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Merit or Inherit: How to Approach Succession in a Family Business

Both have risks. Here’s how to strike the right balance.

One of the most critical questions facing family businesses is how to treat the next generation. They are clearly different from other employees, as current or potential owners of the company, whose wealth and reputation are on the line. On the flip side, most parents rightfully worry that providing too many unearned advantages undermines not only the next generation’s work ethic, but the soul of the company. In answering this question, families often default to one extreme or another: giving the next generation special treatment that doesn’t hold them accountable to the same standards as other employees (the “inherit model”) or requiring them to earn everything they get (the “merit model”). This article describes a path that blends elements of both, and which is far more likely to set family members up to succeed.

“Some people are born on third base and go through life thinking they hit a triple.” This quote, often attributed to NFL football coach Barry Switzer, perfectly captures what many people think about family businesses. Family members are given jobs, promotions, and salaries that they would never have achieved without their name being on the front door. As one non-family executive put it, “He’s the COO of the company — the child of the owner.”

• JB Josh Baron is a co-founder and partner of BanyanGlobal Family Business Advisors and a Visiting Lecturer in Executive Education at Harvard Business School. He is a co-author of The Harvard Business Review Family Business Handbook (Harvard Business Review Press, 2021).

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Balancing Succession In Family Businesses: Merit Or Inherit Approach

• September 20, 2023
• Accountability , Business Strategy & Innovation , Family business , Leadership , Motivation , Perception , Strategic planning , Succession planning , Workplace

Succession planning plays a crucial role in family businesses, as it facilitates a smooth transition of leadership, preserves the family legacy and wealth, and reduces conflicts and power struggles. However, selecting the appropriate approach to succession is a complex task. The inherit model, which grants special privileges to family members, can result in a lack of accountability, erosion of work ethic, and resentment from non-family employees. Conversely, the merit model, which holds family members to the same standards as other employees, promotes fairness and equality but may face difficulties in retaining non-family talent. Therefore, a balanced approach that combines elements of both models is recommended. This approach acknowledges the unique position of family members, establishes clear expectations and performance metrics, provides development opportunities, and ensures a fair balance between merit and family ties in terms of rewards. By adopting a balanced approach, family businesses can motivate family members, uphold company values, attract non-family talent, enhance reputation, and strengthen family cohesion. Strategies for implementing a balanced succession plan include open communication, role definition, governance structure establishment, leadership development investment, and seeking external advice. However, caution must be exercised to avoid potential pitfalls such as relying excessively on unqualified family members and neglecting the concerns of non-family employees. Ultimately, finding the right balance, tailoring the approach to the family’s specific needs, and continuously evaluating and adjusting the succession plan are critical for the long-term success and sustainability of the business.

Table of Contents

Key Takeaways

• Succession planning in family businesses is important for smooth leadership transition, preserving family legacy and wealth, mitigating conflicts, and allowing for long-term strategic planning.
• Treating the next generation in family businesses involves balancing special treatment and accountability, while avoiding erosion of work ethic, threat to company culture, resentment from non-family employees, and risk of nepotism and favoritism.
• The inherit model provides unearned advantages to family members, lacks accountability and performance standards, and can negatively impact the company’s reputation and ability to attract non-family talent.
• The merit model holds family members to the same standards as other employees, promotes a strong work ethic, fairness, and equality, and avoids favoritism and nepotism. Blending the inherit and merit models involves recognizing the unique position of family members, establishing clear expectations and performance metrics, providing development opportunities, and balancing rewards based on merit and family ties.

Importance of Succession Planning

Succession planning in family businesses is crucial as it ensures the smooth transition of leadership, preserves the family legacy and wealth, mitigates potential conflicts and power struggles, allows for long-term strategic planning, and increases the chances of business continuity. However, family businesses face unique challenges in succession planning. These challenges include balancing the needs and expectations of family members, addressing conflicts and power struggles, and ensuring the selection of capable successors. Succession planning strategies for family businesses involve identifying potential successors early on, providing them with appropriate training and development opportunities, and establishing clear criteria and processes for selecting the next leader. Additionally, family businesses may benefit from seeking external advice and expertise to ensure objectivity in the decision-making process. By addressing these challenges and implementing effective succession planning strategies, family businesses can ensure a smooth transition of leadership and long-term sustainability.

Challenges in Treating the Next Generation

Challenges arise when considering the treatment of the next generation in the context of family business dynamics. One of the challenges is the potential erosion of work ethic among the next generation. The special treatment given to family members may create a sense of entitlement and reduce their motivation to work hard and earn their success. This can have a negative impact on the overall work culture and productivity of the company. Additionally, there may be resentment from non-family employees who perceive favoritism and nepotism within the organization. This can lead to a decrease in morale and commitment among non-family employees, affecting their job satisfaction and overall performance. Therefore, it is important for family businesses to address these challenges and find a balance between treating family members fairly and maintaining a productive and inclusive work environment.

The Inherit Model

The Inherit Model in family business dynamics involves providing unearned advantages to family members, which can result in a lack of accountability and performance standards, potential negative impact on the company’s reputation, difficulty in attracting and retaining non-family talent, and an increased likelihood of an entitlement mindset.

• Unearned advantages: Family members may receive preferential treatment and benefits without having to demonstrate the same level of competence or achievement as non-family employees.
• Lack of accountability and performance standards: When family members are given special treatment, they may not be held to the same standards as other employees, leading to a lack of accountability and potential underperformance.
• Negative impact on reputation: The perception of nepotism and favoritism can damage a company’s reputation, making it more challenging to attract and retain external talent and stakeholders.
• Difficulty in attracting and retaining non-family talent: Non-family employees may feel discouraged or resentful when they perceive that family members are receiving preferential treatment, leading to difficulties in attracting and retaining talent from outside the family.
• Increased likelihood of an entitlement mindset: By receiving unearned advantages, family members may develop an entitlement mindset, expecting privileges and benefits without having to earn them based on merit.

The Merit Model

A key aspect of the alternative model in family business dynamics involves holding family members to the same standards as other employees, promoting fairness and equality in the workplace, and fostering a culture of meritocracy. The merit model emphasizes the importance of treating family members as employees and not providing them with unearned advantages. By holding family members to the same standards as other employees, it promotes fairness and equality in the workplace. This approach encourages a strong work ethic and a sense of achievement among family members. By fostering a culture of meritocracy, it avoids perceptions of favoritism or nepotism and ensures transparency and fairness in decision-making. This model also helps in attracting and retaining non-family talent by establishing a level playing field for all employees.

Blending Inherit and Merit Models

Blending the principles of inheritance and meritocracy in family business succession planning involves recognizing the unique position of family members and establishing clear expectations and performance metrics. This approach aims to strike a balance between providing opportunities based on family ties and rewarding individuals based on their merit and performance. To effectively blend these models, family businesses can consider the following strategies:

Performance evaluation: Implement a fair and transparent performance evaluation system that holds family members accountable for their contributions to the business. This ensures that promotions and rewards are based on merit rather than solely on family ties.

Developmental opportunities: Provide development opportunities such as mentorship programs, training, and access to external networks. This allows family members to enhance their skills and competencies, ensuring that they are well-prepared to contribute to the business based on their own merit.

Balancing rewards: Establish a system that balances rewards based on both merit and family ties. This can involve linking compensation and benefits to performance outcomes, while also considering the long-term sustainability and well-being of the family.

Ensuring fairness: Maintain transparency and fairness in decision-making processes related to succession planning. This helps to address concerns of favoritism or nepotism, and fosters a culture of meritocracy within the family business.

Benefits of a Balanced Approach

Implementing a balanced approach in family business succession planning offers several benefits. Firstly, it motivates family members to earn their success by holding them to the same standards as non-family employees. This fosters a strong work ethic and a sense of achievement, ensuring that family members are driven to contribute to the success of the business. Secondly, a balanced approach preserves company values and culture. By maintaining a focus on merit and performance, the business can uphold its core principles and traditions. Furthermore, this approach attracts and retains non-family talent, as it demonstrates a commitment to fairness and equality in the workplace. This contributes to enhancing the reputation and credibility of the business, as it is seen as a professional and merit-based organization. Finally, a balanced approach strengthens family cohesion and harmony by minimizing the risk of favoritism and nepotism, promoting transparency and fairness in decision-making processes.

Strategies for Implementing a Balanced Succession Plan

Engaging in open and honest communication is a crucial strategy for the successful implementation of a balanced succession plan in family businesses. To evoke an emotional response in the audience, consider the following sub-lists:

Engaging stakeholders:

• Involving family members in the decision-making process fosters a sense of ownership and commitment.
• Seeking input from key employees and external advisors helps gain diverse perspectives and expertise.
• Regularly communicating the succession plan’s progress and milestones creates transparency and builds trust.

Evaluating performance metrics:

• Establishing clear performance metrics for family members ensures accountability and merit-based advancement.
• Regularly reviewing and assessing performance against these metrics allows for continuous improvement and development.
• Recognizing and rewarding achievements based on objective performance measures reinforces a culture of fairness and equality.

Case Studies: Successful Family Business Succession

The implementation of a balanced succession plan in family businesses requires careful consideration and strategic decision-making. Examining case studies of successful family business successions can provide valuable insights and lessons learned for achieving long-term sustainability. These case studies highlight the strategies and approaches implemented by companies to ensure a smooth transition of leadership and preserve family dynamics. By analyzing these examples, valuable lessons can be gleaned regarding the importance of open and honest communication, the establishment of clear roles and responsibilities, and the necessity of professional management practices. Successful family business successions demonstrate the positive outcomes that can be achieved when a balanced approach is taken, including enhanced reputation and credibility, the ability to attract and retain non-family talent, and the strengthening of family cohesion and harmony. These case studies serve as a guide for family businesses seeking to navigate the complexities of succession planning while ensuring the long-term success and sustainability of their ventures.

Potential Pitfalls to Avoid

Potential pitfalls to avoid in the implementation of a balanced succession plan in family businesses include over reliance on unqualified family members, neglecting conflicts and power struggles, lacking transparency in decision-making, disregarding non-family employees’ concerns and contributions, and underestimating the importance of professional management practices. One potential pitfall is over reliance on family members without proper qualifications. This can lead to a lack of expertise and competency in key positions, which may hinder the growth and success of the business. Additionally, ignoring non-family employees’ concerns can create a sense of resentment and disengagement among the workforce. It is important to address conflicts and power struggles within the family and the organization to maintain a harmonious and productive work environment. Transparency in decision-making is crucial to build trust and ensure fairness. Lastly, underestimating the importance of professional management practices can hinder the long-term success and sustainability of the business.

Finding the Right Balance

One key aspect to consider in achieving a balanced succession plan for family businesses is finding the optimal equilibrium between the qualifications and capabilities of family members and the need for professional management practices. This requires a holistic evaluation of the succession plan to ensure long-term sustainability. Succession plan evaluation involves assessing the qualifications, skills, and experience of family members to determine their suitability for leadership positions. It also involves considering the need for professional management practices, such as hiring external talent or implementing governance structures. Long-term sustainability assessment involves evaluating the potential impact of the succession plan on the business’s ability to adapt to changing market conditions and maintain its competitive advantage. By finding the right balance between family qualifications and professional management practices, family businesses can ensure a smooth transition of leadership while maintaining long-term sustainability.

As we continue to explore the topic of balancing succession in family businesses, the focus now shifts to managing family dynamics and ensuring fairness and equality within the organization. This is a crucial aspect of succession planning as it helps to maintain harmony within the family while also promoting a level playing field for all employees.

Key considerations in managing family dynamics and ensuring fairness and equality include:

• Establishing clear communication channels to address conflicts and concerns
• Implementing fair and transparent decision-making processes
• Providing equal opportunities for professional development and advancement
• Creating a culture of respect and inclusivity

Frequently Asked Questions

How can a balanced succession approach benefit both family members and non-family employees in a family business.

A balanced succession approach in a family business benefits both family members and non-family employees by promoting fairness, motivating family members to earn their success, attracting and retaining talent, enhancing reputation, and preserving company values and culture.

What are some potential challenges that may arise when implementing a balanced succession plan in a family business?

Some potential challenges that may arise when implementing a balanced succession plan in a family business include conflicts and power struggles, lack of transparency in decision-making, neglecting non-family employees’ concerns, and ignoring professional management practices.

Can you provide examples of successful family businesses that have effectively blended the inherit and merit models of succession?

Examples of successful family businesses that have effectively blended the inherit and merit models of succession include Ford Motor Company and Walmart. This approach benefits by motivating family members to earn their success while preserving company values and attracting non-family talent.

How can open and honest communication help facilitate a smooth transition of leadership in a family business?

Open and honest communication plays a crucial role in facilitating a smooth transition of leadership in a family business. It helps build trust, align expectations, and address any concerns or conflicts, ensuring a more seamless and successful succession process.

What are some key factors that should be considered when tailoring a succession plan to the unique needs and dynamics of a family business?

Factors to consider when tailoring a succession plan to the unique needs and dynamics of a family business include understanding the family’s values and culture, identifying suitable successors, addressing conflicts, ensuring transparency, and promoting professional management practices.

Family Business Succession Planning: The Definitive Guide & FAQs

Family business succession planning can be tiring and exhausting. Our definitive guide provides answers to all the questions about succession planning, including when to start, who to involve, and the dangers of getting it wrong.

Succession is an emotional and exhausting time for many family businesses. If handled incorrectly, it can have dire consequences for the reputation and stability of a firm. Statistics bear this out. According to research, roughly 75 percent of all businesses fail to survive past the first generation – and more than 85 percent fail by the third generation.

When succession events take place, the result can go one of two ways: the growth of your family’s business or its slow terminal decline. An ill-prepared plan, or even worse, a non-existent plan, could lead to the decline in value of your family business – and possibly even its collapse.

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There is a huge amount at stake. So, it is important to create a robust plan that can see your business sail smoothly into its next chapter, where it can grow in the careful hands of your successors.

This guide provides an overview of all the key questions that families may ask as they start to think about the succession process – as well as a backgrounder on all the fundamental concepts that underlie a successful succession process.

What is succession planning?

Does a succession event happen all at once, does management and ownership have to be transitioned at the same time, how is succession in a family business different to other businesses, are next generation members part of succession discussions, what is leadership succession planning, do i only need to start thinking about succession planning when i’m ready to retire, are other business families taking succession planning seriously, why is succession planning important, what advisors are usually involved in the succession process, is there any excuse for not preparing for succession amongst business families, why don’t more families start planning early, how can you engage the next generation in the succession process, what should next-generation family members do to ensure smooth transition during succession events, in practical terms, what activities should the next-generation family members be involved in during succession, when should the current generation start to introduce younger members of the family, how early should you start to think about succession planning, how can you ensure that the succession process is staying on track, how can business families avoid the pitfalls of getting succession wrong, how do i ensure we have a strong internal family candidate to take over leadership of the company, how do i pick the right individual to take the business forwards, how do you resolve tensions between next-generation members, after you have decided on the next-generation leader, what needs to be done, how do you ensure you have made the right choice, who is responsible for developing a succession plan who should be involved, how can succession planning help you better articulate your values, what is a family charter, and how can it help with succession, what is the most common mistake when it comes to succession planning, what should you get to paper as part of succession planning, does succession planning only happen at the ceo level, how do succession events impact reputation, how do you control reputation risks during succession, how can you raise the profile of the next generation, is it best to just not say anything to stakeholders at all, what stakeholders should we think about during succession events, can succession events also improve a business’ reputation, can you give me an example of a succession event gone wrong, can you give an example of a smooth succession event, frequently asked questions (faqs).

Succession is the process of handing a business – or a large amount of wealth – down to the next generation. This means not only thinking about the future of business operations but considering the future of management and ownership.

The process can be a daunting and overwhelming task for founders who may find it difficult to hand over control of the day-to-day management of the family business.

No. ‘Succession’ is not simply the moment when the business changes hands – it is the long-term process of slow transition from one generation to the next. There is not a single moment when it happens. It is a gradual process.

