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Family Succession in a Family Business Published: Monday, May 3, 2010 1:00 am By: Ramón L. Rivera, President & CEO

Perhaps no other family business issue has been devoted so much attention as the issue of succession. This is, however, hardly surprising since succession can be seen as the ”ultimate test of the family business”, involving issues of technical, organizational, and psychological character. Researchers on family business (Gersick et al 1997, Handler 1994) emphasize that succession must not be understood as a single event. Instead, succession is a ”multistage process that exists over time, beginning before the heirs even enter the business” During this process, both the present manager and the successor should get used to their roles and learn how to handle their new situations, which includes both practical skills and emotional challenges.  

 

Family firms are often depicted as a social context characterized by complex role relationships. A member of a business family can have three different roles within the context of the family firm: family member, an operational role in the business and owner. Because these different roles are played out in one and the same context – the family firm – the role boundaries between these roles can be said to be rather weak.   This is often the case with the role as CEO.  To exit the role as CEO is therefore a huge challenge – even if ownership is retained. “Letting go” of the business is frequently described as the biggest challenges in the life of an owner-manger.

 

When someone identifies the self as a certain kind of person through the role, the likely implication is that leaving the role is very difficult. In this case to switch roles is to switch social identities. Someone identifying with a role is constantly seeking opportunities to enact it, and is prone to integrate that role with his or her other roles. In some cases, role identification might imply a loss of an independent sense of self. Individuals identifying strongly and exclusively with a particular role might be devastated if forced to exit the role, as they have no alternative identities to fall back on.

 

To exit the role as CEO can therefore imply an identity crisis  - “who am I when I am not the CEO”? This deserves to be taken seriously – or else it could ruin the whole transfer process. To exit the role as CEO is a mental and emotional process of maturity that starts long before the actual role shift. It takes careful preparation to exit a role with meanings extending far beyond making a living. 

 

A large part of the succession literature focuses on the resistance of the founder-entrepreneur to passing the business on to the next generation. Related to this problem is the tendency of founder-entrepreneurs to hang on to their creations even when they formally have passed the baton. Having devoted most of their time and energy to the business, founders are likely to be emotionally very attached to it.

 

For the roles transition to be complete, i.e. for the senior person to exit the role as CEO her or she has to find other roles that will not only fill the owner’s time, but –more importantly will also meet the needs of identity, meaning, belonging and control.  Especially if the senior generation intends to continue working in the business on a daily basis it is vital that his or her new role is made absolutely clear. Moreover, the duties of this new role must not overlap with the role as CEO. As discussed, role exit is difficult as it violates deeply held human needs.

 

If there is any overlap between the senior generations new operational role and the role as CEO it will be all to easy for the senior generation to “glide back” into the role as CEO. If this happens the result is that two persons are simultaneously trying to enact the role as CEO – even if only one of them is formally authorized to do so. Without a crystal clear job description – with absolutely no overlapping areas of responsibility – for the senior generation’s new role in the business, the risk of failure in the transition of the CEO role is very high.

 

With respect to the above discussion, an absolute requirement for the successful entrance of the next generation into the role as CEO is the senior’s successful exit from the same role. A next generation family member taking over the role as CEO faces also other challenges. The complex role relationships in the family business tend to make the transition of the role a CEO to the next generation especially demanding. One reason for this is that “child” taking over runs the risk of always being compared to the parent. Whatever he or she does in the role as CEO this will be evaluated in the light of how the parent should have handled the matter.

 

It is however, exactly by making his or her own mark that the next generation can make the way out of the shadow of the previous generation. As long as the child is trying to “copy” the parent, this will prevent him or her from psychologically engage in the role as CEO. Without a psychological engagement, the next “child” will not identify with the role and thereby not feel comfortable enacting it. In turn, this means the role will not be enacted with self-reliance and so the individual will not be able to release his or her full potential in the role. 


 

 Copyright 2010 QBS, Inc.

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