The transfer of a family business is not a smooth process. This collective journey turns the life of both the family and the company upside down, placing the family business leader in an extremely uncomfortable and demanding position.
Professor Miruna Radu-Lefebvre, who is the holder of the Family Entrepreneurship and Society Chair at Audencia, and Raina Homai who is a research analyst at Audencia outline their thoughts on the challenges associated with succession and exiting leaders in a family business.
Giving up one’s power and position is never easy, but in the case of a family business succession, the challenge is even greater. Indeed, the predecessor must accept to start a process of gradual disengagement, while accompanying the successor in their rise in competence as a business leader.
Furthermore, the predecessor must think not only about the transfer of the business itself but also about their own gradual withdrawal, from a realistic and calm perspective.
Any transfer plan should be accompanied by a retirement plan for the predecessor because without it, the disengagement is likely to be longer and more psychologically painful for all the parties involved.
How To Continue To Live Outside Of A Role In The Business
In a 2016 research article, a family business leader asked: “How will I be able to continue to live, to exist, to remain valid, and to have a positive image of myself if I part from my company?”
Many family business leaders ask themselves similar questions as illustrated in a 2019 global survey by STEP Project Global Consortium for family enterprising network, of which the Audencia Family Entrepreneurship & Society Chair is a member.
The survey data showed that most family business leaders wanting to retire after 70 have little or no plans for how they will occupy themselves after they pass on their company.
The proportion of family business leaders worldwide who say they aim to retire after age 70 stand at 40 percent in North America, 60 percent in Europe and Central Asia and 46 percent in Asia. But when asked:
“What are your plans for ‘after’?
Do you have any new plans for retirement after you leave the family business?”
50 percent of executives in North America revealed that they had no plans for retirement, as did 42 percent in Europe and Central Asia.
Of those who do have plans for ‘after’ 37 percent said that they want to spend more time with family and to travel, some are considering semi-retirement, meaning that they still wanted to have some involvement with their company, particularly in Latin America. In Asia and the Middle East, many family business leaders want to be involved in philanthropic activities after the transfer of their business.
Family business leaders emphasise the importance of family business succession in terms of both capital and management. Planning the transfer of the business raises a series of questions and doubts for both the leader and his or her potential successors. The questions that must be answered before the transfer also concern the ‘after transfer’ life, such as what will I do with my life after retirement? What will become of me, what will my role be in the family, and in the community once the transfer is made?
But these fears might be unfounded.
Our research shows that the problem often lies in family business leaders’ inability to anticipate the challenges of business transfer. The earlier they can address these issues, the easier it will be to get through it. But unfortunately, many family business leaders, even in their sixties or seventies, are reluctant or unable to accept that their busiest and most active years are behind them. Most of them fail to confront the reality, preferring to continue to focus on familiar day to day challenges of their companies such as growth or digital transformation.
Facing family business succession is a complex and intense life experience for family business leaders, but it is tremendously important to secure the future of the company. Luckily, we see that things are changing, and nowadays, more and more family business leaders in the age group 40-50 now believe that their children need to be initiated early to the company and entrepreneurial culture.