No. The handing over of control and management of the business does not necessarily mean the handing over of ownership – both transfers do not have to happen at the same time, and many advisors will recommend separating out those processes. In fact, these two different parts of the succession process could take place years apart.

In most cases, one generation will handover management of the business to the next generation first. Transitioning ownership might not take place until the last member of the current generation passes away.

Venn diagram showing the overlap between family, business, and management. Source: KMPG Family Business Succession

Family businesses are noticeably different to other types of businesses. During succession events, complicated internal family dynamics are often at play – and these can lead to difficult, emotional, and challenging discussions amongst the family.

In many cases, the future of the business is not only a commercial decision but, instead, a deeper discussion about the family’s future itself: will they continue to lead the business? Will the family hire in new professional management? Will they sell the business? These are difficult, sometimes painful, questions that families need to ask when starting to think about succession.

Absolutely. Next-generation engagement is crucial to the success of any business’s succession planning programme. The next-generation members of the family – whether the immediate next generation or the generation below that – are the future of the company, and it’s important that their views about the direction of the business are properly represented in the process.

Younger family members may want to take the business in a different direction, prefer hiring professional management, or simply not feel up to taking the business forward. It’s important that the current generation know this because they start making decisions about the future.

‘Succession planning’ can also mean the process of identifying talent to lead a business in the future – this process applies to all businesses, and not just family businesses. For example, a publicly listed company will often undergo a process of identifying a list of candidates to takeover from an CEO when they step down or retire.

When researching succession planning, it is important for families and family businesses to distinguish between these two types of succession planning – it can be easy to confuse the two, which may lead to misunderstandings when talking about succession planning with partners, advisors, and peers.

Absolutely not. Succession events can take place completely unexpectedly, and it’s important that a family knows what to do in these unfortunate (and last-minute) circumstances. It may be that the current head of the family dies suddenly or, alternatively, that they are otherwise unable to run the business. This will be an exceptionally stressful time for the family, even without the added pressure of having to take difficult decisions around succession immediately.

Additionally, the succession process can take up to 20 years to complete successfully, so the earlier families start planning, the better.

Yes. Succession planning is a central focus of energy and anxiety amongst business families – because getting the process wrong can have long-term damaging impacts on the wealth of the family and the performance of their businesses. Research shows that nearly three in five families (57%) have started to draft a succession plan. On top of that, 67% say that succession planning and inheritance is their biggest business concern.

If the succession process isn’t handled well, it can have a hugely damaging impact on the financial affairs of the family and their businesses. A few of the potential implications:

• Next-generation family members not having the right skills to run the business effectively
• Banks and financial partners losing faith in the future of the business
• Employees not respecting the skills and capacity of the next generation to lead the business
• Lack of clarity amongst the family members about who will lead the business, resulting in interfamily disputes and conflict
• Weaker relationships between next-generation members and important partners, suppliers, and others

Ultimately, if the succession process is not handled in a professional and smooth way, it can result in a very poor outcome for the business. According to results, 70% of families report failure in intergenerational wealth transfers.

A family business could risk collapse without a strong succession plan. Source: PwC.

Business families may want to engage outside experts to help them prepare for the transition of the business to the next generation. These outside experts include:

• Lawyers to put in place structures to transition wealth effectively
• Financial advisors to help mitigate financial risk
• Family business consultants to help the family understand and navigate the risks of succession
• Reputation and public relations experts to help with communicating the succession event effectively
• Wealth managers
• Accountants

Not at all. Firstly, there is countless research to demonstrate the negative impact that a succession event can have on a family, their businesses, and its collective finances. Secondly, it is already known well ahead of time that the current generation will one day step aside and pass down the business – and the family’s collective wealth – to the next generation.

Maybe families are so ‘trapped’ in the day-to-day business that they forget to find the time to devote to succession. For many families, succession is always a topic that dropped to the bottom of the list – many families do not feel a sense of urgency, so it is always left until tomorrow.

On the other hand, many families know that discussions about succession could lead to difficult discussions about the future of the business and, potentially, even conflict. As a result, they would rather avoid these difficult discussions rather than confront – and resolve – them directly.

The family can encourage next-generation engagement through the following activities:

• Conducting family-wide meetings to discuss and decide the future of the business
• Including next-generation members in company Board meetings where succession and the future direction of the business is discussed as an agenda point
• Starting informal discussions about the future of the business around the dining room table
• Ensuring the presence of next-generational members in discussions with non-family members of staff about their own thoughts about the future of the business

The next-generation should build a hands-on, practical, and thorough understanding of all parts of the family business – and meet as many important partners as possible.

This will help tackle two potential risks of the succession process: firstly, the next generation not properly understanding all aspects of the business and how it operates, secondly, not having the strong and important relationships with partners and stakeholders that the current generation does.

In order to build a thorough understanding of the business as well as build strong relationships with partners, next-generational members might want to get involved in the following activities:

• Attend internal business meetings
• Work for short stints (3-6 months) in different departments of the business
• Participate in the preparation of financial documents and Annual Reports
• Attend meetings with important external stakeholders, such as banks, business partners, suppliers, regulators, and others
• Take a leadership position within a particular division
• Work for a short stint in partner business or supplier
• Build experience in another company in the same industry as the family business
• Take a course or degree that aligns with the family business’ industry

The components of successful family business succession planning. Source: KPMG Family Business Succession Planning.

As soon as possible. Founders can sometimes hold back on introducing younger generations to the business for fear they are not ‘old enough’, yet it is truly never too early to introduce them. Familiarity takes a long time to build, so the earlier that this process starts the earlier stakeholders will build confidence and respect for the next generation.

Within family business, it is important to start thinking about your succession plan up to 20 years in advance – this allows for the correct structures to be put in place. This might include taking steps to introduce the next generation of leaders to customers, shareholders, suppliers, and so on.

Regular meetings and ongoing communication are essential. It is sensible to have a quarterly meeting specifically about succession planning. These meetings might have to become more frequent the closer you get to the actual transition.

At each meeting, it is important to put to paper the next steps that need to be taken to further prepare the family for succession, whether that is getting the next-generation more involved, taking on further professional advice, or otherwise.

The family can also review the steps that were agreed in the last meeting to see if progress is being made – and the business and the family are moving in the right direction.

One of the best ways to avoid mistakes is to talk to other business families who have navigated the succession process effectively. On one hand, this might mean taking the time to talk to people in your existing network who have managed this process successfully. On the other hand, it might mean tapping into pre-existing networks for business families – like the IFB or Family Business United – where people share best practice.

Follow a step-by-step process when carrying out your succession plan. Source: Deloitte.

Firstly, it is important to understand exactly what makes the current leader of the business successful – this will usually be as a result of the skills, experience, commanding presence, and relationships that the current management bring to the business.

Now, sit down and thoughtfully answer the following questions about the current leadership:

• In precise terms, what are the current leader’s responsibilities?
• Who does the current leader depend on within the business?
• What previous experiences makes the current leader successful?
• What technical skills are essential to the current leader’s success, i.e., accountancy, pricing, supply-chain, marketing, etc?
• What softer skills are essential to the current leader’s success, i.e., management capacity, communications, etc?
• What specific relationships are essential to the current leader’s success, i.e., banks, partners, advisers, suppliers, etc?

Secondly, put to paper a ‘plan of action’ to ensure that the appropriate next-generation family member who will be taking over the business can develop those same skills, experiences, and networks that made the current leader successful. This plan of action might be a five-year pathway of technical education, experience, and exposure.

For a family business with multiple next-generation family members, this is a very difficult question, but it’s important to go through a fair and balanced process – and communicate the answer clearly across the family as early as possible.

It is not beneficial to any of the next-generation family members or the business itself for there to be an aggressive, hostile battle for the position. This could lead to a toxic work environment, one-upmanship, and other destructive behaviour.

Families should go through an objective and balanced decision-making process – and work hard to ensure that the process is not clouded by emotion. Families should answer the following questions:

• Which family members are genuinely interested in leading the business in the future?
• Which family members have existing technical skills?
• Which family members have naturally strong soft skills, and enjoy leadership itself?
• Which family member already commands respect, trust, and confidence of staff members and external partners?

Ask yourself which family members have the genuine interest and skills required to succeed you. Source: Insperity.

When choosing the next-generation leader of the business, there may be a degree of healthy competition between next-generation members. However, it is very easy for this healthy competition to descend into toxic, hostile in-fighting. Resolving these disputes will require emotional sensitivity and effective communication.

Usually, the best way to resolve these disputes is to emphasise that all next-generation members of the family that they each bring their own unique, compelling skillsets to the business – and, ultimately, everyone is pulling in the same direction: to create a growing, sustainable, and successful business that benefits everyone financially.

It is also important to clearly communicate to the next generation why different choices have been made – and show objective criteria for making these decisions.

Communicate the decision sensitively to all next-generation members. At this point, it is also important to stress that there are no guarantees, and the situation may change.

Investment in the professional development of those people who you have selected to lead the company into the future should now be stepped up. This is a good opportunity for your next-generation family members to gain additional knowledge and experience – you may consider connecting them with mentors within (and outside) the business who can boost their skills.

Use any opportunity you might have to ‘trial run’ your plan and reconfirm your choices. This might be having a next-generation member assume some responsibilities of a more senior member who is on leave or taking control of a certain division of the business. The opportunity enables the individual to gain fresh knowledge and experience and, importantly, enables you to assess if that person might need some additional training and support.

The owners and top management of a family business are responsible for developing and implementing a succession plan. It’s essential that the leadership of the business is involved at all stages. The task cannot be outsourced solely to outside advisors or HR – instead, there needs to be buy-in at the very highest levels of the company. Without this commitment, succession will not work effectively.

While strategic decisions will be made at Board level, HR will typically be responsible for carrying out, monitoring, and implementing the process. This will be done with the full involvement of the CEO, other senior leaders, and the Board.

Succession planning also provides families with an important opportunity to articulate the values of the founder (or current generation of leadership), the family, and help to cultivate agreement on these values. These are the values that have enabled the business’ success over recent decades – and the values that the next generation will take forward into the future.

A family charter is a single, collectively agreed document that puts to paper a common understanding of key issues between a family. A family charter may codify the purpose of the family, the family’s values and aims, as well as articulate a very clear plan for the future of the business, including who is expected to take the business forward.

This can be very helpful during succession events because it spells out in crystal clear detail what the future looks like and expectations about the next generation. Getting collective buy-in for the document also mitigates against the risk of dispute, misunderstandings, and strategic drift.

Ultimately, the biggest mistake is the complete absence of a succession plan in the first place. A rushed approach to the succession planning process also has very damaging results. It is like going into a storm without a map, plan, or strategy. You run the serious risk of failure.

Be aware of the common mistakes when creating your family succession plan. Source: TRG Talent.

It’s important not to approach the succession planning process informally. It’s better to have a proper formal plan to paper, which will enable you to see problems, challenges, and opportunities.

Your succession plan should align with the strategic goals of your business and should include:

• A plan to ‘skill up’ the next generation of the family
• A plan to introduce the next generation to important stakeholders
• Explicit agreement of what specific roles and responsibilities next-generation family members will take on at the point of succession
• List of actions that will be undertaken in the case of a sudden transition
• A list of professional, non-family members and advisers with the knowledge, capacity and know-how to support the next generation when they take on the business

Absolutely not. A successful succession plan will span across all levels of your company. The current generation of the family may hold leadership and technical roles across the whole business, including marketing, HR, and accounting. There must be a clear plan to replace these people, either with next-generation members of the family – or newly recruited professional individuals.

A bumpy handover of a senior leader to a next-generation family member can severely impact the reputation of your organisation. The current leader of the business – especially if they are a first-generation entrepreneur who founded the company – are often the most recognised representative of the firm by employees, suppliers, banks, and other important stakeholders.

In fact, many important stakeholders might associate the business solely with that individual and believe the success of the company depends on them.

If stakeholders believe the business cannot stand on its own two feet once the first-generation member has stepped aside, you might start to see banks pulling in credit, long-standing loyal employees leaving, and suppliers ending their dealings with the company. This could lead to a collective crisis of confidence in the company – and the start of a vicious downwards cycle.

There are many ways to mitigate against the risk of a succession event leading to a crisis of confidence in the family business. These include:

• Prepare early . It is better to start planning earlier rather than later – sometimes this means beginning the planning process up to 20 years in advance.
• Prepare a crisis plan . In the event of an unexpected death or another crisis, the future and stability of the company can be thrown up in the air without a plan for how this event will be handled. Putting a plan together that includes prepared statements for all stakeholders is one way to get on the front foot.
• Raising the profile of the next generation. Start raising the profile of the next-generation and start lowering the profile of the current generation. As early as possible, start to build familiarity around the next generation of leaders of the firm.

The best way to raise the profile of your next-generation members is to proactively include them in more of your communications, public relations, and stakeholder engagement activity. Some examples that have worked for other families include:

• Including next-generation members in internal employee-focussed newsletters
• Adding a cover letter from a next-gen member to your Annual Report
• Allowing next-gen members to address staff in townhall meetings
• Letting next-gen member deliver investor briefings
• Including next-gen members as spokespeople in press releases
• Ensuring next-gen members are interviewed and seen in relevant trade publication
• Giving next-generation members visibility on the company website

How many families have codified their values. Source: PwC Family Business Survey 2021

Absolutely not. Instinctively, some businesses might assume it is best not to say anything at all when it comes to a succession event. This is the wrong approach.

When companies ‘go silent’, they hope that important stakeholders will just not notice the transition – but they always do. Employees will start asking questions. So, will banks, suppliers, and others. It is best to answer those questions before they arise.

You should take the time to proactively list all the groups of people and individuals who you rely on to make your business a success. These will likely include:

• Banking partners
• Business partners and co-investors
• Local communities
• Policymakers

Absolutely. Succession isn’t all bad news. In fact, succession events are also opportune times to improve the brand and image of the company. Next-generation members of the family will often bring new skills and approaches to a business. For example, they might bring greater understanding of IT, digital, and social media marketing.

During the succession event, there is an opportunity to showcase to important stakeholders that the business is onboarding these important new skills that will help the business continue to grow into the future.

In 2021, the co-founder of cosmetics company Natura Siberica passed away unexpectedly without a clear plan for who was going to takeover the business. Following his death, a hostile, toxic battle broke out between various potential successors, including children from previous marriages and his widow. This led to several significant, high-profile lawsuits between different members of the family.

In August 2021, the media reported that 57 staff members quit and 101 left for a holiday in just 48 hours. This could potentially lead to a wider, broader crisis in confidence in the company – and a downwards vicious cycle that could damage its long-term value.

Usually if a succession event has been handled smoothly, we will not know about it. Instead, the business will have been handled over without attracting any untoward and unnecessary negative attention. Many of the oldest family businesses in the UK have been handed over in such a quiet and smooth way, including Hoare’s Bank, Folkes Holding, Shepherd Neame, Berry Bros & Rudd, Aspall Cyder, and many others.

Further reading

• Deloitte: Family business succession planning
• KPMG: Family Business Succession
• The Family Business Consulting Group: Family Business Succession
• Forbes: How To Make Family Business Succession Successful
• Davis Wright Tremaine: Succession Planning in a Family Business
• HBR: The Key to Successful Succession Planning for Family Businesses

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Succeeding with Succession Planning in Family Businesses

The ten key principles.

March 25, 2015  By  Vikram Bhalla and  Nicolas Kachaner

For many family-owned businesses, succession planning is the proverbial “elephant in the room.” Despite recognizing the importance of selecting and preparing a successor, the leaders of a family business often do not give succession planning the attention it deserves.

In a recent survey by The Boston Consulting Group, family business leaders ranked succession as the second-most-important subject on the their minds, topped only by the closely related issue of achieving alignment among family members on critical topics. Even so, our research found that more than 40 percent of family businesses have not adequately prepared for succession during the past decade.

The consequences of not focusing on succession despite its obvious importance can be profound; a leadership void and the resulting discord can significantly undermine the company’s performance. Indeed, poorly planned successions are among the biggest value-destroying events for family-owned businesses.

