Family businesses should prepare for the unexpected if the next generation succeeds.


Family businesses seeking the next generation to take control need to prepare for unexpected events – such as Brexit – according to researchers at the University of East Anglia (UEA).

Instead of trying to protect companies from the outside world and exclude non-family members from taking on leadership roles, modern family businesses should open up to collaboration and expertise.

They should prioritize equipping all of their members for the "unexpected, the erratic and the external," rather than seeking longevity and friendly inner relationships. The authors argue that this is particularly important when rapid social and economic changes occur outside the business.

Moving a business to the next generation is commonly called succession planning. Using a family-owned construction company in Scotland as a case study, Dr. Zika Bika and Dr. Fahri Karakas of UEA, and Prof. Peter Rosa, of the University of Edinburgh Business School, analyzed the succession process over three generations.

As part of the STEP (Successful Transgenerational Entrepreneurship Practices) world project, they investigated how the values, knowledge, and resources of the entrepreneurial family emerged or were transferred from the founders to subsequent generations. The results, published in the journal Family Business Review, show how the traditional process of succession has changed.

Where once they were taught "at work" from an early age by the older generation, referred to as "internal socialization," younger members now network with stakeholders and external peers known as "interactive socialization" to bring in new skills . and knowledge. This may involve working elsewhere in a different or related industry before joining the family business.

A third process, the "experiential socialization," sees the younger members of the family using their external experiences and their own participation in the business to better inform how to replicate their values.

Lead author of the study, Bika, an associate professor of entrepreneurship at the UEA's Norwich Business School, said Brexit is an example of an unusual external event that could affect family businesses.

"When the change that takes place outside the business is quick, your new experiences and the way you experience the context become very important.

"Events like Brexit can make family businesses worried about succession, the older generation may think the younger generation can handle it better and bring succession. For a company to adapt to something like Brexit can take years, but some companies will only have had months. "

Dr. Bika added, "Although an entrepreneurial mindset can be" nourished ", which is gradually developed over time, or" transmitted "through traditional processes of socialization, it can also be nourished organically through peer interaction and experiential learning.

"Instead of departmental boundaries, ground rules, and training tools, we suggest that modern family businesses need more open spaces and collaborative events that bring together diverse stakeholders and recognize a variety of personal experiences, role changes, and emerging strategies in a context flexible and changeable. "

The authors say the findings have implications for family business planning training, which should no longer be seen as an internal process by systematically transferring values ​​and knowledge from the older generation to the younger generation, rather than pairs, mentors, shareholders minority and professional consultants. and non-family managers, who may not be driven by shared goals or constitute a successor team.

They add that when change is rapid, the older generation can benefit from "resocialization."

"This study provides a rationale for introducing more formal re-socialization training and guidance to family business leaders," said Dr. Bika. "The younger generation can teach older members what they need to know and do in the new business context. Indeed, in times of rapid change, attitudes, knowledge and skills of the older generation, conscientiously passed on to the children, can be active contributors to business failure.

"In our case study, resocialization has become a business-conscious strategy. A dynamic board of family and non-family directors, a less self-sufficient growth strategy, a proactive approach to business opportunity creation, such as a new induction and other programs adapted for apprentices and the adoption of new "modern" managerial practices such as new open-plan offices are among a number of recent changes that have reversed years of traditional family management practices.

"This is best illustrated by attempts to engage more shareholders in the running of the business, requiring many to reconsider and abandon the older assumptions."

Multi-layered socialization processes in transgenerational family businesses, Zika Bika, Peter Rosa and Fahri Karakas, is published in Family Business Review.


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