Boyden Executive Search

Matthew Lewis talks about the changing face of leadership in family business.

By Matthew Lewis

No matter where a business is located, the principles of succession planning should be the same, even though the motivation and processes between corporations and private family business are often radically different. Nevertheless, whether it is the future leadership of a state, a Chief Executive Officer (CEO) of a corporation, or the patriarch of a family business, there are strong principles that can be applied to each arena.

What we are seeing currently is a shift in the leadership style of the next generation family businesses. Planning for succession and managing succession is often overlooked and not always considered important until it is too late, and a lack of succession planning can precipitate failure, for states and all types of businesses alike.

Unfortunately this is often a critical but overlooked element of corporate or family business in the region, and is an ever-increasing feature of family disputes and corporate infighting and shareholder discord.

Guiding principles

Irrespective of public or private ownership, well-run, suitably financed and properly governed businesses will generally thrive over those that are not. And it is within these guiding principles that we can discover how important succession planning is to the overall direction of the company.

Corporates, of course, have the distinct advantage that the process is made easier, more transparent and democratic, and is not based on a family generational transition. Boards of non-executives, advisors and external shareholders have a vested, objective interest in the successful appointment of a new leader. They have common and aligned goals, and most large corporates normally know who their internal and even external successors may be well in advance. GE is the classic example, whereby Jack Welch had been grooming and observing several potential successors before selecting Jeff Immelt to take over. The same process applies for Bill Gates, Steve Jobs and others.

“Choosing a successor is the most important business decision you will ever make.” –Jack Welch.

Fall or fly

For family groups and private businesses, the topic of internal family succession planning is a highly sensitive area, and unfortunately second and third- generation business failure is a familiar scenario among family groups that do not take it seriously. This can result in family feuds, court cases and potential business collapse. To ensure the success of any senior succession planning exercise, it is essential that the company takes a proactive approach, having, at least, a process in place and ideally an identified and assessed list of potential successors.

The key word is continuity, which privately-owned businesses often overlook. They rarely evaluate the negative impact that uncertainty can bring when the overall direction, leadership and future of a business is unclear. Often the cost of no succession planning to a business is hidden and only reveals itself when least anticipated or welcome.

If there is no succession in place in a family business, they are likely to experience some or all of the following:

“Statistics show that second to third-generation business survival is at most risk in the period of leadership transition. The lesson is that, number one, this management has to be at the highest class possible. Number two, they have to have a succession plan.” –Prince Al Waleed bin Talal.

Fail to plan, plan to fail

In order to plan for the future, irrespective of the anticipated timing of change of leadership, companies should formally start to think about what the future may hold, and how the business should be run, and by whom, going forward, and design a process of dialogue to ensure that succession planning is always on the agenda. In order to achieve this, there are a number or proactive steps a business can take.

Prior to need

Post appointment

The buck stops here

At all levels of government, corporation and family business, succession planning should be constantly on the agenda. Statistics show that second to third-generation business survival is at most risk in the period of leadership transition. This is a challenge in the Middle East, a region where there is a lack of internal and external talent that is adequately qualified, experienced, and emotionally and culturally aware enough to be true leaders in this environment. But what is certain is that the world is changing faster than anyone is comfortable with and in directions we never imagined. Like the leaders of Qatar, its businesses should take heed of their example and ensure they are well prepared and have planned ahead for every leadership change eventuality.

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