BCG’s research sheds light on the extent to which poorly planned successions can harm revenues, market capitalization, and margins. Although our study focused on family-owned businesses in India, the findings offer cautionary insights for companies in any country. We found a 14-percentage-point differential in revenue growth over two years when comparing family businesses that had planned transitions with those that had not. (See the exhibit.)

We also found a 28-percentage-point differential in market capitalization growth between companies that had planned transitions and those that had not. Moreover, unplanned transitions yielded EBITDA margins that after two years were more than 4 percentage points lower than those achieved by companies that successfully planned succession; margins remained below the trend line for the peer group for more than four years after unplanned transitions. Clearly, an enormous amount of value is destroyed by unplanned transitions, with potentially catastrophic consequences for the business.

A Difficult Subject to Discuss and Address Head-On

What lies behind the reluctance of many family-business leaders to openly discuss succession planning and tackle the challenges head-on? Succession planning sits at the intersection of family considerations, which typically involve emotions and feelings, and business considerations, which are typically driven by merit and economics. This juxtaposition of sentimental and financial concerns can make succession an especially complex topic.

Moreover, many incumbent leaders are unwilling to talk about relinquishing the helm, because their personal identity is often tightly linked to the family business itself. A charismatic founder having a strong personality, formidable capabilities, and a long record of managing all aspects of the business often casts a lengthy shadow over younger generations. In such cases, succession can be a nearly taboo subject that is difficult to broach.

Even when succession is high on the leadership agenda, family businesses face significant challenges to getting it right. First, they need to decide whether to select a successor from within or outside the family. Several family members may each aspire to take the reins, and talented nonfamily executives may also be interested in leading the company. Then, if the business designates a young family member as the successor, it must define a plan for how he or she will prepare for the role and gain acceptance as the leader by other family members and executives. Finally, the departing leader must be willing to let the successor emerge from under his or her shadow and take charge as planned.

Succeeding with Succession

Planning for a smooth succession starts with recognizing that it will be one of the most complicated transitions that a family business will experience. The family must also recognize that it is never too early to start discussing succession and that the costs of getting succession wrong will be nothing short of catastrophic for the business. These challenges mean that family members must focus strongly on succession planning, giving it their undivided attention on many occasions. Based on our experience advising family businesses on succession, we have identified ten principles that improve the chances of succeeding with succession.

Start early. Families may hesitate to plan succession because they are uncertain how the interests, choices, and decisions of different family members will play out over years or decades. But succession planning should start as soon as possible despite this uncertainty. Although things may change along the way, leaders can often anticipate the potential scenarios for how the family will evolve. Issues to consider when developing scenarios include the number of children in the next generation and whether those individuals are interested in the family business as a source of full- or part-time employment or purely as an investment. Families should also consider how the scenarios would be affected by marriages or the sudden demise of a family member or potential successor. It is important to plan a succession process and outcome that will work for the different foreseeable scenarios.

Set expectations, philosophy, and values upfront. Although setting expectations, philosophy, and values is central to many family-business issues, we have found that doing so is essential when it comes to succession planning and must be done up front, even if the specific mechanics of succession come later. In our experience, the family businesses that thrive and succeed across generations are those that possess a core philosophy and set of values linked not to wealth creation but to a sense of community and purpose.

Long before decisions will be made about specific potential successors, the family must agree on overarching issues such as whether family unity will take precedence over wealth creation, whether all branches of the family will have an equal ownership right and voice in decisions, and whether decisions will be based purely on merit and the best interests of the business. These guiding principles will provide the framework for more specific decisions.

Understand individual and collective aspirations. Understanding family members’ aspirations, individually and collectively, is critical to defining the right succession process. Leaders of the succession process should meet with family members and discuss their individual aspirations for involvement in the business. For example, does an individual want to work for the business or lead the business, or, alternatively, focus on the family’s philanthropic work? Or does an individual want to chart his or her own course outside of the business? The family’s collective aspirations can emerge from the effort to establish a philosophy and values. Does the family want its business to be the largest company in the industry? Is maintaining the business as a family-owned-and-operated company of paramount importance, or does the family want to relinquish operational responsibility in the coming years? Understanding these aspirations helps in managing expectations and defining priorities in the succession process.

Independently assess what’s right for the business. Although the best interests of the business and the family may seem indistinguishable to some family members, in reality the optimal decisions from the business’s perspective may differ from what family members want for themselves. This distinction makes it essential to consider what is right for the business independent of family preferences when developing a succession plan. It is therefore important to think about succession from a purely business perspective before making any adjustments based on family preferences. This allows leaders to be transparent and deliberate in the trade-offs they may have to make to manage any competing priorities.

Develop the successor’s capabilities broadly. A family business should invest in developing the successor’s capabilities and grooming him or her for leadership. The preparation should occur in phases starting at a young age—even before the successor turns 18.

The challenges of leading a family business are even greater than those faced by leaders of other businesses. In addition to leadership and entrepreneurship, a successor needs to develop values aligned with the family’s aspirations for the business and its role in society—capabilities that constitute stewardship of the company. Given the rapidly increasing complexity of business in the twenty-first century, we often strongly recommend that potential successors gain experience outside the family business in order to broaden their perspective.

Some of the best-managed family businesses have elaborate career-development processes for family members that are the equal of world-class talent-management and capability-building processes.

Define a clear and objective selection process. A company needs to define a selection process to implement its succession model—whether selecting a successor exclusively from the family or considering nonfamily executives as well. The selection process should be based on articulated criteria and delineate clear roles among family governance bodies and business leaders, addressing who will lead the process, propose candidates, and make decisions.

An early start is especially important if several family members are under consideration or the potential exists to divide the business to accommodate leadership aspirations. To obtain an objective perspective on which members of the younger generation have the greatest leadership potential, some families have benefited from the support of external advisors in evaluating talent and running the selection process.

It is important to note that the selection process, while critical, is the sixth point on this list. Points one through five are prerequisites for making the selection process itself more robust and effective.

Find creative ways to balance business needs and family aspirations. Striking the right balance between the business’s needs and family members’ aspirations can be complex. Addressing this complexity often calls for creative approaches—beyond the traditional CEO-and-chairperson model.

For example, the leader of one BCG client split his conglomerate into different companies, each to be led by one of his children; the split occurred without acrimony and in a planned, transparent manner. Beyond helping family members fulfill their aspirations, such a planned split can often greatly enhance value for the business. Another client systematically expanded its business portfolios as the family grew and tapped family members to take over the additions, thus ensuring that several members of the family had a role in the leadership of the businesses.

Stepping into an executive position is not the only way family members can contribute to the business or help the family live its values. As an alternative, family members can serve on the board of directors or take leading roles in the family office or its philanthropic activities.

Build credibility through a phased transition. Successors should build their credibility and authority through well-defined phases of a transition into the leadership role. They can start with a phase of shadowing senior executives to learn about their routines, priorities, and ways of operating. Next, we suggest acting more as a chief operating officer, managing the operations closely but still deferring to the incumbent leaders on strategic decisions. Ultimately, the successor can take over as the CEO and chairperson and drive the family business forward.

It is important to emphasize that the family member who assumes leadership of the business does not necessarily also become the head of the family, with responsibility for vision setting, family governance and alignment, and wealth management. The transition of family leadership can be a distinct process.

Each phase of the transition often takes between two and six months. The transition should be defined by clear milestones and commensurate decision rights. A sudden transition can be disruptive, which is especially harmful if the intent is to maintain continuity in the family business’s direction and strategy.

Ask departing leaders to leave but not disappear. Most leaders bring something distinctive to a family business. Holding onto this distinctiveness in a transition is essential but requires a delicate balance. Although departing leaders should relinquish managerial responsibility for the business, they should remain connected to one or two areas where they bring the truly distinctive value that made the family business successful under their guidance. However, the leaders should be involved in these activities through a formal process, rather than at their own personal preference and discretion. Departing leaders should stay available to guide the new leader if he or she seeks their advice.

To help leaders strike this balance and overcome their reluctance to let go, companies can create a “glide path” plan that sets out how they will turn over control in phases and transition into other activities while the successor assumes control and builds credibility.

Family businesses should also consider the need to adjust aspects of the company’s governance model when the departing leader hands over the reins. Although such adjustments can be made outside the context of succession, they often become particularly relevant after transitions to the second or third generation. A strong leader’s hands-on governance approach is often no longer sustainable for the next generation, creating the need to divide and formalize roles and institutionalize many business processes.

Motivate the best employees and foster their support. Managing the company’s most talented nonfamily executives is especially challenging during the succession process. The company needs to ensure that these executives have opportunities to develop professionally and take on new responsibilities and that morale remains high. Involving executives in the succession process can help to foster their support for the new leader. For example, they can be asked to serve as mentors for the successor or lead special projects relating to the succession. Surrounding the new leader with a strong and supportive senior team is a key ingredient for success, and the departing leader should ensure that such a team is in place.

Assessing the Status of Succession Planning Today

As an initial “health check” to assess the current status of their succession planning, family businesses should consider a number of issues:

• Has the family clearly articulated its values and the principles that will guide its decisions and succession process?
• Has the current leader committed to a fixed retirement date?
• Has the family evaluated the pipeline of leadership talent within its younger generation? Has it looked at potential leaders who come from within the business but not within the family?
• Has the company defined a succession model and determined the timing for selecting a successor so that he or she has a sufficient opportunity to prepare for the leadership role and build credibility before the current leader retires?
• Does the family understand how it will accommodate the aspirations of family members not selected for leadership roles, in order to maintain harmony and avoid discord during the transition to new leadership?

In many cases, family businesses will find that the answers to questions like these indicate the need to devote much more time and attention to succession planning. Most important, the current leader, other family members, and the top management team will need to begin having an open and candid discussion about succession-related issues to enable the business to thrive for generations to come. These discussions are never easy, but they are essential. Getting succession wrong can be an irreversible and often fatal mistake for a family business.

Managing Director & Senior Partner

Mumbai - Nariman Point

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Start » strategy, how to write a family business succession plan.

Whether your family owned business is a Main Street mom-and-pop or a Wall Street powerhouse, a well-written succession plan can be crucial to the future success of both the company and the family.

If you don’t have a succession plan in place, you’re not alone. According to PwC , only 18% of America’s family-owned businesses have a documented strategy for handing over the reins.

Of course, this isn’t just any business we’re talking about. It’s your business, and your family’s. ‘Those without a plan’ is not the group you want to be in. Like so many other important tasks, the hardest thing is getting started. Here are some key steps.

Choose the right business structure

Many small businesses begin life as sole proprietorships or partnerships. If you launched that way, it may be time to take another look at your structure. As The Balance points out, forming a corporation will legally separate you from your business—a key step toward a smooth transfer, even if that transfer turns out to be a sale to a non-family entity.

The right business structure can set your successors up for a reduced tax burden. And, if you desire to remain a sole proprietor, you can still make your wishes for the business known by including them in your estate planning.

[Read: Getting Ready to Launch? How to Choose the Right Business Structure ]

Have a mission statement and a set of core values

You’re not just passing along some office chairs and a customer list. The big idea that launched your business is your why, and it’s what separates your family-owned business from the competition. Knowing you have clearly communicated your vision will help others understand their place in the organization and give you confidence to make the difficult decisions ahead.

According to a report from Deloitte , as time passes, the importance of family values increases, and may be the one thing that binds successive generations together. Stated family values can act as a roadmap for decision making, a magnet for like-minded employees and business partners, and a metric by which to measure success.

[Read: Writing a Mission Statement: A Step by Step Guide ]

Succession planning is not the time to make assumptions about what the next generation wants and is capable of.

Choose your successor

Working with family can be complicated and few decisions are as fraught as choosing someone to replace you. Remember the purpose of a succession plan is to do what’s best for the future of the business, its customers, vendors and employees—not any particular family member.

Now is also the time to seek advice from a diverse group of non-family members. Start with your legal and accounting professionals for help with the basics. Job descriptions and skill assessments, for example, may narrow or broaden your list of potential successors. Board members, key customers and trusted vendor partners, whether or not they have specific personnel input, will be happy to know you are planning for succession.

Talk to prospective successors

Succession planning is not the time to make assumptions about what the next generation wants and is capable of. Including them in the process may reveal strengths and weaknesses crucial to your decision making.

According to Michael Klein , author of “ Trapped in the Family Business ,” this is the time for potential successors to ask themselves some honest questions. By reviewing their motivations, qualifications and the emotional weight of carrying on what the previous generation started, the children of business owners can assure themselves, and you, that the corner office is the right future for them.

Talk to non-family employees

You should keep key employees in the loop for several reasons: First, because they have a right to know a succession plan is in the works; and second, because of the valuable insights they may have about people and processes. Long-term employees may already be working alongside family members, giving them insight that you, as the boss, might not have. Asking their opinion is a sign of respect. Finally, your successor is going to need the acceptance and cooperation of non-family employees who may be the ones offering training. This crucial support is gained more easily if the non-family employee is part of the process.

If you’re concerned about losing rising stars, the truth is, it may happen. Those with ambitions to become CEO might look elsewhere when it becomes clear they are not in contention. The risk is necessary, however, and not everyone wants to be the boss. According to the Conway Center for Family Business , working for a family-owned business can have its perks. From the way they measure success (not just profits and growth), to the strategies they embrace (putting employees first, being socially responsible), family businesses can be a great place to work.

Making a plan is the first—and most difficult—step

Announcing your successor, getting them the education and training they’ll need and having an annual review of progress all remain on your to-do list.

Remember, succession planning is a good problem—a best-case scenario. It means your business has a future—one so bright it’s going to outlive your desire, or ability, to run it. You’ve always had a plan for the worst case. You should have one for the best case, too.

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Managing a Family Business for Success and Succession

Exploring the dynamics and decisions of running a family business in Kenya.

May 18, 2021

Meet Naomi Kipkorir and Annette Kimitei, the mother-daughter team leading Senaca East Africa, and Peter Francis, lecturer at Stanford Graduate School of Business, and hear about finding success and navigating succession in a family-run business.

Family dynamics can be challenging, not to mention emotional. But when you add in a business, things can get even more complicated, especially when the entire family is involved. That’s the story behind Senaca EA, a private security company headquartered in Nairobi, Kenya. Founded by Kipkorir’s husband, an ex-policeman, the business started in 2002 as a side hustle and now it’s a full-time, all-in-the-family-of-five affair.

After a failed merger with a European company, the family literally came together to pull their company back from the brink. Thinking about family succession came next. And as Kimitei learned, “Succession is not one event, it’s a process.” Formalizing corporate governance is key to that process, which for Senaca begins with introducing advisory board members who have skill sets the business is missing, and eventually independent directors.

Francis fully supports that plan. And he knows from experience: his family-run business has been going for six generations. Francis uses that firsthand knowledge to teach a class called “The Yin and Yang of Family Business Transition” at Stanford. Because issues that arise in a family business can often turn emotional, Francis advises seeking outside expertise and relying on education, transparency, and communication to handle tough issues.

“If you’re having a conversation about the business at home you might say, ‘You know what, we’re home, we should be wearing our family hat, not our business hat.’ And then communication … I don’t mean just communicating, but also learning how to communicate. That is a muscle that we can strengthen in the family.”

Listen to Kipkorir and Kimitei’s family story and Francis’ business insights to help think about your own company’s succession and governance plans.

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Grit & Growth is a podcast produced by Stanford Seed , an institute at Stanford Graduate School of Business which partners with entrepreneurs in emerging markets to build thriving enterprises that transform lives.

Hear these entrepreneurs’ stories of trial and triumph, and gain insights and guidance from Stanford University faculty and global business experts on how to transform today’s challenges into tomorrow’s opportunities.

Full Transcript

Naomi Kipkorir: We are not just a family business that is by blood. Even the way we relate with our customers, the way we relate with our suppliers, the way we relate with each other, we came to realize that it was a strength and not a weakness.

Darius Teter: Naomi Kipkorir is the proud CEO of a family business, and she’s been on quite a journey with her company.

