Passing a family business on to a successor continues to elicit hopes, anxieties and expectations from every family entrepreneur. On the one hand, attention is focused on the family business that needs to be kept running. Considerable organisational and leadership issues can arise, as well as problems concerning inheritance and tax laws. On the other hand, the business family cannot be ignored, as it also faces challenges in selecting one or more successors from within. Expectations of equal treatment and fairness need to be resolved, competence needs to be assessed, and selection decisions made. Loss of face should be avoided at all costs, since it can often causes massive family conflicts. Handling successors from outside the family along with the expectations people have of ‘other people’ have to be done within the family as well. Another aspect that the WIFU regularly picks up on and examines in its research is female succession. This entails special circumstances, criteria and aspects that family businesses must consider.
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(Video available in German)
Few situations are as important to a family business – and as fraught – as succession in the company. The entire business usually goes through far-reaching changes, and functions, roles and attributions have to be clarified and amended in the family and shareholder group. Many company crises and insolvencies can be traced back to failed succession processes.
Despite all the existing research, advisory literature and countless checklists on the subject, there still does not seem to be a universally valid success strategy for family businesses. In the WIFU’s view, one problem is that succession is usually understood as the decision to hand the business over at a particular point in time and not as a systematic process. Furthermore, the focus is often solely on the person of the successor; the one handing over is often left out of the equation.
Families themselves are partly to blame. They often avoid addressing the topic for too long because it involves engaging with highly emotive themes, such as fairness, children’s abilities, roles and activities in the ‘post-working phase’. The situation comes to a head and escalates when the handover decision takes place. It seems to work better if succession is viewed as an ongoing responsibility within the family.
The Witten model of succession therefore describes the succession process as an ongoing process that extends beyond the actual handing over of responsibility. The question of succession begins at birth and certainly does not end when responsibility is passed on to the successor. Its progression can be divided into nine typical phases. The duration of these phases is not so much a matter of time, it is more about the themes at the centre of each one.
You will find a detailed description of these tips in our best practice guide ‘Succession in family businesses (Available in German)’.
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