Rising to the Challenge of Succession Planning in Family Firms

Finding a family successor is one of the greatest challenges for family firms but when done correctly, it will deliver value for the company over and above any other strategy.

- Morten Bennedsen

For all family firms there comes a point when the founder has to retire. The family has to then decide whether to keep the firm family-owned and family-managed. When there are strong assets (the unique contributions that only families can bring to the firms) underpinned by efficient governance structures, a family succession is the right path to take. But how to ensure the path ahead is clear for the chosen successor?

My book the family Business map co-authored with Joseph P.H. Fan, identifies a number of challenges that families and businesses across the world face during a succession process. These include cultural issues, the transferral of family assets and competency. The first three are:

The challenge of succession culture

The challenge of transferring family assets

The challenge of being competent

When culture matters

It would be unrealistic to believe that the culture of any given country does not affect the succession planning of family firms. In fact, this is probably the strongest influence over the firm’s decisions in this process. a succession model which works successfully for, say, a 40-year-old U.S.. family business could not easily be applied to a Chinese Confucian-based family firm in Malaysia where the sons would typically inherit the lion’s share.