Naomi Kipkorir: I used to tell them, “Whatever brought us here won’t take us where we are going. So you have to accept change.” And they are telling me, “Now it’s not change, it’s even transformation.”

Darius Teter: For family businesses, planning for leadership change presents many challenges. But could the act of family succession itself give your business the tools to re-imagine

I’m Darius Teter, and this is Grit & Growth with Stanford Graduate School of Business, the show where Africa and South Asia’s intrepid entrepreneurs share their trials and trials, with insights from Stanford faculty and global experts on how to tackle challenges and grow your business. Today, we meet the mother-daughter team of CEO, Naomi Kipkorir, and managing director, Annette Kimitei, of Senaca East Africa, to hear about how they are facing family succession and board governance issues head-on.

Our story begins in the Republic of Kenya. Here, the traditional economic bases are agriculture, trade, and tourism, but in recent years, tech, manufacturing, and construction industries have accelerated. At the same time, the threat of terrorism and insecurity has spurred the rapid growth and diversification of the private security industry, and that’s where family business Senaca East Africa got its start. Here’s founder and CEO, Naomi Kipkorir.

Naomi Kipkorir: Senaca was started in the year 2002 by my husband who was an ex-policeman. We are in the business of ensuring that the country, families, and businesses are safe as we offer private security. My husband started the company. By that time, I was in full-time employment in a government parastatal. I didn’t join him immediately because initially, it was just a side hustle. Later, I saw the passion and the seriousness he put in the business, and after five years I resigned and I joined him full-time.

Darius Teter: You came onto the business within about a year of your husband’s starting it, and then quite quickly, he handed increasing authority and control over to you. Who else is in the business from the family?

Naomi Kipkorir: I was blessed with three daughters. Annette is my firstborn. She’s in the business now as the managing director. My second born also did finance, a CFA, and she’s also in charge of finance. And my third born, who is the last born, she did legal, and she also takes care of the support services in the business. So all of them are working together.

Darius Teter: Naomi and John’s three daughters all found their place within the family business, and Annette, the oldest, joins us today.

Annette Kimitei: Annette Kimitei, and I’m the MD of Senaca East Africa, a woman very passionate about private security in the East African region.

Darius Teter: What were the security issues like in Kenya when your father started the business?

Annette Kimitei: I do recall private security was not common back then. The Kenyan scenario of a security officer was probably someone who couldn’t speak proper English or Swahili, which are the two national languages. So it’s just someone you get from the village and you put a couple of sweaters with a logo, and that’s it. And then you give them instruction. So yes, security was not really much of a need, but what happened is as a growing economy, of course, people started building homes. There was a little bit more urbanization. Factories started to come up, and then thefts also came in. Right now, the biggest threats we face, for example, are the threats of terrorism, the threats of cybersecurity, technological threats, reputational threats, and risk management. But then that was not the case.

Darius Teter: You’ve grown up in the business from childhood. I’m curious, what are your earliest memories of it?

Annette Kimitei: Well, I didn’t like it, to be honest. When my father was growing up, being a policeman was really cool. That was the career everyone wanted to aspire to. But by the time I was growing up being a lawyer, being an engineer, those were pretty cool courses. But what happened is when dad started the business in 2002, by the time he started growing in 2004, I joined university. So just to keep busy and probably not be naughty around the home, Dad would carry me to work and then just help me help him with filings. So my first encounter with the business was actually helping Dad and mostly was in registry. But I’m really grateful for that opportunity because I believe it’s through registry, through working in the file room, which is not something that many people, particularly family businesses, would appreciate, I actually learned how to do tenders, for example, official letters to customers, appointment letters, promotion letters. And that’s what actually changed my career.

Darius Teter: In time, Annette progressed from administrative tasks all the way to her current role as managing director, and we’re going to explore that succession process later. But to understand the unique dynamics at play here, I wanted to speak to someone with deep knowledge from both inside and outside a family business. Here’s Stanford Graduate School of Business lecturer, Peter Francis.

Peter Francis: My name is Peter Francis. I am a member of a family that has a rather large family business; it’s in the sixth generation. I ran that company as a chairman and CEO for 16 years. Currently, I am investing in small businesses, and I also teach at Stanford at the business school. I teach a course on family business transitions called the Yin and Yang of Family Business Transitions.

Darius Teter: So in Africa, our research has told us that something like 30 to 40% of the largest companies in Africa are family businesses, but I want to start with how would you define a family-run business?

Peter Francis: As far as I’m concerned, there are two key things. The first is that a family needs to have sufficient strategic control, if you will, over that business so that they can make key decisions such as who’s running the business or have very, very strong input to those decisions. And then the second characteristic is they have to have the intent to take their family ownership and move it from one generation to another.

Darius Teter: Interesting. Can we talk a little bit about the advantages and disadvantages of being a family-run business?

Peter Francis: It surprises people oftentimes to hear that family businesses actually perform better than their public counterparts. And it strikes me that there are four really important things. The first is what I call patient capital. The median tenure of a CEO in the Fortune 500, S&P 500 is something around the range of five years. The incentives for an individual who’s in that position, therefore, are on a very short timeframe, and yet investments often pay off over the long term. So what creates the incentive to pursue those things where you have to be patient about the capital, but you can end up with higher annual returns because of it.

The second is speed of decision-making. Oftentimes, people think of family businesses potentially being slow. However, that doesn’t have to be. Indeed, they can make decisions extraordinarily quickly because they may have a smaller shareholder base. The third is the ability to pursue unconventional strategies. You’ll find many family businesses over time end up in what I’m going to call a conglomerate, a multi-business structure because they can mitigate some risks by investing in other places. And the fourth is values-driven, pride of ownership if you will.

Darius Teter: So that’s patient capital, speed of decision-making, unconventional strategies, and values. Four advantages that we’re going to hear play out in Naomi and Annette’s story.

I’m interested in exploring the separation between the mother-daughter relationship and the boss-subordinate relationship. How does that work out for you Annette?

Annette Kimitei: I think with years of practice it switches automatically. The minute I get into the lift in the office, she becomes Madame Naomi. And my dad, even my kids call him chairman as long as they’re in the office. We learned that a lot. And then when you get into the car, she can switch back to mom.

Darius Teter: So you get in the elevator and now you’re in a professional relationship with your mother, with your siblings. You go home, and it’s back to being family. I don’t imagine that happened overnight. What was the effect of working with your sisters? Was that easy? Was it hard? Is it changing over time? I’m really curious.

Annette Kimitei: I came into the business very young, and despite the fact that I had gone to university, I still went and did the very clerical roles for nearly three years. Grew to HR, became an HR assistant, became an HR manager. Again, got HR and training manager, then again became general manager, again became a HR director. So my role changed. What happened is the business no longer remained a family business. As the family was growing, we were hiring professionals, professional accountants, and professional people in operations. So you’re not going to call mom, mom. And believe me, when it comes to work, if I don’t perform, she might look nice and cute right now, but she can bite. And she bites the same if it is myself or at the general manager who’s non-family or another manager or my sisters. There’s no discrimination when it comes to issues of performance.

Darius Teter: I think that’s fascinating. So part of what’s going on here is that for you, Naomi, it was important for you to treat all your staff the same and not to distinguish between family members of staff and non-family members. Is that your philosophy?

Naomi Kipkorir: Annette joined the company even before me. And as the other siblings also joined when I was there, they still had to learn that there’s a difference between being at home and also being in the office. Like now, what I’m doing with my grandchildren, I allow them to come to the office, and they know when you come to the office, if there’s a meeting, you sit and keep quiet. I’m training them when they are still young because that is the opportunity I didn’t have when I was bringing up my children. It is not very easy for us even to hold our board meetings and for them to be purely business issues discussed. So many times my husband has to keep on reminding us, “This is a board meeting, no mom, no dad. Let us be serious.” So it has been a journey. I say that where we have reached it is because of what we have gone through and even the training that we have also undertaken.

Darius Teter: Peter says that proactive engagement and training is key. In fact, although there’s no one antidote to issues that arise in family businesses, Peter believes that many problems can be addressed through three core practices; education, transparency, and communication.

Peter Francis: It’s so powerful for family members and owners to have a language to use so that they can communicate. If you’re having a conversation about the business at home, you might say, “You know what? We’re home, we should be wearing our family hat, not our business hat.” And then finally, communication. By that, I don’t mean just communicating but also learning how to communicate. That is a muscle that we can strengthen in the family. And so, that gives people a chance to be better at this as they go forward.

Darius Teter: Naomi and Annette have undergone training for everything from how to serve on a board, to how to differentiate between the family and the business. And it was during one of these coaching sessions that Naomi first heard about family succession planning.

Naomi Kipkorir: We have held workshops with consultants that are also experts in family businesses. I remember the first time we were told that I was running so many companies at the same time as the CEO, and I needed to let go of some of the responsibilities and the big sister was supposed to take over. I saw emotions arise. My two daughters, one of them was in tears. “Mom, you can’t leave. How is it going to be?” So emotions came and we were able to overcome that, but we took some time for them to digest and know that with or without mom, there at the top, a time had to come that I had to let go of some of the responsibilities.

Darius Teter: Tears from the family at the idea of Madam Naomi leaving might sound extreme, but the family had been through so much together. Senaca prioritized seeking expert advice because the business had been burned once before.

Naomi Kipkorir: There’s a time that we merged with an European company, and we had an independent board, and we had expatriates on the board. We were represented in so many countries, in Canada, in Europe, in Ireland. When it came to the board, we were so naive because we were just running as a small family business that now was almost swallowed by the big company from Ireland.

Darius Teter: They came in and bought a majority share, you are minority owners, but you had no representation on the board.

Naomi Kipkorir: Me, Annette, and my husband, the three of us were on the board, but we were toothless.

Annette Kimitei: It was a very painful lesson, but a lesson we needed to learn all the same because when we merged, we gave, we didn’t even sell, we gave majority shareholding, and we took a step back and some of us went to pursue other businesses.

Darius Teter: Senaca embarked on this journey because they were keen to explore new markets. In Kenya, residential security is less profitable, and late payments from state-owned companies led to cash flow issues. So they figured, “Why not find an international partner and start targeting corporate and multinational clients?”

Annette Kimitei: It started out very well. We started getting high-profile clients. We had expatriates working with us, but what happened is not everything that works in Europe is a copy-paste, that you can just cut it and paste it in Africa. And particularly even what we do in Kenya is not what we do in Uganda. The guards in Uganda we have are armed, in Kenya they are not armed. One of the mistakes we did as a board is we didn’t ask bold questions. We didn’t give that governance element to be able to ask, “Is this the right solution for this market?”

Darius Teter: The European company didn’t understand the local market, but you didn’t feel that you had the voice or the stature to stop these guys in the board meeting and say, “Hey, wait a minute. This idea is not going to work in Kenya.”

Annette Kimitei: We tried to highlight it. We did papers, we did comment, but again, what mom was mentioning was we either did not respect our positions as directors and probably took a backseat like employees giving a report, you know? So the result of all this was that the business ended up being overburdened financially. You have all these megaprojects, technology to run airports like the way it’s done in Europe. In Kenya, the airport is so tiny, and they didn’t care for technology at that time. So you’ve gone into heavy debt. And within no time, that debt caught up. So we were wondering because the management accounts are seeing profits, yet you can tell the cash flow strain is so bad. The clients are paying on time, and that was because we were recording losses. These partners from Europe, when they realized the debt was too much and what they owed the government, especially when it comes to taxes and loans and auctioneers were coming on board, they just packed their bags. Literally, this is a funny story, but they packed their bags and resigned on an email, and sold the shares at a very, very, minimal amount.

Darius Teter: This was a make or break moment, a reckoning for the family and for the business.

Naomi Kipkorir: They left the company under big debts. So by the time we were coming back as a family, we were coming back to a company that was supposed to be a basket case, and we were supposed to be auctioned. But then the family came together and we asked ourselves so many questions. “What was the problem?” The first one was we were not present. We were not even serving on the board as we were just listening to the partners and just doing what they were saying.

Annette Kimitei: We had to hire account consultants, auditors. And when they went through the books, they said, “Throw out this business, you can’t recover it.” I remember one of them, an international firm, actually bought mama a book that said “How To Know When To Give Up.“ But I’m grateful because we had another local auditor who came and said, “The business looks bad, but with the expertise you have, you know this market. Come back together as a family, utilize your different strengths, and it’s going to be a painful six months, but you can naturally help this.”

Darius Teter: What the consultants saw was that with their combined backgrounds; chairman John from the police, Naomi in sales, Annette in strategic management, and the two sisters in legal and accounting, this family had the tools to turn the business around.

Annette Kimitei: The family was the problem in terms of our governance and our lack of knowledge and drive to be able to understand what corporate governance requires out of us. But again, the family spirit and the values and the passion we have for the business and our reputation is, again, what saved the business. Fast-forward to who we are right now, Senaca is one of the most respected security companies across East Africa.

Darius Teter: Those family values that Peter Francis highlighted would prove to be the secret sauce that brought Senaca back from the brink. And along the way, they created a company that would be worth handing down to the next generation. But because of their rollercoaster experience, when the time came to start thinking about family succession planning, Naomi was a little hesitant.

Naomi Kipkorir: My initial reaction was fear after our previous experience of if I let go, maybe we would fail again. I was troubled a lot because I was not ready for that. But by and by, I could try to plan my weeks, my days, it was not adding up, and I saw that I was not adding a lot of value to some of the companies. So I had to let go of two of the companies. It was never taken lightly, but we kept on talking about it over the dinner table, and they have now come to buy in and they are now supporting the plan of me handing over the baton to Annette.

Darius Teter: Annette, I’d love to hear this story from your side. Was it a shock to you that your mother was thinking it was time for you to take over?

Annette Kimitei: I’m always more comfortable as Madame fix-it. I like fixing where there’s a problem, but I didn’t want to take the leadership position. So at this time, yes, when mom said… We had the family business consultant, and he gave us that tough news and said, “I’ve seen your qualifications, I’ve seen your experience, it’s time.” And of course, for me, I said no, I’m not ready for it.

Darius Teter: So you doubted yourself?

Annette Kimitei: Yes, I did doubt myself, I’ll not lie.

Darius Teter: Naomi, did you doubt Annette?

Naomi Kipkorir: I didn’t because I could see beyond what she could see. I knew her capacity, and I knew she was equal to the task.

Darius Teter: That’s interesting. So Annette, did that give you confidence that your mother believed in you?

Annette Kimitei: No, no, no, not too much. I think succession is not an event, it’s a process. What happened is when I was supposed to be called MD, I actually asked that I be called deputy MD just to warm up to the seat. So for around three years, I was a deputy MD, executing everything an MD does, but just wanting to hide. And the reason for that is, number one, from an industry perspective, I’m one of the youngest managing directors. Number two, I have a really tiny frame and this is the security industry. Most of the people running security companies are way older. They are my father’s age. They are brigadiers, majors. And these are the people that I was going to meet with. And then that is even for my voice, I didn’t have that commanding security voice. So I had a bunch of excuses, Darius, very nice excuses as to why to hide.

Darius Teter: I don’t know. Honestly, those don’t sound like excuses, those sound like serious rocks and boulders that you have to push up a hill. Because it was not just about how you felt, your self-confidence, it was about how you felt you would be perceived in the market.

Annette Kimitei: I always joke that the general manager we currently have is an amazing guy, but he’s very big, and he’s ex-police, and he’s ex-CID. So every time we go to a meeting, guys will be like, “Hey, hello, Mr. MD.” It’s always an assumption that I’m probably his secretary because I’m a little bit tinier. And then by the time I introduce myself, somebody will say, “Oh, so you are Annette. Yeah, we’ve heard of Annette. We just thought she’s bigger.”

Darius Teter: The transition of leadership in any business affects more than just the C-suite executives. And Naomi knew that getting employee buy-in would be vital.

