Workshop Session III – Part 2
The Challenge of Management
Succession in Family Enterprises
Professor Alden G. Lank
UBC X1
Alden G. Lank
A Significant Challenge:
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40% of U.S. family businesses will
see a leadership change at the top
in the next 5 years
UBC X 2
Alden G. Lank
Session III Part 2
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Management Succession
Planning in Germany
No Plan
27%
Written detailed plan
15%
Albach & Freund
UBC X 3
Alden G. Lank
Session III Part 2
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Succession Planning in Family
Business: USA vs Australia
USA
Australia
Written
Plan
In Mind
25%
11%
34%
56%
No Plan
41%
33%
UBC X 4
Alden G. Lank
Sources: Massachusetts Mutual
Price Waterhouse / Commonwealth
Bank F.B. Survey Session III Part 2
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The Imminent Succession
Challenge: Italy
7% of entrepreneurs
in an Italian survey
have formalized in a written plan
how they want to pass
on their leadership responsibilities
G. Corbetta & D. Montemerlo
F.B.N. Newsletter, May 1998
UBC X 5
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Session III Part 2
Danish Data on Succession
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Question:
What do you hope happens with the company at
the next generation change?
A member of the family will carry on
the company
Question:
48.6%
What do you consider to be the realistic scenario
at the next generational change?
A member of the family will carry on
the company
Total Population
9100 companies
No. of Responses
2790 companies
33.0%
Green Institute of Market Research
UBC X 6
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Session III Part 2
Family CEOs Stick Around
in Germany
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FB
NFB
% in job > 20 years
47%
21%
% changing CEOs in previous 5 years
43%
63%
% leaving job after age 65
32%
17%
% successor < age 45
75%
58%
Sample:
422 enterprises
Employees:
100-5000
70% were FBs, of which 75% had < 500 employees
UBC X 7
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Albach III
& Part
Freund
Session
2
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Session III Part 2
Departure Styles
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I.
II.
Monarch
III.
Ambassador
Refuses to depart and typically dies on the job
Reborn Entrepreneur Keeps contact with family firm but leaves to
start up another company
Gives up CEO post but stays on as the firm’s
external network builder
IV. General
Agrees to depart or gets forced out but plots his
return
V.
Leaves, usually voluntarily, and remains
available for providing advice and guidance,
when asked, to the new generation
Mentor
VI. Hedonist
Voluntarily departs to pursue cultural
activities/hobbies which he/she never had
enough time to pursue earlier
Sonnenfeld & Lank
UBC X 9
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Session III Part 2
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“Le jour où je m’arrêterai,
c’est que je serai mort. Ce
sera d’ailleurs une surprise
pour tout le monde, y comris
pour moi.”
Jacques-Yves Cousteau
UBC X 10
Alden G. Lank
Jacques-Yves Cousteau
“The day that I stop it will be
because I am dead.
Moreover, that will surprise
everyone, including me.”
Session III Part 2
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“Ce n’est pas parce qu’un
gosse est né de votre sperme
qu’il a les qualités
nécessaires pour vous
remplacer.”
Jacques-Yves Cousteau
about his son
Jean-Philippe
Cousteau
UBC X 11
Alden G. Lank
Jacques-Yves Cousteau à
propos de son fils
Jean-Philippe Cousteau
“It is not because a kid is
born from your sperm that he
has the necessary qualities to
replace you.”
Session III Part 2
A Founder Looks at Work
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“Thinking men know that work is the
salvation of the race, morally, physically,
socially. Work does more than get us our
living, it gets us our life. I do not think that
man can ever leave his business. You
think of it by day and dream of it by night.”
Henry Ford
UBC X 12
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Session III Part 2
Letting Go: It Can Be Difficult
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Each of us in his own unconscious way seeks omnipotence
and immortality.
To varying degrees, each wants his achievements to stand
as an enduring monument to himself;
each wants to demonstrate
that he was necessary to his organization, that it cannot do
without him.
This pressure is particularly strong
for entrepreneurs and those who hold
their positions for long periods of time.
Harry Levinson (1971)
UBC X 13
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Session III Part 2
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Session III Part 2
A Message for the Successee
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“The final test of greatness
for a business manager
is to know
how and when to let go.”
Peter Drucker
UBC X 15
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Session III Part 2
Mandate No. 1
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You have been asked to address a group
of highly competent, new university
graduates – all of whom aspire to reach
the very top level of your family company.
What advice do you give them to
maximize the probability that the eventual
transition of management power is as
efficient and effective as possible.
Assume that there are a couple of your
family members in the group?
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Session III Part 2
Mandate No. 2
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Assume you are addressing a group of
CEOs of family companies most of whom
are members of the owning family. They
range in age from 55 to 75.
What advice do you give them to
maximize the probability that the eventual
transition of power is as efficient and
effective as possible?
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Session III Part 2
Advice to Potential Successors
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 Relevant education
 Outside experience
 Examine motivation
 Be prepared to live in a fish bowl
 Insist on clarity of role expectations and performance





standards
Demand honest, constructive feedback on performance
Actively search out developmental opportunities
Build alliances with key stakeholders including the family
Get to know the successee and top management team
Clarify successee’s plans
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Session III Part 2
Successee: Caveats
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1. Don’t force potential successors to enter or stay
against their will
2. Create systems for:
•
•
•
•
•
Challenging assignments
Diverse experiences
Realistic objectives and standards
Quality feedback on performance
Opportunities for education and training
3. Manifest interest and concern
4. Start the process early
5. Share your values but do not expect that
successor will buy all
UBC X 19
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Session III Part 2
Successee: Caveats
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1.
2.
3.
4.
5.
Interact with stakeholders
Build consensus
Clarify intentions on phasing out process
Stick to your intentions
Develop game plan for retirement
N.B.: The name of the game: Go for competence!!!
UBC X 19a
Alden G. Lank
Session III Part 2