of a two-part feature. The second part will be published on CampdenFB.com next week.
1. From planning to strategising: reframing succession
Rather than see succession as the planning of the handover of a single executive role in one business, successful families use the concept of strategising, to address the respective needs of family and the business; to reflect the complexity of the change, and to open up new options. The way in which they think about the future leadership of the business(s) might change in the light of events or opportunities emerging, or the discovery of new and unexpected family member talents.
2. Unbox the process
If one thinks one can “plan” the succession, this can limit the options to what we call a “monolithic succession paradigm”, with only one company and one top leadership role at stake. This might create some predictability of planning, but reduces adaptability and capacity for new innovation. Some of our research cases used this but other, more entrepreneurial options, would be used in parallel. The most successful families would switch over time, or use concurrently, different approaches.
3. Succession terrains
The family that strategises a succession relates to a complex terrain, not just a process. This terrain consists of the different family members involved, the family unit and its needs. It includes the financial and emotional function of one or more of the businesses they own, and their competitive context and challenges. It comprises the assets resulting from past achievements, which form the springboard for future opportunities, identified through the succession strategizing. A dimension of growing importance is the emergence of a highly competent new generation of qualified daughters and sisters.
4. Authority in social mobility or dynastic succession
Highly effective successions are based on a recognition by the family the process creates authority rather than hands over power. We found two patterns where families did this, as they developed their innovative capacity. Family serial entrepreneurship enables the family to leverage on their business so that the next generation could start new ventures. A family with substantial resources can use a family office as a platform for new ventures. In either case, such an approach can lead to the family owning a cluster of companies.
5. Distributed leadership
An expanded understanding of succession often leads to the creation of a distributed top leadership structure. The family can build complementary leadership teams which may include a non-family leader, sometimes as a Managing Director. Such a non-family leader will often have less strategic discretion, as the family might have active ownership roles, or the board will be stronger in its strategic guidance. Another option is that several family members are in different top leadership roles with shared responsibility for strategy. From our research, we found women often steer the family towards such distributed leadership. In earlier generations, mothers and grandmothers had informal leadership roles, younger women are now filling more formal roles.
Visit CampdenFB.com for points six to 10 next week.