Naomi Kipkorir: My leadership style and Annette’s are very different. I remember even the members of staff calling me and saying, “If you go, this company is done.” Annette is very aggressive. Annette is very strict. I think they were used to the way I was leading them. Everybody was afraid, but then I had to let Annette prove that the company also needed to change the way it was led because things were also changing and the market demands were also changing. Annette, she’s a risk-taker, so she could bring in so many other different things, so many products. And some of them are like, “Are we ready for this?” But she was pushing and I could see the results. They are telling me, “Now it’s not change, it’s even transformation.”

Darius Teter: With Annette now in the managing director role, Senaca is diversifying, and they’ve gained a new perspective on the importance of a well-functioning board.

Annette Kimitei: The ideas come from everywhere, but all these ideas have to be conceptualized. And then we place together on the table the different concepts. And it is the board that’s now going to say, “Out of the five ideas, we felt that these two can work. This one can start this year. And once this one is stable, now we can move on to the next one.”

Darius Teter: So you’re trying to make sure that the proposals are supported by analysis to take some of the emotion out of the decisions?

Annette Kimitei: I feel most comfortable with a project if she says yes. Because if I can convince the whole world. But if I convince the chairman and Madame Naomi or mom, then I know I have worked my figures out.

Darius Teter: Has there ever been a proposal that you took to the board where it was shot down and you still are convinced that you’re right?

Annette Kimitei: Of course. This year is when they finally accepted a concept of diversifying to technology and risk when the numbers were shown. I’ll tell you what I did wrong the last two years was, I saw the dream, but I didn’t have the data to back it up to show that it’s not just the product, the expenses associated with this, at this amount. And guess what? The profit is this. I just did a small pilot by bringing in a few of the dogs, a little bit of the technology, and the bottom line really improved. So I’m really excited because they didn’t say no, they said, “Test this business model.” Because we are moving from 93% guarding and only 7% were other services. Now we are moving it to 30% guarding, 30% technology, and 30% risk. Just one year of doing that, our profits grew by nearly 6%.

Darius Teter: I love this story because that’s what a good board should do, is say, “This is an interesting idea, but you haven’t tested it. Go out and test it. Come back to us with the results, and then we’ll decide.” Would you say, Naomi, that this decrease in the guarding business and increase in risk management business and technology could not have happened without Annette’s leadership in driving for change?

Naomi Kipkorir: Yes, we were still calling ourselves the old school, and we just wanted to manage the guarding business. We worked in the government, we have our pension, so we were not really looking for money. We were not greedy for that kind of growth when it comes to a business. But we have seen that through her efforts and her ambition, she has really made the company now look like, “Oh, this is something that even outlives us, and it can even grow bigger.”

Darius Teter: Senaca is now two years into the transition, and they’re putting a major focus on solidifying their corporate governance.

Annette Kimitei: For a long time, we didn’t understand what is manager, what is director, what is shareholder. So when it comes to our corporate governance, we engaged an external consultant again this time. What we are working on is the family constitution, the family office, the shareholders’ agreement. We also want to bring in advisory board members. We’re bringing in three this year as board advisors. And then based on that is now when we move into independent directors. I think because of our previous experience with our European partners, we thought it’s good for us to be able to engage consultants. We’re going to see what are the skills we are missing in the business, what are the skills that we are missing in the board, and how do we bring in the right people. How do we induct them? How do we monitor their performance?

Naomi Kipkorir: We have seen where we’ve always gone wrong, and we are saying, “If we knew what we know today five years ago, we would be having even the independent boards and other boards that would be able to drive and steer the company to different levels.”

Darius Teter: Naomi and Annette’s plan to first introduce advisory board members and then independent directors is what Peter Francis describes as a best practice.

Peter Francis: There’s a real concern, “Oh gosh, I let an independent director in. He or she is going to take control. It’s going to be awful.” They often will go to friends to be board members because they trust them, and I think that’s a reasonable first step. Think of it as a board of advisors but not a fiduciary board. I would say that at some point creating a fiduciary board, especially as the businesses get somewhat larger, is a hugely powerful step. Only one person who’s actually in management, I think, should be on the board. That’s typically the CEO. I would suggest at least three independent outside directors.

Peter Francis: I think it’s incredibly important to pick those people based on the needs of the business. And this is where the power of a board comes. The Business Roundtable, I think, had a terrific definition of a good director. Effective directors maintain an attitude of constructive skepticism. They ask incisive, probing questions and require accurate, honest answers. They act with integrity and diligence, and they demonstrate a commitment to the corporation, its business plans, and long-term shareholder value. If you could get two or three or four independent directors that fit that, and you listened to them, it’s going to make your business better, it’s going to be worth it, and the business will make more money.

Darius Teter: Naomi and Annette have recognized the skill sets that the business is missing and are actively searching for independent directors that have that expertise. Partly due to the growth of the company and the formalization of their governance, Annette became extremely purposeful about her current and future role.

Annette Kimitei: I’m a little more aggressive now with succession planning for various reasons. Number one is the business is expanding at a higher rate. We are diversifying, and even our customers are demanding different skills now. So I am already working on my succession plan outside Senaca and actually outside Kenya into other countries. I think what we wanted to do was to say that the next successor after Annette has to be a family member. And my sisters, yes, they are good, but they are still young. And then the industry experience. So we had to actually be very bold and say, “For this next successor cannot be in the family. Maybe the next generation will have been nurtured. But at this point, we have a serious gap if Annette is no longer there because mom and dad are very clear that they just want to focus on board and shareholding roles.” I would say in three years I’d be very comfortable to leave not only the general manager but a good number of managers to be able to run this business so that we focus more on what is our key strength, which is entrepreneurship.

Darius Teter: It’s remarkable that Annette is already looking ahead to when she will hand over the leadership to her general manager. The first-generation family succession may still be a work in progress, but it seems that this delicate and lengthy process has taught Annette to plan with purpose.

Annette Kimitei: Procrastination, I would say, has been a bit of a challenge from our side. There was no deliberate plan, and now we have it. Actually, we had our board audit last week on Friday. We thought we were doing so well. I was actually very eager for that meeting. And when the audit was done, I was surprised that we were only at 5%. We are very good at preparing all the documents. So we have the shareholders’ agreement, we have the family constitution, but we just never sit down and sign it. And if it’s not signed, it’s not there.

Darius Teter: Sometimes procrastination is actually a symbol of something else, which is maybe a lack of underlying agreement, particularly if somebody else is drafting all of this stuff. Is there something more to the procrastination than simply, “We just didn’t get to it.”?

Naomi Kipkorir: I think as the founders, me and John, we thought that we are part of the business. And what does it mean? What are we handing over? Why do we need to be succeeded? It became a conversation that we really had to face. We have now fully understood what it means for the business continuity. But initially, that is why it took so long.

Darius Teter: So was it scary? The first time you read it, you said, “Wait a minute, that’s not what I signed up for.”

Naomi Kipkorir: Yes. So it’s like we are going to lose our positions. We are going to lose our titles. We are going to lose everything we’ve built with our hands. We could look back from where we’ve come from and how we were able to turn around the company, and it’s like, “Is it really time for us to hand over to these girls?” I think that has taken a backseat, but it has been a process.

Darius Teter: There’s a lot of businesses and a lot of CEOs and managing directors that are exactly in your position. What’s your message to them?

Naomi Kipkorir: It’s just to take a bold step and know that one day you have to leave. I remember sometime back I was overworking myself, and I had a mild stroke. And then I thought, “What if I died? What would happen to the company?” And I say it’s better for me to prepare for this when I’m still alive. So time has to come for you to let go at one time or the other. And for the business continuity, you have to trust and allow the children to make their own mistakes because you cannot keep on spoon feeding them all the way through. I’ve done that for the last, I think, one year. I’ve been on and off the business, and I’m telling you, they have lost business in the process. So they have to sit back and come up with their own plan on how they are going to recover the lost business. If they fail, they’ll fail. If they fall down, they will still wake up and move on with the journey.

Naomi Kipkorir: Annette, she’s saying that she’s preparing her successor early enough so that he doesn’t wait until she’s threatened by anything ahead. It is always very good to be prepared for any eventuality. We are now even thinking 50 years from now.

Darius Teter: After the initial fear of the unknown and what sounds like many, many pointed family discussions, Naomi has made peace with the act of handing over responsibilities. Annette has been with her all along and is now looking forward to taking some bold steps of her own.

Annette Kimitei: I’ve been in the nest of Senaca for a long time. I am now serving on other diversified boards to enrich my experience, but what I would be happy and say that a second generation we impacted is when I’m able to plant another Senaca in another five countries. That’s when I’ll say my parents started a good business and they left us to run, what did we do with it? We left many more businesses, feeding many more families. That would be the kind of legacy that I would be more proud of other than holding on to this MD seat.

Darius Teter: Whether it’s that generation one to generation two transition, or somewhere further down the line, Peter Francis suggests that it’s really all about process.

Peter Francis: I will say as we speak of Naomi and Annette, somehow they have done a terrific job as a family in having some really extraordinary conversations in this generation one to two transition, which is so critical. It is, I think, very common that certain human emotions rule the day. So denial and conflict avoidance, for example, they’re there in spades. When thinking about how you get started, the founder is the key and he or she can use the universal antidotes to begin to move things along, and I think starting with a vision. And the vision could be a simple, “We really do want this to be a family business that goes through the generations.” And then I would say get help and get educated. I do think there’s a tremendous role to be played by an outside voice, and that is because there are some very emotional aspects to it. So it’s really the process that counts, not so much the content.

Darius Teter: You’ve been through this amazing journey with foreign buyers and then taking control back and rebuilding it. What recommendations do you have for other family businesses who need to develop and implement a family succession plan?

Naomi Kipkorir: Succession is not an event. It is a journey. It is a process. The corporate governance is not enough. There are so many other tools that are needed. You need a very clear board charter that even talks about the third and fourth generation. You also need a family office with a very clear family constitution. You have to think of maybe another 100 or 50 years what kind of a company you’d want to see or you’d want even to leave to your children and even the country as a whole because this business does not just benefit the family alone. And knowing that the children are also different. Like now what I’m doing with my other children, because this one girl who is not really adding a lot of value, I had to look at her strengths and see what else can I do for her? I’ve opened a different business for her, and she’s thriving there.

Darius Teter: Those are really powerful messages. I mean, no presumption that because somebody is in your family they’re the right person for the specific business. And it needs really careful thought and planning. Annette looking back on the past few years, what recommendations do you have for other businesses where it’s still being run by the founders and are thinking about succession planning? What would you advise them based on your experience?

Annette Kimitei: As mom said, make it a bold decision, a bold decision to say that if you want the business to continue and outlive you and go all the way to your great-grandchildren, then the process has to start today. The conversation could be uncomfortable, but it’s a conversation that still has to be had. If it’s difficult for you as an individual or difficult for you as a family, seek help. There are so many bodies there that are willing to help. So go to school, get consultants, join family business associations, do performance assessments, have very deliberate training and induction or mentorship programs. But all of it has to be very deliberate.

Darius Teter: I think it’s really interesting that there are resources in Kenya and in Africa to help you think through these issues. There’s associations of family businesses. There are specific family business consultants. So I don’t know if that industry has always been around or if that’s becoming a bigger opportunity for other companies in Africa that you might say one or two words about how you found these resources.

Annette Kimitei: Initially, we never even wanted to confess we had a family business. We’d go into meetings, run a contract for five years, and nobody knows we are related because of that fear that people think family businesses are unprofessional. We thought we were very lonely and very few until we joined the Association of Family Business Enterprises. And then we went to Strathmore University, and they have a family business unit, and they had courses on family businesses. And then even for our board competence and even for our female leadership, there’s a program that is run in Kenya called the Female Future Programme that really just gives you that boost of confidence. And then from the Association of Family Business Enterprises, we learnt about it around three years ago. It’s a new phenomenon. And what we’ve realized is that there are so many strong businesses in Kenya that are actually family businesses. So what that does is that gives you a safe space to be able to interact. Because family businesses are either new or learning the ropes in Africa, most people don’t have that information.

Darius Teter: Naomi and Annette are still on their transition journey, but Senaca has already been through some big changes, and I wondered, “Where do they see themselves in two years?”

Naomi Kipkorir : Two years from now, I will not be managing the business at all, but I’ll still sit in the booth as a director for three of the companies. But for the two young ones that we started this year and last year, those ones I still have to work with for maybe another five years. That is my personal strategy for how I run with the companies. But for Senaca, I’ll have handed over the baton to Annette within the next two years.

Darius Teter: Annette, two years from now, what does your day look like?

Naomi Kipkorir: My day will be just scratching my head as to where is the next opportunity in another country, and even in that country, what particular products or services. I am also very keen on serving on an international board, not just for the look of it, but because I’ve realized that the world is that global and Africa does need to prepare for globalization. I would love to hone my skills in running an international brand. We have 10 ambitious goals as a family, and one of them is empowering 100,000 people in Africa. And one that stands out is to be an inspiration for family businesses in Africa, simply because there are no companies to look up to, that you say, “When I grow up, I want to be like that business.” I’d really love to be spending time talking to young businesses in Africa and just sharing what we just shared, the good, the bad, and the ugly, of where we got it right, where we got it wrong. I hope that by sharing that we’ll be inspiring more.

Darius Teter: As we come to a close on today’s episode, I’d like to thank Naomi Kipkorir and Annette Kimitei for sharing their personal journeys, and Peter Francis for his keen insights. Family succession planning can be a complex undertaking and it’s full of emotion, particularly for businesses that have had to fight for their own survival. But as we’ve learned today, the will comes from recognizing that continuity and long-term success means preparing mindfully and being ready to let go. And if you do that right, you’ll be handing over fertile ground to grow the ideas of the next generation. So it’s important to keep Peter’s universal antidotes in mind.

Peter Francis: I have those three; education, transparency, and communication. But then I don’t want to forget a fourth one, and that is there needs to be a sense of love. Maybe it’s just a sense of community, a sense of a tribe, a sense of something that pulls you together. That’s important as well.

Darius Teter: This has been Grit & Growth for Stanford Graduate School of Business, and I’m your host, Darius Teter. If you want to learn more about best practices in managing a family business and planning for family succession, follow us now. You’ll be notified about upcoming episodes, including one where I take a much deeper dive with Peter Francis. To learn how Stanford Graduate School of Business is partnering with entrepreneurs throughout Africa and South Asia, head on over to the Stanford Seed site at seed.stanford.edu/podcast. Laurie Fuller researched and developed content for this episode, with additional research by Jeff Prickett. David Rosenzweig is our production coordinator, and our executive producer is Tiffany Steeves, with writing and production from Isobel Pollard and sound design and mixing by Alex Bennett at Lower Street Media. Thanks for joining us. We’ll see you next time.

For media inquiries, visit the Newsroom .

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Family business succession and innovation: a systematic literature review

• Original Paper
• Published: 09 January 2023
• Volume 17 , pages 2897–2920, ( 2023 )

Cite this article

• Juliana R. Baltazar 1 ,
• Cristina I. Fernandes 2 , 3 ,
• Veland Ramadani   ORCID: orcid.org/0000-0002-8495-9141 4 , 5 &
• Mathew Hughes 6  

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This study systematizes and classifies the state-of-the-art of knowledge about innovation and succession in family businesses. Our systematic literature review details the existing knowledge and establishes new points of departure for future research. This research analyzes 32 articles retrieved from the Web of Science database and makes recourse to bibliographic coupling through the VOS viewer software to identify the main lines of research on the theme of innovation and succession in family businesses before advancing new topics for future research. The results identify and classify the prevailing theoretical foci in this domain to: (i) Impact of Succession on Innovation; (ii) Succession and Sharing of Knowledge; and (iii) Obstacles to Innovation. This study also shows that the succession process hinders investment in innovation and that family businesses’ innovation capacity represents life or death for these businesses. This review also presents a framework that shows how succession processes impact innovation in family businesses.

