Strategy for succession in family owned small businesses as a wicked problem to be tamed

Contemporary strategic-planning processes don’t help family businesses cope with some of the big problems they face. Owner managers admit that they are confronted with issues, such as those associated with succession and inter-generational transfer that cannot be resolved merely by gathering additional data, defining issues more clearly, or breaking them down into small problems. Preparing for succession is often put off or ignored, many planning techniques don’t generate fresh ideas and implementing solutions is often fraught with political peril. This paper presents a framework to explore the idea of wicked problems, its relevance to succession planning in family businesses and its implications for practice and policy. A wicked problem has many and varied elements, and is complex as well as challenging. These problems are different to hard but ordinary problems, which people can solve in a finite time period by applying standard techniques. In this paper the authors argue that the wicked problem of family business succession requires a different approach to strategy, founded on social planning processes to engage multiple stakeholders and reconcile family/business interests to foster a joint commitment to possible ways of resolution. This requires academics and practitioners to re-frame traditional business strategic planning processes to achieve more sustainable family business futures.

Succession in the Family Business: Need to Transfer the ‘Socio-Emotional Wealth’ (SEW)

Rather often we have to confront with the pessimistic views on the future of the family business. Contrary to these prognosis, the FB is not only present but also improving its position in the global economy and playing a key role in the European economy too. They represent 60 % of employment and more than 60 million jobs in the private sector. Among many internal challenges of FB in the five years’ time, the importance of the ‘company succession’ is increasing together with the renewing technology and ‘attracting the right sills/ talents’ (Global Family Survey, 2015). This article is focusing on the transfer of socio-economic wealth (SEW) as a key intangible asset within the intergenerational changes in the FB. The paper outlines the various concepts (narrow vs. broad) of the SEW and special attention is paid to the risk prone [taken] and risk adverse entrepreneurial attitudes. In this relation, the authors made distinction between the ‘opportunity’ and ‘necessity entrepreneurs’. Using empirical experiences based on multi-site company case studies in the three INSIST project countries, the various sub-sections are focusing on the transfer of the following key components of the SEW to the next generation: trust-based social-system, generic human values (i.e. openness, mutual respect, correctness, reliability, responsibility etc.) and ‘practice based – embedded collective knowledge’. Key lesson of this analysis is the following: transferring physical assets in the succession process seems to us less important than the transfer of the intangible one embedded in the company’s culture community. Further systematic national and international investigations – combining quantitative and qualitative research tools – are necessary to acquire more accurate picture on the impacts of transferring both intangible and tangible assets in the succession process in the FB.

Family Business Succession in Austria – Satisfaction and the Incumbent-successor Relationship

The transfer of businesses contributes to the dynamics and the development of the economy in Austria. Successful transfers generate numerous positive impacts. Securing both employment and investment, creating new jobs and stimulating growth are some of these effects. Failed transfers can contribute to negative effects, including the loss of jobs and an economic slowdown. Over recent years the number of business handovers in Austria has been rising. The forecasts show that this number will remain high over the next few years. Between 2015 and 2024 more than 42,000 economically sound SMEs will face the challenge of finding an appropriate successor. This means that 26 % of all Austrian SMEs (excluding one-person businesses) and 29 % of all employees in these companies will be affected. The aim of this paper is to provide a multi-faceted discussion of the relevance of affective components in family business transfers. A “good” relationship between the successor and the departing owner fosters the success of a transfer. This relationship involves, among others, the willingness to share relevant information, openness and respect. The satisfaction (with the completed business transfer) is closely interrelated with the relationship between the successor and the departing owner. Consequently, we can assume that affective and emotional components can indeed shape the success of business transfers. Based on that, new future research opportunities are outlined.

Financial Characteristics of Family Businesses and Financial Aspects of Succession

Family businesses are special in many respects. By examining their financial characteristics one can come to unique conclusions/results. This paper explores the general characteristics of the financial behaviour of family businesses, presents the main findings of the INSIST project’s company case studies concerning financing issues and strategies, and intends to identify the financial characteristics of company succession. The whole existence of family businesses is characterized by a duality of the family and business dimensions and this remains the case in their financial affairs. The financial decisions in family businesses (especially SMEs) are affected by aspects involving a duality of goals rather than exclusively profitability, the simultaneous presence of family and business financial needs, and the preferential handling of family needs at the expense of business needs (although it has to be said that there is evidence of family investments being postponed for the sake of business, too. Family businesses, beyond their actual effectiveness, are guided by individual goals like securing living standards, ensuring workplaces for family members, stability of operation, preservation of the company’s good reputation, and keeping the company’s size at a level that the immediate family can control and manage. The INSIST project’s company case studies revealed some interesting traits of family business finances like the importance of financial support from the founder’s family during the establishment of the company, the use of bootstrapping techniques, the financial characteristics of succession, and the role of family members in financial management.

