The bulk of successful family businesses place responsibility for succession planning with the board of directors, according to a new report, with shareholder councils and the chief executive the next most popular options.
Preparing or procrastinating?, released by EY, also found that boards of directors are more likely to prioritise next generation education and preparation.
The report found 88% of the businesses surveyed had clearly identified who was responsible for succession. Forty four per cent had placed this responsibility with the board, 23% had placed it with the shareholder council and 22% with the chief executive.
In emerging economies boards are even more likely to give succession planning responsibility to the board, with 51% stating this was the case, compared to 41% in developed economies.
There was no correlation between board responsibility for succession planning and the requirement for family members to have career experience outside the family business – even though many businesses require this of family members.
The report added that no study has ever linked the requirement for outside work experience with business, family or personal success.
The report added that it was important to consider a succession as a process and said there must be someone responsible for determining:
- succession timing and selection
- developing an emergency succession plan
- preparing the ownership group for succession, as well as the company and its leadership
- inspiring loyalty and commitment internally to avoid deflection when succession takes place
- discussing the exit strategy and timing for the current CEO
- building support for the successor within the family
The study surveyed 525 successful family businesses worldwide, across the US and other developed economies, as well as companies in emerging economies across Asia, Latin America and the Middle East.