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1 Introduction

Family businesses represent the oldest type of commercial organisation and are now the key driver of wealth creation in both emerging and developed economies (Dana and Ramadani, 2015 ; Harris et al., 2004 ; Ingram and Glód, 2018 , Ramadani et al., 2020 ). Family businesses are those businesses at least 50% owned by a single family, a definition we adopt to define a family business. They are commercial organizations in which various generations of the same family may influence the decision-making processes to achieve objectives defined by the family leadership (Lee et al., 2017 ; Mukarram et al., 2018 ; Jain et al., 2022 ). In addition, according to König et al. ( 2013 ), family businesses are organizations characterized by the existence of individuals interrelated by their family bonds that deploy their influence in their businesses, whether through their direct participation or a family member holding executive roles.

Prior systematic literature reviews exist around innovation in family businesses (Akram et al., 2021; Aparicio et al., 2019 ; Calabrò et al., 2018; Casado-Belmonte et al., 2021 ; Filser et al., 2016 ; Fuetsch and Suess-Reyes, 2017 d, 2016; Toska et al. 2021 ), open innovation in family businesses (Gjergji et al., 2019; Torchia and Calabrò 2019 ), organizational innovation in the family businesses (Suman and Das, 2020 ), and radical innovation in family businesses (Hu and Hughes, 2020 ). Cocnerning succession, there are systematic literature reviews that approach the role of women in inter-generational succession in family businesses (Kubíček et al., 2018 ; Ratten et al., 2018 ) and analyses on gender in intergenerational succession in agricultural estates (Sheridan et al., 2021 ) and (Cisneros et al. 2018 ) research networks on succession in family businesses. However, while innovation represents the lifeblood of family firms (Hu and Hughes, 2020 ), succession represents the future of a family business. It is remarkable then that no systematic literature review unique to succession and family business innovation, spanning both dimensions, has emerged. To address this omission and the bifurcation of innovation and succession, we present a systemic literature review that culminates in a framework for future lines of research into these two critical aspects of long-term family business survival.

This research aims to systematize and classify the state-of-the-art in innovation and succession in family businesses through a systematic literature review that details the existing knowledge, establishes new points of departure for future research and fills the gap that stills exists in the literature. The research gap focuses on the need to observe and classify the state-of-the-art research on family businesses, their succession processes, and the effects of innovation on these businesses. Part of the motivation for this review is the need to discover how innovation affects the succession processes of family businesses. This research also makes recourse to bibliographic coupling to identify the main lines of research on the theme of innovation and succession in family businesses before advancing new topics to inform future research endeavours.

Through the analysis of 32 articles sourced from the Web of Science database and through bibliographic coupling with recourse to VOSviewer software, we established three clusters in the body of literature on innovation and succession in family business: Impact of Succession on Innovation, Succession and Sharing of Knowledge, and Obstacles to Innovation. This research contributes to family business and managerial science by systematically mapping and classifying the literature on innovation and family succession into distinct clusters, developing a framework that shows how succession processes impact innovation in family businesses, and putting forward an integrated vision of key lines of enquiry and points of departure for future research.

Following this introduction, this article sets out the methodology applied, provides descriptive analysis of the selected articles and their journals of publication followed by a study of the bibliographic coupling. The following section then presents a discussion and the framework systematised from the research. Finally, we put forward the conclusions and future lines of research originating from this study.

2 Theoretical background

Family businesses perform leading roles in the global economy as they represent the largest number of economic ventures worldwide, and frequently evolve into complex business undertakings (Colli and Rose, 2008 ; Larissa, 2020 ). The business and the family are thus intimately interrelated with the business controlled by family members within the scope of obtaining its success and guaranteeing its sustainability by transferring it to future generations (Chua et al., 1999 ). According to Buang et al. ( 2013 ), family businesses run into internal conflicts among their respective members, particularly regarding issues surrounding succession, which represents a crucial factor for future survival, impacting the efficiency of succession processes. Many family businesses do not make it beyond the second generation. Various authors e approached this theme, proposing definitions for successful succession processes and correspondingly identifying the predictive factors for such successful succession processes (Morris et al., 1997 ; Dyck et al., 2002 ; Le Breton-Miller et al., 2004 ; Wang et al. 2015 ). According to Sharma et al. ( 2004 ) and Le Breton-Miller et al. ( 2004 ), defining successful succession processes comes about via two different dimensions: the satisfaction of the parties interested in the succession and the positive performance and viability of businesses following the succession process.

CEOs and business owners, sooner or later, must hand over the ownership and management of the company to other persons, with such transfers taking place either suddenly or in planned approaches. Given that the challenge of family business often involves surviving through to the third generation and beyond, families and their businesses have to plan succession across the three facets that constitute family businesses: the family, the business, and its ownership (Belausteguigoitia, 2012 ; Johnson et al., 2019 ). Around 70% of family businesses do not survive the transition of the founder to the second generation, with the 30% of family businesses making it through to the second generation then reduced to 15% on reaching the third generation and 11% when arriving at the fourth generation (Poza, 2014 ).

Bower (2007) defines family business succession as the transition between the management and ownership of the company to the next generation of family members. Devins and Jones ( 2016 ) describe succession as a dynamic process that ends up operating as a socialization mechanism between the successor and the former incumbent. A successful succession process reflects not only on the future positive performance of the company but also on its viability (Le Breton-Miller et al., 2004 ). Succession is essential to generational continuity while also involving family progression at the expense of nonfamily members of staff (Sharma et al., 2001 ). Thus, such processes constitute important landmarks in family businesses as they necessarily drive change and create instability (Devins and Jones, 2016 ).

Innovation consists of every activity enabling businesses to design, develop, produce, and launch new products, services, or business models (Hu and Hughes, 2020 ; Rondi et al. 2019 ). Innovation means generating a new idea or applying existing ideas in new and different ways. In turn, Schumpeter defined innovation as “the introduction of a new product (or improvements to the quality of an already existing product), the introduction of a new production method, opening a new market, a new source for supplying raw materials or semi-manufactured goods, a new way of industrial organisation” (Schumpeter, 1934 , p.66). Furthermore, Tidd et al. ( 1997 ) define innovation as a process of transforming opportunities into new ideas and putting them into practice. Ultimately the willingness and ability to innovate (Hu et al., 2022 ), regardless of specific innovation strategy (Scholes et al., 2021 ), fundamentally affects the longevity of family businesses.

Schmid et al. ( 2014 ) report that research and development (R&D) is higher at family-managed businesses, while earlier studies demonstrate the effects of family and their influences on the innovation outputs of companies (Classen et al., 2014 ; De Massis et al., 2015a ; Matzler et al., 2015 ). Nonfamily businesses typically display a greater willingness to deploy formal monitoring and control mechanisms that stifle innovation activities, while family businesses tend to have more open channels of communication, make decisions informally and maintain flexibility in their processes that together create more innovation-friendly environments (Craig and Dibrell, 2006 ). A study by Classen et al. ( 2014 ) also reports that family businesses produce more process innovations than non-family companies. However, De Massis et al. ( 2015a ) found that the innovation climate is more adverse to risk and more informal in family businesses, and their degree of innovativeness varies markedly for resource and socioemotional reasons (Hu et al., 2022 ).

Family businesses display different capacities to undertake more efficient transformations of their scarce resources into the production of innovation, thereby helping family businesses to achieve more innovation than non-family companies in terms of the relative amounts of resources consumed (Duran et al., 2016 ). Family businesses are better at ‘doing more with less’. Duran et al. ( 2016 ) tie this in part to succession, arguing that the successor CEOs of family companies display strategic advantages that enable them to nurture their resources better and ensure the conversion of inputs into outputs is more productive.

Innovation is crucial for family businesses (Cesaroni et al. 2021 ), with its role deepened per its capacity to strengthen the sustainability of businesses through successive generations (Zellweger et al., 2012 ; Rondi et al. 2019 ; Ahmad et al., 2021 ). Many researchers propose that family involvement in management and ownership may influence business innovation (Llach and Nordqvist 2010 ; Kellermanns et al., 2012 ; Hughes et al., 2018 ; Cucculelli and Peruzzi, 2020; Scholes et al., 2021 ). But such influence and how this takes place alongside other driving factors are not yet well-defined by the literature, with research studies returning mixed results (De Massis et al., 2013 ; Calabrò et al., 2019 ; Hu and Hughes, 2020 ). Röd ( 2016 , p.198) even describes this family influence as a “double-edged sword” potentially generating advantages and disadvantages for family business innovation.

Few studies have approached how innovation within family businesses changes over time and which factors influence the evolution of businesses and the generations managing them (Cesaroni et al. 2021 ). De Massis et al. ( 2015b ) argue there is a need for further research to convey the diversity prevailing among family companies and identify the factors explaining the different orientations to innovation and why some family businesses successfully innovate over the longer term while others fail to do so.

Furthermore, researchers have reported how family businesses tend to be risk-averse, hindering the investment of capital in financing innovation projects that only carry uncertain results (Block et al., 2013 ). Scholes et al. ( 2021 ) indicate a general preference for exploitative innovation strategies among family firms because of governance mechanisms implemented by family stakeholders. According to Kotlar and De Massis ( 2013 ), family companies need to make recourse to external sources to obtain the capital necessary for investments in innovation, which may compromise the family objective of maintaining long term control over the business. Calabrò et al. (2018) refer to how conservative stances and organizational rigidity represent negative aspects for family businesses in terms of innovation that calls into question traditional product lines even while a long-term orientation and the involvement of various generations in the business can foster their innovation capacities (Cucculelli et al. 2016 ; De Massis et al., 2015b ).

Research into family businesses innovation has deepened (De Massis, et al., 2015a d, 2016; Fuetsch, 2017 ) even while dividing into two areas, one focused on innovation inputs and the other on innovation outputs (De Massis et al., 2013 ). The studies of innovation inputs demonstrate that family companies invest less in innovation than nonfamily businesses (Feranita et al., 2017 ). According to Mitchell et al. ( 2009 ), research into the succession of CEOs in family businesses describes the transfer of control to the next generation, with these authors revealing the role of successor CEOs in product innovation and their openness to new ideas, taking risks, and accepting new knowledge and perspectives (Salvato, 2004 ; Kraiczy et al., 2015 ; Woodfield and Husted, 2017 ). Scholes et al. ( 2021 ) found that family businesses are more willing to adopt an explorative innovation strategy when next-generation involvement in the business is high, speaking again to the symbiotic relationship between innovation and succession.

3 Methodology

Bibliographic coupling deems there is an interrelationship between two articles whenever both cite in-common one or more articles, with the references to the articles cited taken into consideration as the means of determining the levels of similarity between these articles (Habib and Afzal, 2019 ; Kraus et al., 2020 ; Kraus et al. 2021 ; Linnenluecke et al., 2020 ; Donthu et al., 2021 ). Kessler ( 1963 ) defines bibliographic coupling as the only item of reference adopted by two articles. We adhered to general good practices and principles set by Kraus et al. ( 2022 ). Furthermore, the objective of systematic literature reviews involves, according to Tranfield et al. ( 2003 ), “a replicable and transparent process, hence, a detailed technology that seeks to minimize the bias through exhaustive searches of the literature, the published and unpublished articles and returning a path of decisions, procedures and conclusions to the reviewer” (p. 212).

In order to achieve the above-defined objectives, this systematic literature review made recourse to VOSviewer software to delineate the bibliographic coupling. The present systematic literature review began by defining the keywords that would be used in the database. Web of Science was the database chosen, and the keywords selected were based on family businesses, their different variations, innovation, and the succession process that family businesses go through. The process also included defining the type of documents used in this literature review, and the language that they would be in, settling on only articles written in English.

The systematic literature review process spans three stages. The first stage here consisted of searching the Web of Science database, in December 2021, deploying the keywords (“famil* business*” or “famil* firm*” or “famil* compan*” or “famil* owned*” or “famil* entrepr*” or “business* famil*” or “firm* famil*” or “entrepr* famil*”) and innovat* and succession. We selected only articles written in English, in the categories of Economics, Management or Business, resulting in 65 articles. In the second stage, we analyzed the titles and summaries of the articles to ensure the selection of only thoseanalyzing innovation and succession in family businesses. This step led to 32 articles meeting this criterion. This analysis consisted of a complete reading of the articles. After reading, a selection was made on whether each article addressed the theme under analysis, innovation and succession in family businesses. The articles that did not approach the theme were discarded from the database. The third and final phase involved the application of the VOSviewer software for bibliographic coupling. The research protocol is set out in Fig.  1 .

Stages in the Systematic Literature Review (Own elaboration)

After the search on Web of Science with the pre-defined keywords, the systematic literature review started with 65 articles. After an analysis and read-through of these articles, 33 were eliminated, either because they did not address the theme or were duplicates. The software VOSviewer was used on the final sample of 32 articles for the bibliographic coupling. Through bibliographic coupling, the remaining articles were classified into clusters. After the selection by the VOSviewer software, a new reading of the articles by cluster was performed to identify common lines of inquiry and research among each article, to verify whether articles were related to each other, and to determine the precise theme each article focused on. This process ultimately determined the name of each of the clusters identified.

4.1 Descriptive analysis of the articles

The following descriptive analysis and those presented in Figs.  2 and 3 focus on the 65 articles that appeared in the first step of the systematic literature review. In contrast, Fig.  4 ; Table  1 present the map of clusters and the composition of each cluster based on the 32 articles that appeared in the third step of the systematic literature review.

Annual growth in publications on innovation and succession (Own elaboration)

Figure  2 displays the growth in the initial 65 articles (before the analysis of the articles) and the number of citations published in the last five years. The peak number of publications occurred in 2021, even though there has been an ongoing and significant rise in publications ever since 2018. Figure  2 shows a time interval of 4 years, by choice of the authors, which makes it possible to observe the decrease in the number of citations between 2019 and 2020. This decrease in the number of citations may be related to the Covid-19 pandemic or, in an extreme situation, stagnated interest in the literature on innovation, succession and family businesses.

The 65 articles were published in a total of 44 journals with the Journal of Family Business Strategy accounting for the largest number with eight articles, followed by the Journal of Family Business Management on six, with Entrepreneurship Theory and Practice providing four publications. A sum of six journals accounts for two publications apiece, and there are 35 journals with but a single article on succession and innovation. Figure  3 encompasses the original 65 articles and details the ten journals with the largest number of publications and their respective years of publications. The timeframe in Fig.  3 shows us when articles that address the theme under study begin to appear and what kind of journals they are published in.

Journals with most publications (Own elaboration)

Table  2 presents the top ten journals and the respective country of the initial 65 articles. Table  2 also presents the h-index, which represents the number of articles in a journal that have been cited an h number of times. Table  2 shows that the United Kingdom is the country that appears most often as the country of origin of the journals with the largest number of publications, appearing in 6 out of 10. The values of the h-index of the ten journals with the highest number of publications are also between 18 and 169, with Equilibrium-Quarterly Journal of Economics and Economic Policy, from Poland, representing the lowest number, and Entrepreneurship Theory and Practice, from the United States, representing the highest number.

The final 32 articles present various methodologies, from quantitative, qualitative, combined (quantitative and qualitative), and theoretical methodology. Of the final base of 32 articles, 17 present a quantitative methodology, 13 have a qualitative methodology and the remaining 2 have a combined and theoretical methodology.

Table  3 below shows the 20 journals where the final 32 articles were published, the number of citations per journal, and the H-index and country of origin. It is possible to observe that 5 of the journals do not present any citation, however, 4 of them present an h-index above 20 with the Serbian Journal of Management presents an h-index of 11.

The journal Entrepreneurship Theory and Practice has the highest h-index (169); however, it is one of the journals without any citations in the final base of 32 articles. The Journal of Product Innovation has an h-index of 154 and 54 citations. In comparison, the journal with the highest number of citations is the Journal of Family Business Strategy with 193 citations and an h-index of 51.

Tables  2 and 3 show that the origin of the articles in the research (Table  2 shows the 65 original articles from phase 1, Table  3 shows the 32 articles analyzed in the research) focuses mainly on the United Kingdom, followed by the United States. Switzerland, Poland, Serbia, Slovenia, and the Netherlands are some of the countries that appear as the origin of the journals.

