Life After Succession in the Family Business: Is It Really the End of Problems?

The succession processes in family business are well chronicled in the business literature. Most of the research focuses on the process of transferring power within the business-family. What has not been as closely examined is the after-succession environment that exists when the management and leadership of the family business are passed on to the next generation. This article addresses that organizational climate and the potential for additional problems in the business-family if post-succession issues are not identified and addressed and suggests some steps that will be helpful in producing complete succession success.


Organizational Environment After Succession
It has been reported that only 30 percent of family organizations are thought to survive the transition to the second generation (Beckhard & Dyer, 1983b). It has recently been proposed and supported by limited data (Handler, 1992) that for a high-quality succession experience to occur, as many of the following characteristics need to be present as possible: The succession meets the personal career needs of the individual placed in power. There is a good fit between personal psychological needs of the successor to be a leader and to contribute to the family business. The position should be appropriate for the life stage of the candidate, that is, he or she is prepared and has sufficient ability to take the responsibilities of the family business. The more the successor can exert personal influence, the more likely that it will be a high-quality succession experience for the candidate.
There is mutual respect, understanding, and communication between generations so that the family unit feels an informed decision was made. The more siblings accommodate rather than conflict with one another, the more likely high-quality succession experience will occur. Succession reinforces the family and the selected family member's commitment to perpetuate the family business.
But even when these expectations are met, a conflict residue can still exist in the organization and in the family unit after a successful succession has occurred. Why would conflict still exist? Due to the centrality of the succession issue in the family business, seldom can everyone involved be satisfied with both the process and the outcome. Even the winner in the succession sweepstakes can be unhappy with the requirements of the process, producing resentment that can continue to interfere with business and personal relations. New roles will be created in the business relationship, particularly among rivals for positions of power during succession. There will be confusion, inexperience, and often ambiguity in these new roles. As with ambiguity in almost any structured environment, tension, stress, and conflict will occur until the parameters of each position are established over time. Role conflict may occur because the new appointees in the new organization may still attempt to manage areas of their past responsibility Business decisions made for the good of the company may have negative consequences for family units, as might be the case when, for example, one of the rival succession candidates is transferred to open a new division of the company after the reorganization. If this directive was given by the new leader, the potential for conflict clearly exists regardless of the appropriateness of the decision from a business perspective. It is important not to assume that conflict will be avoided because the "change" was successful. Change in itself provides the stimulus for conflict to arise (Beckhard & Pritchard, 1992).
Beyond the residual conflict (inter-and intragenerational) in the family business, the uncertainty about the new leadership or about the direction of the family business may naturally produce a stressful environment. One determinant of the level of succession conflict may well be the rate of change at which the succession process progresses. A revolutionary, unanticipated succession due to a death or grave sickness may generate a high level of uncertainty, anxiety, and conflict. Conversely, a well-articulated and managed succession, encouraged by effectively communicated shared values for the future of the family business, may have a minimum of disruption and conflict emanating from succession.
Honeymoon periods often accompany organizational change. The personal dynamics produced by family relationship may well influence the extent of the honeymoon periods as the family business changes. Further, such periods tend to limit criticism, promote abnormally high tolerances for error, and reduce decision urgency, and thus may encourage indecision. Such indecision inside the family business may generate stress and anxiety within the business and, importantly, generate outsider concern for the business's future. The longer the honeymoon lasts, the greater this stress and concern are likely to be. The influential stakeholders, that is, board-of-director members, bankers, suppliers, and key channel-of-distribution members, may go so far as to challenge the new leadership or fill the power vacuum they perceive to exist by taking action that may create added conflict for the family business (Flamholtz, 1986).
At the same time the family business is attempting to return to a homeostatic state, the family units may continue in an agitated state because of the new positions that individuals are accorded within the family structure owing to their promotion. A reordering in the family pecking order can naturally create conflict among members affected by the business succession. There will be "winners" and "losers" in the succession process, and they cannot control the emotions of members in their family unit toward others. This interfamily tension can easily disrupt the best-planned and -executed succession process that can be devised.

