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Succession is one of the biggest challenges a family business can face. Many
business owners and families assume that the process will be difficult, risky
conflict-prone, as it is indeed. As a matter of fact, succession is a decisive
moment in the life of any organization. Hence, many family firms fail as a
unsuccessful successions. However, just as many succeed without great
What do these successful transitions in leadership have in common?
It turns out they are never smooth, and they are never without conflict. But the
people involved expect the conflict, view it as natural and do not let it get in
way of things. They also make sure current and future leaders as well as the
business itself are adaptable and receptive to change as much as possible so
they can weather the temporary turbulence.
In succession, instead of fighting against tensions and conflicts, it is far
important to formulate a unifying, positive goal for the family; to strengthen
relationships among family members and family branches; to improve communication
frequency and quality; and to strengthen conflict resilience. Let us take a
look at what each of these tenets entails.
If it can be avoided, a succession should not take place when a company
financial or legal troubles, risks the loss of a major customer, or
any other kind of turmoil. To use an analogy from medicine: no doctor will
a patient a heart transplant if the patient is morbidly obese, because
regardless of how healthy the heart is, the body will likely not be able to
with the stress of the surgery. Hence, it goes without saying that family
businesses ready to hand over the reins need meaningful, future-oriented
strategies, a solid financial base, and optimal processes and structures for
achieving their goals.
A family business must also make important financial investments at the
time, before any transition in leadership takes place. Older, more
CEOs are less likely to invest in the business — mainly because they want to
keep the return on assets high to please family members and other
who have been enjoying a stable dividend and a healthy income. When the
successor takes over and encounters a situation of chronic underinvestment,
makes those long-needed investments, both the company’s expenses and asset
increase. As a result, the return on assets (net income divided by assets)
decline for several years in a row, much to the chagrin of family members
employees who have been enjoying generous dividends over extended periods of
time and may not understand why this investment is now necessary. This can
to conflict and leadership rejection. To avoid this scenario, the family
keep an eye on the investment policy and ensure that necessary investments
happen before the management transfer takes place. As for the shareholders,
might make sense to take a look at the depreciation trend; if it is flat or
decreasing, it is likely that too few investments are being made.
CEOs who have served a long time enjoy close relationships with the
and leadership team and are often less likely to provide honest feedback or
punish misconduct. This is when relationships get in the way of truth.
Groupthink creeps in, and even worse, rules are conveniently bypassed in
deference to relationships. This is a considerable problem, particularly
comes to quality assurance.
A shakeup at the top might cause some longtime employees and family members
leave, and while that is uncomfortable it is not always a bad thing. Changes
good, because employees – and the management team in particular – must share
vision of the new leader. This is particularly the case with CFOs, who often
feel so strongly connected with the departing leaders that they may decide
continue to report to them even after they have left the organization. This
damages the trust not only between the CFO and new CEO, but also between the
CEO and the predecessor. In addition, most CFOs have been reporting the same
numbers for years or decades, based on their predecessor's specifications,
is usually quite difficult to introduce a new way of thinking or a change in
orientation. Ideally, the successor should consider appointing his or her
CFO. Lastly, it makes sense to make changes in the top management team
the successor takes over, so the new management team is already in place at
time of the succession. This final step may entail many changes and
However, the more turbulence one can anticipate, the better.
Get Help. Families usually do not become more successful or robust on
their own, without the use of time or money. I recommend organizing family
events or creating a committee dedicated to strengthening family cohesion
(Pieper & Astrachan, 2008). And if one feels that their family has very
cohesion, I suggest seeking professional support to help this process along.
Families with no common vision, or families that weight individual goals
to (or more important) than shared goals, will likely find it rather
to find a common denominator in the succession process.
Communicate often. Family members who do not talk to one another
regularly have no independent relationship, and therefore cannot build up
trust, which greatly simplifies the decision-making process. Remember that
conflict is a natural accompaniment of change. Therefore, do not demonize
conflicts - they are what they are. It helps to understand existing family
dynamics to strengthen the group’s ability to deal with conflict (Astrachan,
Develop younger relatives. If parents want their children to be
and responsible owners, then it is their job to teach them, and give them
appropriate tools. Parents must also give children the opportunity to make
mistakes and introduce (and follow through with!) age-appropriate
(Astrachan & Pieper, 2011).
Have a Fair Process. Decisions are more effective and individuals
more compliant if those involved feel represented, involved and informed.
Interestingly, this is also the case when individuals are not necessarily
agreeing with the final outcome. Families need to make sure that they live
the stakeholders’ procedural expectations - not only during recruitment but
during the periodic evaluation of the successor (Eddleston & Kellermann,
van der Heyden, Blondel, & Carlock., 2005).
Embrace fear. It’s tempting to attempt to control emotional issues
technical, structural solutions. Instead, we need to honestly confront the
and uncertainties we have about the succession process, and understand which
our decisions are driven by fear and caution rather than confidence and
Possible fears include doubts about one’s own ability or doubts about the
ability of the next generation; fear of what the next phase of life will
or fear of not meeting the expectations of the family. Once we know what we
afraid of, we will be better able to objectively evaluate our decisions and
better decisions that are not based on uncertainty, but on confidence. To
with an entrepreneur’s own words: “You need to become comfortable with being
uncomfortable.” (Misner, 2018).
Conflict has always existed, and it will always exist; it is an essential
byproduct of any group interaction, and every change process. Families need
make it the task of the shareholder group to define a unifying common goal,
make sure that family members feel involved in decision processes, and above
all, to improve their communication dynamics and strengthen the group’s
to deal with conflicts. Developing these skills is the greatest gift
can give to future generations.
The article originally published in
Successful Successions are Never Smooth - Family Business
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Dr. Claudia Binz Astrachan, is a researcher and lecturer at Lucerne University of
Sciences and Arts (HSLU). In her role as the head of the Family & Business program she
working closely with Swiss family businesses for the last decade. In addition to her
HSLU, she acts as the head of the governance practice at Keyt Consulting, a US-based
business consulting company. She is a former chair of the Special Interest Group ‘Family
Business Research’ at the European Academy of Management (EURAM), and a member of the
board of Women in Family Business (WIFB). Her scientific contributions have been
several peer-reviewed journals, and she has (co-) authored various practice-oriented
and research reports for the family business community (i.e., on family business
longevity, shared leadership).