4.2 Bibliographic coupling analysis

To analyze the core themes to innovation and family succession, we carried out bibliographic coupling through recourse to VOSviewer. Every article we analyzed, even that have not yet gained any citations, thus not excluding articles that have not received citations as this might lead to the loss of articles essential to the depth of the research. The VOSviewer software formed clusters with a minimum of three articles per cluster, with the 32 articles breaking down into three clusters, which Fig.  4 duly portrays.

Network of Clusters (VOSviewer)

Table  1 presents the composition of the three clusters encountered, with each one corresponding to one of the respective approaches: (1) Impact of Succession on Innovation, (2) Succession and Sharing of Knowledge and (3) Obstacles to Innovation.

4.2.1 Cluster 1: impact of succession on innovation (N = 15)

The 15 articles present in this cluster contribute to the literature with knowledge on the shaping of innovation and the influences of families on the potential for family business innovation. Ahmad et al. ( 2021 ) explore how the involvement of families in companies affects their innovative capacities, with such innovation enabling the companies to embark on the path to sustainable longevity. The authors demonstrate that innovation capacities are a life and death factor for companies operating in the globally competitive environment. In turn, Cesaroni et al. ( 2021 ) approach the ways family businesses’ innovation capacities evolve between the first and second generations as well as the conditions that improve and favour this process. These authors also propose a typology of founders and successors concerning innovation and the influences such processes are subject to as they evolve from the founding to the successor generation.

Querbach et al. ( 2020 ) analyze how and under which conditions the retention of the predecessor’s board membership impact on product innovation in family businesses in the wake of succession processes and with the results demonstrate that retaining the existing board of directors brings about negative consequences in terms of product innovation.

Wong and Chen ( 2018 ) study how the family firm’s founder shapes the innovation performance of successor family CEOs and what outcomes compared with the succession of non-family related CEOs. They also study whether the results of innovation announcements receive stronger reactions on stock markets than those published following the succession of an external family member as CEO, with founders remaining within the company (belonging to the board), reducing the negative effect existing between heirs and innovation performance standards.

Carney et al. (2021) consider the differences in “lean” innovation performances among publicly listed family companies and those with open capital structures embarking on succession processes and comparing with those yet to begin any such process. These authors maintain that family businesses successors emerge significantly as keen adopters of lean innovation patented strategies.

Alrubaishi et al. ( 2021 ) approach the differences in the capacities and economic or non-economic orientation of family businesses and how these facets shape innovative activities. Their findings point to the need for businesses to hold the resource capacities as well as the appropriate economic orientation and shunning non-economic viewpoints in order to foster innovation.

Yang et al. ( 2021 ) empirically gauge the impact that succession has on family businesses in terms of their investments in corporate innovation. These authors also examine two different types of resources and state ownership and the potential moderating role existing in the relationship between succession and innovation investments. The authors identify how succession hinders innovation investment in family companies.

Kotlar and Chrisman ( 2019 ) discuss the influence of family involvement over processes of organizational and strategic changes and, according to the literature, the family variable represents an important driver of change and innovation in the succession processes of family companies. Calabrò et al. ( 2021 ) debate the role of the family as an essential input for dealing with company crises during the Covid-19 pandemic and how these transform the challenges into opportunities to emerge more robustly from the financial crisis. These authors apply a research agenda from crisis management to family companies with four articles that consider succession, innovation and family governance.

In turn, the research by Rondi et al. ( 2019 ) focuses on the question of what role the family system plays in resolving the paradox between willingness-ability and how to unblock the potential for research innovation. The authors construct innovation postures applicable to family companies and correspondingly identifying four ideal types: (1) Learner, (2) Recreator, (3) Researcher and (4) Adventurer while also exploring the innovation stances of family firms and the dimensions associated with families to resolve the willingness-ability paradox.

Some studies delve into just how second-generation family company CEOS generate their motivation for investments in financial assets. The authors conclude that second-generation CEO characteristics, market competition and financial restrictions hold significant effects for second-generation successors even while there was no significant relationship between the financing of assets by the second generation of family businesses and their respective levels of performance, with investment in business innovation not harming the core business operations of businesses (Ejupi-Ibrahimi, et al. 2021 ; Chen et al., 2020 ; Korherr and Kanbach 2021 ; Nordqvist et al. 2013 ; Strobl et al., 2020 )

Furthermore, Filser et al. ( 2018 ) put forward a theoretical model that explains how family functionality and socio-emotional wealth influence the innovation capacities of companies. The authors apply a structural equation model which returns divergences between certain dimensions to socio-emotional wealth and innovation in companies. In turn, Hauck and Pruegl ( 2015 ) research how socio-emotional interrelate with the perspectives of the owners/managers and the phase of intra-family leadership succession as an opportunity for innovation activities in family businesses. The authors report how the existence of family adaptability and the proximity of a member to the company positively associated with the perceptions of the succession phase as an innovation opportunity.

Schussler et al. (2017) deepen the knowledge on the conditions in which change triggers the pathways to the internationalization of family businesses. These authors reporting that successor generation adopt internationalization strategies due to their long-term orientations with succession triggering the search for internationalization of a “born again global” family business type. Alayo et al. ( 2021 ) conducted similar research.

Finally, Memili et al. ( 2014 ) approach and explore the organizational psychological capital (PsyCap) in franchised family businesses. The authors provide an overall vision of the important role that PsyCap plays in franchised family businesses and in family succession intentions for building up innovation-friends behaviours in companies.

4.2.2 Cluster 2: succession and sharing of knowledge (N = 12)

This cluster contains a total of 12 articles that address family succession and how this may bring about effects on behaviours in the business. These studies also reveal important factors such as the sustainability of family businesses in addition to exploring the relationship between the entrepreneurial competencies of the founders and the innovation capacities of their successors.

Chalus-Sauvannet et al. ( 2016 ) tackle the cases of family succession in which such is an unexpected event, analyzing the cases of descendants that take up other careers outside of the family business but then return and become the successor. The authors set out the different motivations of descendants for such returns and the acceptance of succession; (1) benefitting from a professional career and personal success outside of the family business, acquiring various advantages for taking up a leadership position in the family business; (2) succession is the result of a personal and deliberated personal decision, neither forced nor pushed; (3) the profile and the situation of an unforeseen succession frames them as legitimate leaders with the heirs perceiving the family business management position as compensation for abandoning a promising career; (4) the acquisitions resulting from negotiations that place the heirs in the same position as the older generation and thus at the same level as the predecessors; (5) acting as entrepreneurs through their proactivity in the succession decisions of their parents, taking on risks, detecting new business opportunities and not hesitating over innovating; and (6) implementing changes while maintaining the support of predecessors in order to avoid destabilising the organisation.

According to Li et al. ( 2021 ), leaders who are exiting tend to continue to closely observe their successors following any transgenerational succession and that the successors concentrate on short term developments and investing less in R&D. These authors find substance for their argument that trans-generational succession reduces the intensity of R&D. Schell et al. ( 2018 ), in turn, focus on planned intra-family successions to grasp the role of social networks during succession processes. The authors identify patterns related to the transfer of networks of contacts that influence the duration and structure of the succession process. Schell et al. ( 2018 ) also observe how these social networks generate a strategic impact that may be crucial to the long-term survival of family businesses.

Wang et al. ( 2019 ) discuss how in questions around company succession, focusing on the successors and analyzing the impact of the successor’s knowledge and desire for succession on sustainable corporate innovation and the success of succession. Their research findings observe that the approval of the leader shapes the relationship between the company successor and its sustainable innovation. Chirapanda ( 2020 ) analyzed factors important to the sustainability of family businesses before identifying how innovation, competitive advantage, leadership and team management, and establishing good relationships with the community constitute essential steps in achieving succession processes in family businesses.

Tobak et al. ( 2018 ) examine the experience, successful management and the succession of generations in a Hungarian company, and their results demonstrate that to ensure the maintenance of appropriate succession activities, family management should plan in advance. These authors also discuss how particular needs, including the sharing of knowledge, innovation performance and the best practices making up the company culture, perform an important role in passing on the baton within family businesses.

Furthermore, within this cluster, Letonja et al. ( 2016 a) probe the relationship between the entrepreneurial competencies of the founders of family SMEs and the innovation of their successors. The authors convey how the entrepreneurial competencies of founders (their creativity, attitudes towards risk and technical knowledge and abilities) positively correlate with the innovation capacities of their successors.

Zybura et al. ( 2021 ) study the production of innovation following the succession of family members while also examining whether the origins of successors and the sustained influence of predecessors interrelate with innovation following succession, with these authors discovering that the extended influence of predecessors boosts the probability of producing innovations following succession processes.

In addition, Hillebrand ( 2019 ) describes the generation–innovation relationship in family businesses and recognizing how the degree of family influence over the business varies down through the generations. The author tests whether the generation–innovation relationship derives from considerations relating to family management and the intention to transfer family control, with this author proposing that family businesses raise their production of innovation over generations. At the same time, innovation has positive and negative effects following increases in family influence.

Letonja and Duh ( 2016 ) study the dynamics of knowledge transfer processes and their effects on the innovation capacities of the successors. Their results identify how the tacit knowledge transferred from founders to successors is of importance even while not in itself sufficient to boost the innovation capacities of successors. Woodfield and Husted ( 2017 ) examine the sharing of knowledge among generations within family businesses operating in traditional industries before proposing that sharing knowledge is bidirectional, leading to innovative results and change. According to these findings, the traditional industries tend to lead towards dependency and cause significant inertia regarding managing the innovation activities ongoing in companies.

Finally, Letonja et al. ( 2021 ) also explore the dynamics of knowledge transfers undertaken during family business succession and the effects these have on the innovation capacities of successors. Their results demonstrate the importance of founders transferring knowledge to successors even though this is not a sufficient factor for boosting the innovation capacities of their successors.

4.2.3 Cluster 3: obstacles to innovation (N = 5)

This cluster incorporates five articles that contribute research findings on how the innovation capacities of family businesses vary in keeping with different criteria, including company size, sector of activity and industry. The articles in this cluster analyze innovation and succession in family businesses over the long term and whether business inertia hinders their progress.

For example, Grundstrom et al. (2012) compare the different forms of company management and the respective perceptions in keeping with the adopted type of succession (internal family successions versus external acquisitions). The article evaluates post-succession perceptions of innovation and management in family businesses to conclude that the choice of successor and the business-related values bring about inertia within the scope of which only minor changes in the innovation orientation become feasible. While external managers may concentrate on growth through innovation, family businesses diversify so as not to abandon prior businesses. In the research, the authors identify some intermediate factors such as client involvement, type of SME and the motivations for acquisition that shape the innovation culture of organizations and establish explanatory connections to the intensity and methodologies of innovation.

Civelek et al. ( 2021a ) approach how the innovation capacities of family SMEs transform following the sector of activity, company size, industry and type of succession. The authors report that SME innovation differs depending on the sector of activity, size and industry while furthermore demonstrating that the innovation capacities of SMEs do not alter according to the involvement of succession. Ključnikov et al. ( 2021 ) also analyze the differences in innovation capacities and the obstacles some family businesses encounter with their research findings confirming that the innovation capacities of companies do not depend on the characteristics or age of the founder/entrepreneur.

Furthermore, the research by Santiago ( 2015 ) into how inertia or omission explains the failure of family companies to make progress as failure to act causes company decline and thus conveys the need for action and strategies to avoid companies entering into decline with this author maintaining that when some family members are unable to introduce innovation into companies, in its own right, constitutes a guarantee of business failure.

Finally, Civelek et al. ( 2021b ) examine differences existing in the innovation capacities of family businesses, taking into consideration the age of the founders of each company, the juridical status of their businesses and their succession processes. According to these authors, the capacity for global innovation does not differ according to the business’ or the founder’s characteristics but with higher levels of organizational innovation emerging in SMEs where the successor is present in the company.

5 Discussion and framework for innovation and succession

The clusters found in this research thus present various perspectives on family businesses, the succession process, and the effects they have on each other. The first cluster addresses the impact of the succession process on innovation, however, this cluster does not present how innovation is impacted, and how the succession process can be prevented from affecting the innovation of the companies. Cluster 2 focuses on succession and knowledge sharing. Yet, it does not mention or present how knowledge sharing affects the innovation capacity of companies or how the succession process influences the sharing of knowledge within companies. The third and last cluster presents the obstacles to innovation. However, it reveals few publications that mention some of the obstacles to innovation and do not present the causes or consequences of these obstacles.

It is also possible to observe clusters 1 and 2 present a closer connection, compared to cluster 3, after examining Fig.  4 above in this research. It can be assumed that the clusters Impact of Succession in Innovation (1) and Succession and Sharing of Knowledge (2) have a stronger connection due to the proximity of the themes addressed in each cluster. Cluster 3 presents mostly articles related to the obstacles to innovation, as the type of industry and sector of activity of companies, and both clusters 1 and 2 address the issue of succession and its impact on the businesses. They have more characteristics in common and appear more interconnected (Fig.  4 ).

This research thereby makes contributions, including the systematization of the existing research on the field of innovation and family businesses and their respective succession processes and correspondingly providing a mapping of the literature and an integrated vision of the state-of-the-art while putting forward points of departure for future lines of research. The research shows that the family is vital for the company, causing effects with positive or negative repercussions on the innovation capacity of companies, which can lead to the failure or success of family businesses.

These findings indicate the importance that the family’s involvement in the firm and its innovation activities impacts the success of family businesses and their future.

Based on the three clusters obtained from the bibliographic coupling of the 32 articles, Fig.  5 sets out the proposed framework for innovation and succession. This framework conveys how succession processes impact business innovation and how advice from predecessors may bring negative consequences for innovation, even though different stances toward innovation also emerge and with families driving both positive and negative effects for innovation in businesses.

Research framework (Own elaboration)

The framework also details how the transfer of knowledge by founders holds importance, even while in itself insufficient to boost the capacity for the innovation of successors. The framework further exposes how the influence of the predecessor guides the production of innovation in family businesses with successful succession processes attained by innovation, competitive advantage, leadership, team management and good relations with the community. This framework thereby details the themes approached by research into succession and innovation in family companies and the potential lines for future research.

The proposed framework demonstrates the essential points of each of the clusters identified in the research. The framework presents how innovation affects the succession processes of family businesses, and how innovation influences the success of these businesses. The framework presented also conveys the different stances towards innovation adopted by families alongside the respective effects they cause and how the transfer of knowledge holds particular importance to the family and the succession process, even while in itself an insufficient factor for boosting the innovation capacities of successors. The proposed framework thus enables the analysis and observation of the outputs of past research findings and that approach and define the paths for future research projects.

Succession hinders investment in innovation by family businesses, according to Yang et al. ( 2021 ) even while the family emerges as an important input to business succession and innovation. Research findings also point to how the predecessor continuing to provide advice holds negative consequences for innovation by those businesses even while the sustained influence of predecessors leads to innovation following the succession process. The transfer of knowledge by the founder is important to the succession process, although insufficient to boost the innovation capacities of their successors.

6 Conclusions, limitations and future research directions

We may conclude that succession constitutes an integral facet of family businesses and may alter their respective levels of innovation. Regarding the issue of succession, we may also accept that this process triggers specific alterations in family businesses that shape the production of innovation by the successors and the production of innovation by family businesses. This article also reports on the need for the transfer and sharing of knowledge between predecessors and successors and identifying some factors of importance not only to succession but also to business sustainability, such as innovation, competitive advantage, leadership, team management and good relationships with the community.

We may also affirm that innovation generates impacts and influences how family businesses behave and undertake their succession processes with these impacts also extending to the innovation capacities in effect at these companies. The current study sought to identify how succession in family businesses shapes their levels of innovation even while the bibliographic coupling results demonstrate that the literature displays greater interest in the impact of succession on innovation (cluster 1). The other clusters, succession and the sharing of knowledge (cluster 2) and obstacles to innovation (cluster 3), demonstrate the recent rise in research outputs since 2019, reflecting both the recent nature of these theme alongside their growing importance.

This study conveys how research has focused on how innovation and succession impact family companies even while there was scant research on how innovation might leverage the succession processes of companies or how succession processes stimulate the innovation capacities of their successors. The literature reflects the need to expand research into the effects of succession on company innovation and how they maintain their innovation capacities within the scope of family businesses following succession processes.