Managing Succession and Knowledge Transfer in Family Businesses: Lessons from a Comparative Research

The most natural mode of family firm succession is the intergenerational ownership transfer. Statistical evidence, however, suggests that in most cases the succession process fails. There can be several reasons as a lot of personal, emotional and structural factors can act as an inhibitor to succession. The effectiveness of the implementation of any succession strategy is strongly dependent on the efficiency of intergenerational knowledge transfer, which is related to the parties’ absorptive capacity and willingness to learn. The paper is based on the experiences learned from the INSIST project. In the framework of the project different aspects of family business succession have been investigated in three participating countries (Hungary, Poland and the United Kingdom). The aim of the paper is to identify the patterns of management, succession, knowledge transfer and learning in family businesses. Issues will be examined in detail such as the succession strategies of companies investigated and the efforts family businesses and their managers make in order to harmonize family goals (such as emotional stability, harmony, and reputation) with business- related objectives (e.g. survival, growth or profitability).

A családi vállalkozások pénzügyi sajátosságai (Specialities of Family Business Finances)

A tanulmány a család és a vállalkozás pénzügyeinek kapcsolata, az utódlás finanszírozásának kérdései, a pénzügyi menedzsment, a hitelfelvétel és eladósodottság, a tőke forrása, a családon kívüli tőkebevonás és az eladás pénzügyi vonatkozásai mentén vizsgálja a családi vállalkozások pénzügyei sajátosságait. Ilyen sajátosságok bőséggel vannak, a családi cégek a nem családiaktól számos vonásukban különböznek, még pénzügyi tekintetben is egyedi jellemzőkkel bírnak. Ezek a pénzügyi ismérvek nem a szektorra jellemző diszfunkcionalitások, hanem a családi cégek alapvető jellemzőiből fakadó üzleti viselkedésmódok. A szerző jelen munkájában arra vállalkozik, hogy rávilágítson a családi vállalkozások pénzügyeinek ismérveire. ______ Family businesses play an important role in every economy of the world’s countries and they differ from non-family ones along several features. They have also unique characteristics in their financial affairs. The author of this work undertakes to highlight that the characteristics of family business finances are not improper functionalities of the sector but unique business behaviours of family businesses stemming from their basic characteristics. The study examines the peculiarities of family business finances along the relationship of financial affairs of the family and the business, the financial challenges of succession, the financial management, the source of the borrowing and the capital, the indebtedness and the financial aspects of selling.

Running in the Family – Paternalism and Familiness in the Development of Family Businesses

The study focuses on two features of family businesses (FBs), namely familiness and paternalism. These two concepts are inseparable in two ways: inseparable from family businesses and also from each other. Family businesses differ from one another in the degree of family involvement, leadership and management in the business. Paternalism as a leadership attitude is naturally present in FBs, especially in the founding stage of development. This feature provides the solid bases for establishing a strong and proud culture built around the personality and success of the founder. This characteristic however can become a major hindering factor upon succession. Through a review of the literature and the INSIST studies for Central Europe this study aims to identify the supportive and limiting factors of both phenomena and examine the case studies of the INSIST research project for signs of the existence of these supportive and limiting factors. It is found that the degree of familiness in these firms is a sliding scale and a lack of familiness is not a precursor for failure. Paternalism is found to be broken down into authoritarian, benevolent, moral and enlightened. After discovering studies claiming that paternalism is a stage in the process of leadership style changing from participative to autocratic (or vice versa) and that Central Europe and the current era of instability and uncertainty lead to employees preferring a more autocratic or paternalistic style, our findings suggest that there are more driving than restraining forces for family firms adopting a paternalistic style. Furthermore many cases appear to be on the path from an authoritative towards a more enlightened paternalistic leadership style either out of choice in the search to shake off the drawbacks of other types of paternalism or as part of a natural evolution of this particular leadership style within the context of this study.