CONDUCTA CULPABLE

Founding a new company provides the chance to develop and implement individual and new business ideas for entrepreneurs who want to build their own living. Taking over a running business has other general advantages such as continuing with the operation of a known and valued brand. Further general advantages – against founding a new company – are (Leitl, 2007, p. 85):

 Avoid beginner’s mistakes,

 Limited and calculable entrepreneurial risk,

 An experienced staff assures continuity and stability,

 An existing customer base provides ongoing turnover and income,

 Existing distribution channels can be developed.

With an intent to holistically analyze the challenges faced in family business succession, Wulf and Stubner (2010) offer a basic model that outlines important and potential fields of the problems. The model intends to encompass all integral aspects of succession and thus helps that important facets are kept clearly in mind. The model allows also for structuring problems within the succession phase. The authors have identified four problem fields presented in their

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working paper. These are the entrepreneur, the successor, the family and the process of transition. Each problem field is influenced by specific drivers. Advisory boards can help to professionalize the important phase of succession especially when young family businesses are lacking succession experience.

From a practical business point of view, the importance of organizational culture in family businesses also requires consideration. Organizational culture is for now widely seen as a company’s identity but also as the source of power of an organization. Family businesses have usually deep-seated histories and organizational culture from which employees establish their identity and loyalty. This is often the source where family businesses take their distinctive power from, but at the same time, this is what makes them what some would call “resistant to change”. This aspect threatens the potential of success in succession as the management of the business is replaced typically after a long period of having the same management.

Molly et. al. (2010) studied the impact of a family business transfer on the financial structure and performance and found no evidence that a family firm’s profitability is affected by succession, which shows that a transfer should not necessarily be seen as a negative event in the life cycle of a family business. A contrary position concerning the succession process is proclaimed by File and Prince (1996); In their research studying 749 heirs of failed family business, they found that inadequate estate planning is often associated with family business failure than is poor succession planning. Also contrary to several current publications, Lussier and Sonfield (2004) only found a few significant differences between the variety of family business management activities, styles and characteristics. However, Sharma has suggested to conceptually differentiating between high performance of families or businesses or both dimensions (cf. Sharma, 2004).

Wimmer and Gebauer summarized some critical aspects that impede a successful succession (cf. R. Wimmer & Gebauer, 2009, p. 49 ff.):

 Missing family strategy – the predecessor does not have a future perspective,

 Pronounced narcissism of predecessor (especially first generation founders) – the predecessor expects a “similar” personality as he or she is and (same dedication to the product and company),

 Involvement of the predecessor is not deconstructive – the predecessor is involved but leaves decisions and communication for the next generation.

Once a successor is taking over control, there are many potential conflicts that can arise because of different strategy approaches between successors and antecessor. Fink & Zimmermann (cf. 1989) summarize potential conflicts due to different interests between the successor and the antecessor respectively the owning family. These fields of conflicts could be developed further theoretically for potential successor success or failure.

..successor Potential Interests

of the… …antecessor

COMPANY GOALS AND STRATEGIES

Dynamic growth Consolidation

Diversification with new products

Concentration on core business

Take out large-scaled loans Largely equity financing

Internationalization of business Stabilization and development

of domestic / home market COMPANY CONSTITUTION

Take in new partners and participation on other corporations

Protection of independence as a family business

Transition in a public

corporation and public offering

Maintenance of legal form / private company

LEADERSHIP STYLE AND ORGANISATION Extensive delegation of tasks,

competences and responsibilities

Concentration of decision making power at the top management

De-centralization Centralization

Cooperative leadership style and team orientation

Patriachical attitude and in line with individual relationships with emploees

Table 2-5: Conflict potentials in transitional phases44

When successors talk to their fathers for instance, they are confronted with multiple roles and expectations (father & son vs. CEO & successor). There is a danger of getting confused with a discussion by mixing up these roles. Business relevant propositions made by the successor for example can fast lead to criticism against the efforts of the older generation that were made in

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the past with high efforts (e.g. propositions on business or sales area development, changing IT systems, or handling customers different). Another pitfall may exist in announcing the intention to take over control. On the one hand, powers transferring family business managers expect the younger generation to progressively seize the business (through which a successor demonstrates entrepreneurial orientation). However, those managers may feel as though they are losing power.

Family businesses with an intensive overlap of the subsystem family and business are bearing a potential for failure and emotionally loaded fights as the two systems and, there within, the roles, identifications and expectations cannot be clearly separated by family members talking to each other. Inter-generational communication therefore has a special need for high-quality communication skills. In her speech at the “FBN Next Gen Summit”, Kux mentions the importance of good communication skills and outlines certain hints for improvement (Kardos, 2012):

 Check overlap of the systems family and business in order to identify explosive potential,

 Check overlap of the successors values with that of the business (and eventually face the brutal facts),

 Listen actively through paraphrasing, open questions, waiting, empathizing and reflecting,

 Demonstrate patience – every person has his or her individual biorhythm with decisions,

 Do not criticize the past – what was right in the past must not necessarily be right in future, but emphasizing changing the world and advanced customer expectations will better support arguing for changes.