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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 2/27/2014

Transitioning from one generation to another 

Transitioning from one generation to another
Transitioning the family business from one generation to the next is seldom an easy and straightforward process. There are a number of inherent complexities and obstacles that need to be tackled, or overcome, to try to ensure the future success of the business.

Challenges faced during the succession period can often be heightened by the close-knit structure of family in business, and furthermore by the disconnect, or gap, between the different generations. Grant Gordon of the Institute for Family Business (IFB), in the book, Family Business Management Perspectives: Succession (PDF 752 KB), states:


“The transition of a family business from one generation to the next confronts owners with a complex set of decisions and, in most cases, they have to make these against a backdrop of confusing psychological and cultural pressures.”

Succession and securing success

According to the IFB, succession can be considered one of the most long-term challenges facing a family business. The process of succession planning plays an absolutely critical role in securing the future success of the business, and is an important part of ensuring smooth sailing during the transitional period.


It’s often easy for business owners to become consumed by day-to-day management and running of the business, so much so that they fail to adequately prepare for the succession phase. Starting early is of paramount importance. Leaving the succession planning process to the last minute may result in hastily made decisions, and insufficient time to create the adequate buy-in from all family members concerned.

Communication is invaluable to family business

Ensuring that all family members have a say and role in the succession planning process will also facilitate a stronger united front in supporting the next generation successor in the coming years. Don’t let a lack of communication be the pitfall to successful transition from one generation to the next. See the time before succession as a valuable period for knowledge-transfer and information sharing.


It’s important that all family members involved in the succession discussion set aside any pre-existing issues and grudges, and focus on some of the critical issues at hand. Family business internal discussions often focus on the current issues at play, seldom looking to the future.


Succession planning creates an invaluable opportunity for more meaningful family engagement, and should be used to answer questions relating to the departing generation, building the skill set of the next generation, and seeing in the successful transition of leadership.

Transitioning the family business

One cannot deny the impact of feelings and emotions on succession planning, and it’s vital that business leaders foster an environment where these are adequately dealt with. An essential part of succession planning is the realization, on the part of the departing business owner, that not all things can be equally shared or fairly distributed amongst the next-generation family members.


While it’s important to manage relationships and expectations, it’s also important that the right candidate is selected, based on merit, skill-set, and their qualification to take on the very important role. Enough cannot be said for the massive value that training, mentorship, and coaching can add to the transition process. Mentorship is a growing business trend that would be well adopted in, and suited to, the family business structure.

Managing relationships and expectations

Key to a successful transition is creating buy-in and awareness of the central family vision, and the values that should be upheld in the business for generations to come. Establishing a strong company culture in everyday business may facilitate an easier adoption of the vision and values, and may better facilitate the outgoing family business owner leaving a formidable legacy behind.


An important differentiation that needs to be made in relation to adopting a mentorship programme for the next generation is that it is not the same as spoon-feeding. Affording the next generation members sufficient autonomy to make decisions, based on guidance, as well as mistakes, is key to establishing a positive skill set for business management and leadership.


It further enables the successor to build their own character, way of leadership, and decision-making style. Family business relationships are inherently fraught with complexity, and it is within this context that adequate succession planning becomes critical for future business success.

Building and growing the next generation

Transitioning ownership to the next generation should be a positive and engaging process in the business, and should be capitalized on in order to strengthen the family business culture, the vision, and the values built by the exiting generation.

 

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.
 

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