Dubai: Businesses have over time come up with workable solutions for many issues of managing a company, even those that may have been deemed insurmountable at the time. But when it comes to effecting a plan for smooth succession at family-owned businesses or those led by an entrepreneur who called all the shots, even the best minds have often come up short. It’s certainly not for want of trying.
“Generally, succession problems are greater the less mature the business is, partly because young businesses lack well established governance,” says Nigel Nicholson, Professor of Organisational Behaviour at London Business School. “Older firms have done it before and learnt lessons.
“There is no perfect solution ... other than paying attention to the unique nature of the individuals concerned and their profile of interests and abilities. There needs to be a shared vision of what the business needs in terms of capability and action, and a pragmatic desire to get the right people to support the balance of the attributes of the incoming leader.
“Mostly, however, the challenge is finding a meaningful role for the outgoing leader, one which respects his past contribution and helps him find a new positive path for the future.”
But in family-owned businesses, succession planning needs sensitivity as much as it requires management acumen. Failing that, it would lead to many a bruised ego and which could spell disaster for the company going forward.
Some owners take the easy way out by hiving off parts of the business into individual, stand-alone units and which would be led by key members of the family. That, as if often the case, can come with its own problems.
“This one model of family development, common in the Middle East and India, works well if the businesses are well capitalised and run with a sound vision,” said Nicholson, who is also the author of ‘Family Wars’. “However, if this is undertaken just to separate the siblings or cousins — that is weak logic. Not every family member has to — or should be — involved in the business.
“Transitions are always risky, for a variety of reasons, but inevitably a founder’s vision gets changed through the process of succession. We should not forget that entrepreneurship is not one process, but three: 1.) Exploring and finding opportunities or problems to be solved; 2.) Finding and developing novel products, services or solutions to problems and 3.0 Scaling them up and bringing them to market.
“Over-reliance on a single person’s vision or ability could be a drawback. Great innovators often go out of business because they are unbalanced in their ability to deliver these actions.”
The culture in which the business is embedded leaves its own mark on succession planning. “Some Europeans have low expectations and a laissez-faire attitude, others insist on children having established themselves in other firms before coming back to the business.
“In some cultures, children automatically assume they will be part of the business. In some, women are excluded; in others treated equally. Some Japanese families with daughters even “adopt” sons-in-law, who will even change their names.”
