The subject of generational succession in family businesses remains a complex undertaking, mainly because of the family factor and the associated interplay of emotional and personality dynamics.
It also remains a key determining factor in the operational longevity of these businesses. In spite of its importance, a substantial ratio of family businesses does not have a succession plan.
Recent research in the UK has shown that “over two thirds of family business owners do not have a succession plan detailing what will happen to the business and who will run and own the business after their death”.
In the GCC the estimate is that, around 50% of family businesses don’t have a succession plan.
4 Key Highlights in Succession Planning
- Developing and implementing a succession plan is not a single event; rather, it is a process that can span several years in the making.
- Some of the succession stages “take place before the successor actually enters the business as a full-time employee.”
- The process requires a significant amount of discussion between the business owners and with other members of the family to explore, align, develop, test, and implement. The key element here is open and frequent communication.
- There are inherent internal resistances that almost always face the development of a succession plan; one scholarly research review has identified around 20 such resistance factors. These would need to be anticipated, discussed and effectively addressed, to everyone’s satisfaction. Effective communication is a key factor.
While the size and level of complexity of a family business play an important role, it is desirable that the planning for succession starts when the second generation in the business family actually start working full time in the business.