Exploring the management succession process in small and medium-sized family businesses

Abstract

Small and medium-sized family businesses in South Africa facing unique management succession challenges, they are particularly vulnerable to the detrimental consequences of a poorly implemented management succession strategy. Many family businesses experiences with difficulty to transfer entrepreneurial commitments and capabilities from the first-generation owner to a less "hungry" second-generation owner. The primary objective of the study is to explore the management succession process in small and medium-sized family businesses with the intention to gain a deeper understanding into elements that distinctly identify this sensitive subject. This research study was conducted through a literature and empirical study. The primary intention is to obtain an understanding of family businesses with specific reference to the strategic significance of the management succession process in the business. Topics covered in the literature study on family businesses include a definition of family businesses, family business success, uniqueness of family businesses, characteristics of successful family businesses, advantages and disadvantages of family businesses and challenges family businesses are facing. Subjects discussed in the literature study on the management succession process include a definition of succession, the importance of succession in family businesses, factors that influence succession, succession planning, selecting and choosing a successor as well as mentoring and preparation of the successor(s). The research methodology takes shape in the form of a qualitative study, a semi-structured interview schedule has been applied by the researcher to preside over the research. The interviews with the specific business owners were conducted personally in English and Afrikaans. Moreover, the interviews were exploratory by nature, thus, respondents had given their own opinion and were afforded the opportunity to propose implementation initiatives to the term "succession planning" within their specific family and business structure. It was concluded on the basis and findings of the empirical study that the general perception is true that small and medium-sized family businesses do not have a formal written succession strategy on the table. These businesses tend to take a less structured approach which allows them to adapt quickly when dealing with the succession topic, family members strategise their decision-making around the basic principle of good understanding and mutual trust amongst family members. Family businesses with high levels of sibling rivalry tend to fail during the succession planning and management succession process. Lastly, practical recommendations focus on the critical leadership strategy the first-generation owner should portray to help and guide the relatives in a constructive manner during the management succession process, parents should be initiators of the succession planning strategy, although they work through their own emotions concerning 'letting-go' they are the only party who has the influential power to initiate and manage the management succession process through to the second generation. It is finally recommended to the second-generation owners to take an honest look at their future, should they stay in the family business or should they go and find a new life for themselves outside the structure of the family business. Finally, relatives who finally decide to stay should consider implementing critical policies and procedures as recommended during the final chapter of the study.