Succession planning is a crucial element for the sustained success of family firms, as it involves the strategic transfer of leadership and ownership from one generation to the next. The significance of this process lies in its ability to ensure continuity, mitigate potential conflicts, and preserve the family legacy.
By identifying and grooming successors, from both family and non-family pools of talent, family firms can potentially navigate transitions smoothly, maintaining stability and fostering growth. Effective succession planning not only secures the future of the business but also nurtures a sense of responsibility and commitment within the family and the business, aligning values and goals for long-term prosperity.
However, succession planning involves plenty of difficult conversations and it can be a tough process for any family to go through.
We asked our Global Family Business Think Tank Panel if they thought that succession planning becomes more difficult as family firms become more multi-generational.
The Results:
Is Succession More Difficult For Multi-Generational Family Firms?
Yes - 72%
No - 23%
Don't Know - 5%
As our panel highlight, the first transition for many, due to never having been through the process before, is difficult and possibly the hardest. However as a business becomes older, families become larger in size and more disparate, and as the impact of modern living and relationships are taken into consideration, it could be argued that succession may not necessarily become harder, but there is definitely scope for the process to be more complex.
THE THOUGHTS OF OUR ‘THINK TANK’ REPRESENTATIVES:
“A more geographically and demographically spread out family and its business over multiple generations will present more challenges to succession planning. Leadership development, communication, education and relationship building will all become more challenging. That is why generational engagement programmes and processes are so important. They need to be in place sooner rather than later.”
Charlie Leichtweis
Founder & Managing Director, Experts in How LLC
“Succession does become more difficult as families become multi-generational and they are more likely to be multi-continental and spread all over the globe.”
Iain Stirling
Co-Owner, Arbikie Highland Estate Distillery
“Succession does become more difficult as family firms become more multi-generational. There is greater complexity, however, if the foundations of good family governance including succession planning are in place, this provides a bedrock of accepted process and expectations that future generations are aware of and can use at each succession event (although of course it is never an event!)”
Philip Pryor
CEO, Family Business Central Ltd
“I think that multi-generational families have a wider set of individuals with different goals. Thus, they need to be more purposeful in the way that they plan for succession and the way that they involve the next generation to be part of the family business.”
Isabel Botero
Adviser at Generation6 and The Fischer Chair in Family Entrepreneurship at the University of Louisville
“The next gen have more options and are looking for roles with purpose and impact. In contrast, baby boomers have different priorities. Bridging different perspectives and priorities becomes more difficult but when they get it right, it will generate a competitive advantage and great cohesion.”
Peter Englisch
PwC Global Family Business Leader and IMD Executive in Residence
“If more stakeholders and/or stakeholders with different goals are involved in the process, it is more likely that planning for succession will become more challenging.”
Josh Daspit
Associate Professor & Dean Paul R. Gowens Excellence Professor in Business, Texas State University
“Complicated, perhaps, but not more difficult. But we must note that succession planning has nothing demonstrable to do with succession success.”
Joseph Astrachan
Chair, Generation6 Family Enterprise Advisors “
As a business family grows in size and complexity there are more potential candidates for leadership roles. This resulting competition can lead to discord unless there is some way to add objective criteria to the selection process and ensure that the decision-making is handled openly and inclusively.”
Paul Edelman
Family Office Coach, Edelman & Associates
“In my opinion, succession planning is hardest when it goes from the first to the second generation, as the bereavement aspect of the succession is very much in the way.”
Ana Aguirregabiria
Director, Doctorana Solutions 42
“Succession challenges are very contextual, and the level of difficulty largely depends on the characters involved. While multi-generational family businesses are more complex, this does not inevitably mean they are more difficult – in fact as numbers grow there are more options and alternatives for succession. In addition, as the generations multiply, businesses tend to become a little larger and can access economies of scale to support succession more thoroughly and take action over the longer term, which helps in both readying successors and setting appropriate expectations.”
Nick Mayhew
Managing Director, Alembic Strategy
“I think that after the first successful round of succession, it can become easier as the second generation tries not to make some of the mistakes that they had to live through. There will always be challenges though that are new and unique to each round of succession.” Mike Schmitt
President & Founder, The Rubra Group LLC
“As family businesses become more multi-generational, succession becomes different, not necessarily more difficult. Succession from founding to second generation can be incredibly challenging.”
Josh Baron Senior Lecturer, Harvard Business School
Find out more:
These results were part of the 2024 Global Family Business Think Tank Report that was published in Spring 2024. Check out the full findings in the report here
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