Generational succession and transition in governance and business leadership.
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All leadership transitions are fraught with risks. Family businesses in particular face a difficult time when members of the succeeding generations vie for leadership, and one ultimately takes the leadership reins of the Family Business System. It is critical to manage this succession and transition so that the strategic vision, values, relationships, expertise and momentum of the Family Business System are not compromised.The founders of successful businesses are a unique group of individuals. Whether or not their successors match the founders' genius and inspiration, they will certainly bring different perspectives and capabilities.
Yet there is much that a founder can do to structure the organization for the transition: develop successors: prepare other stakeholders; promote continuity of operations; and ensure that resources (particularly financial) are available. The need for structure and process is particularly important during generational transition. The introduction of more formal decision-making processes is essential to effective governance. Explicit processes show how the company has traditionally operated, and provide a platform for next generation family members, outside directors and new managers to contribute as well as understand philosophical and performance expectations. Often, new shareholders, including non-family members, accompany generational change.
Clarifying "decision domains (who makes what decisions)" and identifying succession plans increase transparency and avoid confusion. Creating family governance structures is key to both separating and integrating family issues and objectives form the business. The linkage of business governance to family governance during this phase is critical to preserving the value systems and expectations of the non-business family and stakeholders, especially as the firm's leadership changes.
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