SUCCESSFULL FAMILY BUSINESS TRANSFER

Tags: SME, business development, training, change, coaching, leadership

By John Jeckmans, originally November 2008, modified 16 Jan 2011


Founders of family owned SME’s will face the question of business transfer at some point of time, a transfer within the family (children) or outside the family, an exit or discontinuation of the business they started and developed. In the Netherlands, at present, the amount of transfers is approx. 15.000 transfers (on average 180.000 involved employees) per year, of which 30 % is a within-family transfer, i.e. parent – child succession. (Meijaard et al, 2005)

Personally I have engaged some of these processes, either at sale/transfer or before & after. I have witnessed the struggle of the successor, especially some years later, to fulfil expectations (either perceived or real), resulting in less than optimal business performance, self-questioning, difficult work-life balances, conflicts, and in some cases even abrupt discontinuation of the business.

Research also, shows that succession can be problematic, since only 30% of the family businesses survive a transition to the second generation, and only 10-15% survives the transition into the third generation (Birley, 1986; Ward, 1987). Of course the same can be argued for succession issues in other type of businesses, but within family businesses an additional complicating factor lies within the emotional factors of the founder-successor relationship and the social ties with the family (Dyer, 1986; Lansberg, 1999; Miller et al., 2003).

So, is it possible to predict the pattern of influence (if any) from founder (parent) on successor (child), and thus create upfront awareness with regard to succession planning, resulting in deliberate choices regarding the family business?

Basic assumption is that through awareness (knowing, sensing) of possible conflict factors, deliberate choices will be made in succession planning, which in turn will result in more optimal choice outcomes, hence improved business performance, and a higher success rate of succession (business transfers) within the family.

Since here a business transfer is from Parent to Child, there exists a possible role conflict within the founder as MDO (Managing Director Owner) and as parent. Same would apply for the successor as successor (heir) and child. Research shows that running a successful business requires a certain personality type (Schmitt-Rodermund, E., 2004), meant is the whole of perception of self, leadership style, communication style. Similar aspects will be valid for the father role, however of a different nature and magnitude; to be a “good” father requires a different approach towards the child, than towards an employee.

Similar role outcomes will apply to the possible successor. Simultaneously acting as employee, as successor, and as family member (child), all constitute different roles that are possibly conflicting and can result in different projected identities.

These assumptions also touch on existing, researched concepts such as employee satisfaction, role conflicts (Grote, 2005), motivation and commitment (Sharma et al., 2005) on the one hand, and business performance, the business environment, the strategic choices on the other hand.

A general business transfer framework (Meijaard et al, 2005) is shown in figure 1.

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Figure 1: Business Transfer Network

 

REFERENCES

  • Birley, S. (1986), “Succession in the Family Firm: The Inheritor’s View.” Journal of Small Business Management, 24(3), 36-43.
  • Dyer, W. G., Jr. (1986), Cultural Change in Family Firms: Anticipating and Managing Business and Family Transitions. San Francisco: Jossey-Bass.
  • Grote J., (2003) ‘Conflicting generations: A new theory of family business rivalry,’ Family Business Review Vol. 16, No. 2, p. 113.
  • Lansberg, I. S. (1999) Succeeding generations: Realizing the dream of family in business. Boston, MA: Harvard Business School Press.
  • Meijaard et al.(2005) Business transfer: a new start, Entrepreneurship in the Netherlands, (2005), Zoetermeer: EIM
  • Meijaard et al (2005), The relationship between successor and planning characteristics and the success of business transfer in Dutch SMEs, Zoetermeer: EIM.
  • Miller, D., Steier, L. and Le Breton-Miller, I. (2003) “Lost in time: Intergenerational succession, change and failure in family business.” Journal of Business Venturing, 18(4), 513-551.
  • Ones, S. D. C. V. T. A. J. (2007). In support of personality assessment in organizational settings. Personnel Psychology, 60(4), 995-1027.
  • Schmitt-Rodermund, E. (2004). Pathways to successful entrepreneurship: Parenting, personality, early entrepreneurial competence, and interests. Journal of Vocational Behavior, 65(3), 498-518.
  • Sharma P., Irving P.G. (2005), Four Bases of Family Business Successor Commitment: Antecedents and Consequences.” Entrepreneurship: Theory and Practice, Vol. 29, 13-33
  • Ward, J. L. (1987), Keeping the Family Business Healthy: How to plan for continuing growth, profitability, and family leadership. San Francisco, CA: Jossey-Bass.