Second and third-generation family businesses are the backbone of the Asian economy. They make up about 60% of all businesses in the region. The founder’s dreams are that his hard work can be passed on and carried on to the next generation to bring more success and prosperity to the family.
However, there are many difficulties and challenges to face in order to carry out a successful transition in leadership. This process requires careful planning and execution to pass on the business to the next generation.
Challenges of Family Business Succession
As the founder or current owner approaches retirement, there are several challenges to be faced during a family business succession:
- Lack of preparation. This is one of the major shortcomings of a lot of successions. When there is not an adequate amount of preparation and there are assumptions and expectations from either party, this process can go wrong quickly as there is a lot of conflict and confusion.
- Generational differences. Family succession entails passing on the business from one generation to the next. This creates difficulties due to the clashes in values, goals, and expectations for the roles and the business. A significant part of the challenge is the older generation giving way and value to the new ideas from the younger generations.
- Family dynamics. Businesses, in general, are challenging to run. Family businesses have an extra layer of difficulty to them because they carry with them the dynamics of the relationships of the parties involved. These complex systems of relationships and rivalries can complicate the process.
- Cultural factors. A lot of the younger generations are being educated abroad, and with that comes cultural influences from the West, which can be a positive impact, but at the same time can create a lack of respect for the elders, which creates resentment and conflict.
Overcoming the Challenges
Despite the many challenges to be faced during this process, hope is not lost. Many steps can be taken to create a successful passing of the torch, which include:
- Start planning early. The succession process can start from an early age by involving the upcoming generation in the business as much as possible by bringing them to work, asking them to use critical thinking with problems that arise, and sharing success stories from the company. The more we share and involve them with the business, the more they will care about it.
- Be flexible. It really helps the process to keep an open mind, as well as open communication. There needs to be a willingness to adapt when things go differently than expected.
- Get professional help. Family succession, as we mentioned before, is a tricky business, and there is no expectation of having to do it alone. We get coaches to help us train our bodies. Why wouldn’t we get help to help us train ourselves and a new generation to prepare for such an important event?
Family business succession is a complex process that can be filled with challenges, yet by planning early and getting professional help you can increase your chances of a successful transition.
Tiara HoqueePsychologist and Emotional Intelligence Coach