Regeneration And Growth Of Family Businesses

Barriers to succession and continuity planning are many and powerful, and succession planning activity is generally surrounded by ambivalence. Many a family therapist or CEO counsellor/psychologist has tried to disentangle and overcome the CEO’s resistances to letting go. And many an attorney has tried to create a tax and liability-proof estate plan. Given these problems, this article explores alternative paths to succession and growth.

Intrepreneurship

Succession should be viewed as an opportunity for new growth, new challenges and new achievements. While succession often focuses on preserving stability, intrepreneurship embraces change. Intrepreneurship refers to intergenerational entrepreneurial activity driven by new products, product line extension, new markets for existing products, joint-ventures, exports, etc. But what motivates business owners to engage in this process?

In order for succession and regeneration to begin, the business requires energy for growth, vision, and specific growing steps. Energy for growth is the outcome of dissatisfaction with the status quo, which often entails a maintenance or paralyzed state of affairs. Vision comes from a dream or plan for a desired future held by the owner. Specific growing steps is the plan of action that is required to fulfill the dream or vision.

Succession as Best Opportunity

Succession is the best opportunity for regeneration of the family-owned business. Dissatisfaction is often high, and founders often realize the reality of having little choice but to change. If continuity of the family-owned business is the goal regeneration may be a sound option at succession time. It’s like riding a bicycle. The best way to avoid a fall is to keep pedaling on. As the current CEO’s life-cycle ebbs and the next generation assumes greater responsibility, the product that made the earlier generation’s business successful has often matured or begun its decline. Beyond the average 25-year life cycle that parallels a generation of management, survival of the firm depends on revitalization and entrepreneurial activity across generations or intrepreneurship.

Conclusion

Otherwise, the coincident CEO life and product life-cycles will throw the business into turmoil at precisely the time it can least afford it, a time of transition and financial exposure. The business needs capital for growth, the family needs capital for liquidity of the estate, but the product has already been harvested of its profits. Growth stops and/or decline kicks-in. In the absence of growth, a general sense of decay sets in. These often lead to turf protection, in-fighting and conflict both in the business and in the family.



This article has been partly extracted and modified from Poza, E.J. (1990). Regeneration and Growth: One Consultant’s Approach to Succession Planning. Proceedings of the 1990 Family Firm Institute Conference, October 17-20, Atlanta, Georgia, USA.

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