Tuesday, May 8, 2018

Managing succession in family businesses

I prefer to work with family businesses than so called professional organisations. My reasons are simple. Family businesses have always appeared to be more sincere in their objectives. Hence, their chances of implementing changes / improvements successfully are always higher. And so, working with them I stand higher chances of tasting success and satisfaction. 

However, family businesses, particularly the more unorganized ones and smaller ones face one serious business challenge. They find it difficult to pass on the baton to the next generation smoothly. Sometimes (a) in smaller businesses, the next generation may not find the business appealing enough to get involved, or, (b) even if they join the family business, their ways of doing work isn't acceptable to their predecessors. 

In the case (a) above, the business owner loses motivation in scaling up or running a good business and performance gradually worsens. In the case (b), there is regular conflict in the two generations and if there's no amicable resolution, the policies and decision makings become inconsistent, and as a result employees become confused; performance wanes. 

So what's the remedy? Unfortunately, there's no quick fix solution. The responsibility of a smooth succession rests on the business owners (predecessors). The older generation must own its responsibility in ensuring a healthy transition of management responsibility to the next generation in the family, i.e. if they want it. Assuming that they want it, they should build the business and continue to build it in such a way that attracts the next generation. So consideration of expectations or managing the expectations of the next generation is an integral part of this process. Some families involve their children from an early age informally and both sides learn to understand each others needs and expectations and address the same. Some families upgrade their businesses aggressively with time and compete strongly. In short family members should try to attract the nextgen or involve them and should  try to understand and respect their needs too. Exact approaches may vary, but the basic objectives must remain the same.

A family business must consider succession at an early age of its life cycle and integrate it as a part of its culture and practices. It's a risky choice to be left undecided as it could make or break a good business.


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