This article maps the key themes in the literature on innovation and succession in family businesses and suggests new research lines. This also differs from other systematic literature reviews as this research expands the knowledge on succession and innovation in family businesses following many recent publications.

A limitation of this study is its recourse to only one database, which may have prevented access to other articles relevant to this research field. Moreover, despite care at every step, the process of excluding articles may have rejected articles falling within the scope of this research. Another limitation of the study is the timeframe used in the systematic literature review protocol, which covers publications up to the year 2021, excluding articles after this date, which may have added nuance to the present study.

In conclusion, the research findings make contributions across both the theoretical and practical levels through this systematization of the existing research on family business succession and innovation. Our study provides new insights and a better understanding of the themes dominant in the literature. Our study also represents the first systematic literature review on the succession–innovation relationship in the family business. The practical research implications span the directions for future lines of research, thereby meeting the gaps identified in Table  4 . Our study demonstrates how this theme remains far from fully explored.

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Baltazar, J.R., Fernandes, C.I., Ramadani, V. et al. Family business succession and innovation: a systematic literature review. Rev Manag Sci 17 , 2897–2920 (2023). https://doi.org/10.1007/s11846-022-00607-8

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Succession and family vision

Succession is the most critical challenge faced by family businesses since it touches the very heart of family and firm : its foundational bricks and future legacy.

It’s difficult because it affects people – predecessors and successors, the company and the owner family – as well as complex since it can impact all three different spheres of family-controlled firms: ownership, governance and management.

Beyond these three domains, another aspect – succession in the company vision – is often overlooked or not addressed with sufficient realism and rigor: is the firm’s competitive position strong enough when the time comes for the generational handover?

Laying the foundation for future generations

Each generation is charged with upholding, improving and developing the business and leaving it in the best possible shape for the next.

Sometimes, however, the firm’s corporate strategy, competitive and market shifts, and regulatory and technological changes can alone or in combination render the business model obsolete, leaving its leaders without a clear vision of how to lead the succession process while ensuring the company’s competitiveness and long-term survival.

In these cases, it is necessary to establish the company anew , which may exceed the owner family’s capabilities and resources. An approach based on mere stewardship and corporate revitalization will fall short: the owner family must also be willing and able to transform the company by reinventing its value chain and business model.

This process requires a crucially important strategic-thinking exercise and clear-cut answers to specific questions :

Are we the right owners to lead this transformation?

As a business family, are we equipped to provide the requisite knowledge and vision to develop the new company?

Do we have the resources and economies of scale necessary to turn our company around?

If so, are we willing to assume the level of risk and its associated investments?

Does the next generation agree on adopting a new business model to re-establish the company?

Do these family members possess the needed entrepreneurial and leadership skills?

At this critical crossroads, a SWOT analysis of the owner family is highly useful to assess members’ value contributions and how they stack up against the firm’s current challenges.

As an example, when companies seek to expand their geographical scope or innovate using the same business and organizational model, it’s not unusual for them to call on o utside management experts for guidance.

A common vision for the future

Now consider when the business model is n o longer competitive and needs to be re-invented : these plans are far more daunting.

In these cases, the owner family must carry out a collective analysis and reflection on the current situation of both the company and its shared assets, and agree on a future vision and how it will impact the family’s global assets.

Without a clear and common vision, the decision to continue as owners of a family firm isn’t an obligation from a legacy or an emotional standpoint. This is where responsible shareholdership comes to the forefront: shareholders might prefer the company to operate under new owners to safeguard its long-term sustainability.

Given the potential emotional land mines and difficulty in making these decisions, family firms may be tempted to avoid them altogether and ride on the currents of organizational inertia.

The vision must be in the hands of ownership, with governance and management bodies charged with translating it into solid strategies and business plans.

As John Naisbitt observed, “Strategic planning is worthless unless there is first a strategic vision.”

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Wait, wait, go: a guide to business ownership succession and income transition.

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Crafting a business succession or income transition strategy can be one of an entrepreneur’s heaviest task burdens to bear, particularly when the business involves family members. For many reasons—discomfort, no time, lack of experience or skill— this task tends to be put off until it reaches the urgent state.

There is a better way that begins with a sensible set of questions and guidance through a disciplined process.

Since “happiness is positive cash flow” the first question is: How much money will I need to support my lifetime spending goals? This answer becomes your “number.” Sophisticated financial advisors are well positioned to help you with this type of analysis. As an example of this, our team, the Entrepreneurs Group, a Private Wealth Management team at UBS, guides clients through a planning process we call Strategies For Life’s Liquidity. Through this process, we help business owners get clarity on multiple scenarios with varying sale proceeds and how each can help them meet their future financial needs. This step helps to fuel confidence and empower better decision making.

The second question is: What are the priority factors you should be aware of and considering pre and post exit, and how can each be optimized for your short- and long-term benefit? We guide founders using our Entrepreneurs Total-Wealth Optimization Process (ETOP), as a framework to make sure all critical pre-sale personal and business questions facing entrepreneurs and their families are reviewed, analyzed, and answered in clear terms you can understand. Core components of this include our comprehensive financial planning process and the help we provide by building an expert team of complementary professional service providers to advise you on all key components of your transition so that no stone is left unturned. This step is the foundation for the long term.

The third question is: What path best suits my business, family, and personal goals?

We emphasize three key ingredients to a successful succession or exit: intergenerational communication; a common family focus; and a shared meaning of equality, equity, and fairness. No two families are the same and neither are their businesses so each will view the below three paths through their own lens. Consider the possibilities of three Paths:

Path 1 — Transfer the business to family

Family succession is tricky.

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The large majority of family businesses are not passed down to the next generation. Reasons can include unresolved family disputes, too little preparation of successors, and a reluctance of incumbents to cede control.

Prioritize open, dynamic communication

Start early, as succession discussions can take years. Continuous conversations help to address changing business and family dynamics, while mitigating the risk of tensions and making family less likely to seek outside counsel. Consider drafting a family constitution to drive objective discussion and reduce emotional bias.

Set clear family roles

Know which stakeholders are managers, owners, family members, or a combination thereof. Build policies and mechanisms to resolve disputes if relatives have conflicting objectives. Serial entrepreneur families can consider forming holding companies to unite independent businesses, investments, and philanthropic activity under one umbrella.

Consider equality versus equity of inheritance

Splitting assets equally may not secure a business’s or a family’s long-term future. Consider family members’ talents and distribute assets accordingly. Regularly value assets, assess their growth potential, and spread out the transfer of wealth to maximize fairness.

Path 2 — Sell the business privately

Preparations for sale depend on the expected buyer

In a 2018 UBS Investor Watch survey, 48% of respondents said they planned to sell to a competitor, whereas 15% sought a larger company, and 3% a private equity firm.

Professionalize to provide relevant buyer information

Take the time to gather the administrative, financial, and sustainability data potential buyers want. Seek professional external help, and speak to other entrepreneurs about how to balance day-to-day management with record gathering.

Discuss and agree on how much control to retain

Ensure key stakeholders—including family—can agree on how much financial or operational control will be kept after a sale. Losing financial control can impact on entrepreneur’s personal and family financial goals. Building a robust wealth plan ahead of sale may replace lost income, while potentially providing diversification.

Be ready for corporate change

The extent and nature of change will depend on what type of buyer takes over the business. For example, trade buyers may quickly impose their own culture and cost cuts, impacting stakeholder performance and morale. Employee ownership schemes may preserve the existing culture but bring in fewer new ideas.

Path 3 — Sell the business publicly

Think hard about the drawbacks and scrutiny of a public sale

Entrepreneurs may want to carefully consider the higher public scrutiny and heavier regulatory requirements of this route. Performance pressure, a shift toward “quarterly capitalism,” and a loss of control for future generations all can have financial consequences for the family.

Business owners should prepare and reposition the business—and themselves

Full professionalization and documentation will be critical for due diligence and valuation rounds. The demands of a public sale will likely require business owners to step away from day-to-day operations to market their firm. Training to acquire the skills needed for such a sale may be helpful.

Consider business control—and ways to retain it—after going public

Active discussions among key stakeholders and extensive professional advice could be critical to balancing entrepreneur’s needs with market requirements—including corporate governance considerations in a world of increased scrutiny of sustainability.

Evaluate the ability of family versus external managers to run the company

The skills required of the next generation to lead a public company may differ significantly from the founder’s entrepreneurial flair. Hold open discussions and make objective assessments of whether external managers would better run the firm or whether family members have skills gaps to fill before sale.

Whichever of the above paths you choose, begin thinking about and formulating your transition plan at least one to two years prior to your anticipated transition date and include as part of this process interviewing and hiring the key wealth management, investment banking, legal and tax advisory professionals you will use as your team to ensure a smooth and successful transition.

A note from the author : My career as a McKinsey & Company management consultant prior to my career as a Private Wealth Advisor for families and business founders, showed me firsthand how frequently mistakes were being made by even the smartest entrepreneurs. The other senior advisors on my team, Kenneth Shapiro and Thomas Livaccari, also personally experienced business transitions in their prior careers as entrepreneurs which ultimately led them to form The Entrepreneurs Group at UBS Private Wealth Management, to help founders get it right the first time. Each business is different and preparing for a transition is a complex process. Start thinking about how you can maximize the value of your business today. Visit our website the Entrepreneurs Group at UBS Private Wealth Management for more information here or call (212) 821-2729.

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Succession: how relationships impact leadership development in family businesses.

Succession is the Achilles’ heel of family businesses. A key reason for failure in this process is the insufficient or null preparation that next-gen leaders may receive before they take over leadership positions. The theory of leader-member exchange (LMX) suggests that the quality of the relationship between the leader and other members has a significant impact on their development. Hence, high-quality relationships lead to stronger bonds, and ultimately, better leadership development.

In a family business, close relationships between key stakeholders are present by default. The impact of these relationships can heavily influence the business environment and shape the experience of incoming leaders who are closely related to family, non-family members and other stakeholders. Much research has examined how families develop the business and technical skills of their business successors, yet little is known about the impact their relationships have on the leadership skills of heirs.

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9 tips for passing down your business to the next generation

So, you've decided to keep your business within the family. Succession planning is an essential component of protecting the continuity of your business. If done right, it can also support the success and harmony of your family's long-term well-being.

CIBC's Director of Wealth Strategies, Susan Wood explains, “Business transition planning provides answers to critical questions about how your business will transition when the current management and owners are no longer there.”

Here are 9 tips to help you prepare to pass down your business .

1. Start with a conversation

“Begin by opening a dialogue with all key stakeholders, including your family and potentially the leadership team within the business, to get their input and feedback,” Ms. Wood suggests. Talk to your family and other key stakeholders about their future involvement in the family business.

If your children want to be involved, how do they want to participate? Do they want to take on a management position or an ownership role?

If they're not interested, you may have to consider other options for leadership and ownership transition, such as current managers or employees, or potentially third parties. 

2. Identify and develop future leaders 

“Business transition planning involves deciding how management or leadership of the business will be transitioned, and how ownership will transition,” Ms. Wood explains.

When considering candidates for leadership positions, whether they're your children or someone else, you may want to assess if they're ready. Do they have the skills, competencies and commitment necessary to lead the business? Or do you need to provide training and mentorship opportunities to help them build their capabilities? Those with blended families may want to consider stepchildren to potentially fill roles in the future of their business.

A key consideration is developing a good understanding of what the business needs from its next leaders, which may be different from the skills offered by the current generation.

Additionally, business owners may find it difficult to be objective in assessing what each of their children brings to the table. Sometimes it can help to engage outside consultants to work through this.

3. Create a plan

Once you've started to think about who will take over your business and what that might entail, create a succession plan.

“In some cases, leadership and ownership will transition to the same person, but not always,” Ms. Wood tells us. There are different options that can be considered.

Owner-manager model

The business leadership and ownership is transitioned to one or more children. The family believes that to be an owner, you must work in the business.

Owner-investor model

Ownership of the business is transitioned to the children, but they do not take an active leadership or management role in the business. Rather, they hire external managers to run the company.

Hybrid model

Ownership is transitioned to a mix of children, one or more of whom work in the business and others who do not. The ownership could also include non-family members.

4. Assemble a team of multidisciplinary advisors

A multidisciplinary team of collaborative experts can contribute to the success of your business transition.

Your team might include lawyers, family enterprise specialists, accountants, tax specialists, bank managers and financial advisors. Get advice you can count on from professionals to help you make important decisions about your succession plan.

5. Consider your financial needs

Even if you're not ready to retire, you can start thinking about what your financial needs might look like in retirement.

“If you need to continue drawing a salary or dividends to sustain your needs in retirement, can the business financially support you and your child or children that are stepping into a leadership role?” Ms. Wood asks. It’s important to be realistic about how many family members your business can continue to financially support. In some cases, a business owner’s ongoing need for cash flow from the business to fund their retirement can influence or potentially limit their succession planning choices, making it an important consideration.

6. Keep estate planning in mind

When creating your succession plan, don’t forget about broader estate planning. Make sure you have a legally binding will and a power of attorney for property. If you have children who won’t be involved as owners in the business, think about any other assets you may want to gift to them as a form of equalization, if that is important to you. 

Revisit all these documents regularly and confirm whether they accurately reflect your current wishes regarding transition of ownership of your business and other assets.

7. Address emotional aspects

“Business succession planning can be challenging for many reasons, some of which are emotional,” Ms. Wood explains.

Succession planning has the potential to create family conflict if people have different expectations or feel they aren't being treated fairly. Luckily, you can avoid these issues by starting succession planning early and having ongoing conversations.

You might also feel strong emotions about transitioning your business if you don't feel ready to retire or you're struggling with how to let go. Finding something else that you're passionate about can help give you a new sense of purpose and enjoyment. This can often contribute to a successful business transition by making it easier to let go, and giving the next generation the room they need to take the reins. 

8. Revisit your plan often

The first draft of your transition plan will likely not be the last. Succession planning is not a one-time event. It requires regular review and updates as circumstances change and evolve.

9. It's never too early to start

Many people avoid succession planning or simply don't think about it until it's time to retire. Other people are forced to think about it when they encounter a situation in life, such as illness, that requires them to step away unexpectedly.

Early planning can act as a risk mitigation strategy and help reduce the stress that comes with transitioning a business by providing you and your family with peace of mind.

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss these insights in more detail or have questions about your investment portfolio, get in touch with your advisor anytime.

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Asian Family Businesses: Succession, Governance And Innovation

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T1 - Asian Family Businesses

T2 - Succession, Governance And Innovation

A2 - Koh, Annie

A2 - Lee, Jean S. K.

PY - 2021/1/1

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N2 - The global economy is predominantly driven by family businesses that provide the largest source of long-term employment in most countries. In Asia, family members amongst 60% of large corporations own a significant share of the equity and can influence key decisions. This phenomenon presents family enterprises with challenges and opportunities as any other non-family-run enterprise but in a more complex dimension.This book presents a collection of cases that address three key challenges faced by many of the family enterprises in Asia ― Succession, Governance and Innovation. The narration of the cases also offers the reader tips about good practices among the Asian families, such as effective family governance mechanism, development of innovation and entrepreneurial mindsets across generations, and importance of family culture.This case book is essential reading for anyone interested in addressing the needs of business families in the region.

AB - The global economy is predominantly driven by family businesses that provide the largest source of long-term employment in most countries. In Asia, family members amongst 60% of large corporations own a significant share of the equity and can influence key decisions. This phenomenon presents family enterprises with challenges and opportunities as any other non-family-run enterprise but in a more complex dimension.This book presents a collection of cases that address three key challenges faced by many of the family enterprises in Asia ― Succession, Governance and Innovation. The narration of the cases also offers the reader tips about good practices among the Asian families, such as effective family governance mechanism, development of innovation and entrepreneurial mindsets across generations, and importance of family culture.This case book is essential reading for anyone interested in addressing the needs of business families in the region.

M3 - Edited Books

SN - 9789811228612

BT - Asian Family Businesses

PB - World Scientific

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