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WCG - Succession in Fam Bus 7-10-09

WCG - Succession in Fam Bus 7-10-09

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Published by Bill Taylor
Succession in the Family Business
Succession in the Family Business

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Published by: Bill Taylor on Dec 18, 2009
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09/03/2010

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COLUMNWESTON COUNTY GAZETTEBILL TAYLOR7/10/09
SUCCESSION IN THE FAMILY BUSINESSBusiness continuity requires generation to generation transition. Timelinessin the transition is essential. However, the parents may be unwilling to giveup control and authority at the time the next generation wants it or shouldhave it. On the other hand, the next generation may not be ready for theirresponsibilities when they have to assume them. The founder, as the most influential person in the organization, sets the tonefor management succession, makes the "rules" and, more than anyone else,determines success or failure of the succession. Each family business willeventually have a different generation of managers or it will no longer exist. The founder's acceptance of this reality undergirds and fosters managementsuccession planning. Rejection of this reality stifles the planning.Ideally, the founder integrates management succession concerns intostrategic planning. The founder has the responsibility of involving allmembers of the management team in strategic planning. The founder mustalso deal with the integration of plans for the business and plans for thefamily because "family issues ultimately shape the business strategy."Updating the mission statement causes the management team to
 
continuously answer the question, Why are we in business? This questioncan easily be expanded to deal with questions of business and family values,human resources including employees, role in the community and industry,and long-run aspirations. The next generation has multiple perspectives owing to its composition: sonsand daughters who enter the business, their siblings who do not enter thebusiness, the spouses of the founder's children and the founder's employees.For each of these four groups, there are issues of career and financialplanning, career opportunity and career satisfaction, fairness of treatment bythe founder, and family relations.More than the capacity to manage the business affects the next generation.Factors impacting the next generation are personal need fulfillment, careerinterests, personal identity, life stage, personal influence, mutual respectand understanding between generations, sibling accommodation,commitment to family business perpetuation and separation strains due tofamily involvement.Management succession can be a process taking place over many yearsrequiring cooperation of all people on the management team. The successionsteps involve planning, selection and preparation of the next generation of managers, transition in management responsibility, gradual decrease in the
 
role of previous managers and finally discontinuation of any input byprevious managers.In contrast to the above process, management succession can be by crisis. The crisis may be brought about by the death or disability of the founder,divorce, threat of departure by the heir apparent, or hiring of an outsidemanager in an attempt to "finally fix things gone wrong." In the absence of design and implementation of a process, succession will almost certainly beby crisis. Thirty percent of family businesses in this country survive to the secondgeneration and only half of these first generation survivors make it to thethird generation. Following are five actions for management successionsuccess consolidated from a list of more than 15 factors:1.Select managers for the next generation. A person can rarely besuccessful in declaring himself or herself the new manager.2.Put in place a comprehensive development program for thesemanagers. There needs to be some combination of formal training,self-study, mentoring, communication, performance evaluation,strategizing about overcoming specific weaknesses and employmentoutside the family business.3.Provide opportunities for next-generation managers to fulfill theirpersonal and career goals. Delegation of specific responsibilities and

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