Problems That Transpire out of Family Business Succession
To assume that conflict among family members and managers will subside just because power is transferred in the family business would be naive. In fact, the overlapping of the business and the family units and the absence of clearly delineated roles and expectations for family members may perpetuate succession-related problems in the company for an extended period. Succession issues must be addressed by the newly installed leader(s) as well as the generation reducing its involvement in the family business.
Once the succession process starts in the family business, a series of interrelated problems can appear. These issues can be distilled into six often-heard quotes in family businesses that have "successfully" completed a succession process. These complaints are expressed to coworkers, outside stakeholders, consultants, and family members.
"The Old Man Is Second-Guessing Me." There is an old adage in sports that you cannot win the race looking over your shoulder to see where your competition is. It is a frequent complaint of the manager, son, or daughter who takes over the family business that "every time I turn around, my father is there." In many instances, just the physical proximity of the parent creates territorial issues for a newly appointed manager. Even though there is no intention on the senior generations part to interfere with its successor, the successors confidence and self-image may need the physical freedom from his or her parents to develop fully (Handler, 1990). The adjustment of roles between parent and sibling is the foundation for making substantive changes in the work relationship, but it is not the only event that needs to occur. The transfer of power has to include the other symbols of leadership in the family business (Isabella, 1990). One of these qualities is an "open field" in which to manage without interference, intended or unintended, from the past head of the family business. Very infrequently in nonfamily businesses, the ex-president is not allowed to remain on location after a successor has been named (Hambrick & Mason, 1984). After what normally is a very brief transition period, the successor is given "visual" command of the company. Conversely, the family business environment is less likely to support the clear delineation of predecessor and successor because of the family linkage (Danco, 1980(Danco, , 1982. The reluctance to move office space, parking space, conference rooms, or other physical attributes of the founder of the family business can create problems for the newly installed head of the company. Without the symbols of power, other employees receive inconsistent signals from the family members, and without a conscious effort on the part of anyone involved, post-succession conflict evolves.
"I Don't Report to Junior." The chain of command is an essential aspect of informal organizations. But the chain of command is frequently circumvented in family business, particularly during and after the succession process. The most experienced politicians, that is, key employees, will attempt to continue their informal organizational relations to gain resources within the framework of the formal organization. If the founding generation remains involved with the business and physical symbols are not altered, the climate for "end around" posturing is accentuated.
Senior, "old guard," key functional experts within family businesses are the most likely candidates to lapse into circumventing the new power structure. They have a long-standing relationship with the founder, through both good and bad times. They have earned credibility and social capital and are perceived to be instrumental in the success, past and future, of the family business. These key employees feel that they have earned the right to do what is best for the company and, tangentially, for the family. Their loyalty and feelings for both the business and the family make them quasi-family members.
Without attributing any negative motives to these individuals, it can be said that they can undermine the fledgling power base of the next generation. In addition, the trust and support that were developed with the prior generation can be damaged in a very short period of time. Insignificant gestures on the part of the older generation, such as going to lunch, fishing, or to a baseball game, can provide the opportunity to encourage the "end around." If the key employee has ulterior motives, the end around will be used to reduce the level of control that the successor has in managing the company. The conflict that evolves from this lapse in the chain of command can affect other employees. They are not sure why they have to stay within the formal organizational structure and, at the same time, may attribute more power and influence to the key employee. Both of these consequences of the end around promulgate continuing conflict and problems in the family business.
"This Place Has Really Changed." The change in leadership frequently signals an alternation in the corporate culture (Kilman, Saxton, & Serpa, 1985;Lundberg, 1985;Wilkins & Dyer, 1988). The family business culture exemplifies an environment in which the leader's personality and the corporate culture are closely linked. Succession is change, and this change precipitates the likelihood of a change in the basic cultural foundation of the company (Schein, 1983;Peay & Dyer, 1989;Kaye, 1991). The degree to which the culture is modified may hinge on the motivation for the succession, that is, planned retirement or unplanned sickness or the death of an older-generation member, as well as the length of time the succession process takes. If the succession is a natural evolution from one generation to the next generation, and if these individuals have worked together for a period of time and have shared values and beliefs, the change to the company culture may be transparent. On the other hand, if the succession is a "revolution" brought about by outside stakeholders, the resulting company culture may be dramatically different. The change in the company's culture due to succession is a continuum from no change in the core culture through total replacement of the basic cultural fabric of the family business. This change creates conflict with those individuals who are supportive of the old culture and is stimulated as the "personality" of the family business changes (Beckhard & Dyer, 1983a).
The degree of change to the culture of family businesses after succession is contingent on a variety of issues: 1. The degree of shared beliefs between the older generation and the successor If the two generations have commonly held philosophies about the business and what the future holds, then the company culture may not be modified dramatically 2. The age and experience base of the successor Conflict and change in corporate culture may be due to the youth of the successor and his or her limited experience base. An abrupt change in company culture might also, in part, be attributed to age difference between key employees who were contemporaries of the older generation. If the successor does not have experience in the family business when he or she takes over the leadership position, the successor may dramatically change the family business culture. 3. The condition and health of the company after succession. If the family business was successful prior to succession and was financially sound, the motivation to modify the culture may be low. On the other hand, if the company had been in a decline for whatever reason, the successor may be motivated to look to a fundamental change in the culture to revitalize the family business. 4. The level of older-generation involvement in the family business after succession.
The older generation may have a variety of types and levels of commitment after succession. The more involved the predecessor is in the family business, the less likely a precipitous change in the culture of the family business will occur, but that involvement also extends the succession process.
The transformation of the new culture is directly influenced by the type of involvement and the frequency of the involvement of the succeeded leader.
To make an evolutionary adaptation of the culture, the founder may have to change his or her level of contact from a highly visible position to less-significant positions and infrequent involvement. The important issue is that postsuccession exposure of the older generation will influence the rate and level of culture change in the family business.
"Why Are We Changing a Winning Formula?" This is one of the most frequently heard remarks in a business succession. The company culture is attempting to deal with the ambiguity of new leadership, a changing strategic focus, and a modification of the company culture. On a more basic level, the succeeding leader may believe that operating system changes are necessary even while company culture changes evolve. These operating changes are often dramatic and obvious and, therefore, frequently directly affect people in the organization. One defense against change that is coming too fast is to apply the "why are we changing a winning formula?" brake. Depending on the source of the remark, the new management must ascertain the amount of change or conflict that can be absorbed by the company at any one time (Beckhard & Pritchard, 1992). If the changes in the operating systems are occurring too rapidly or in unexpectedly large leaps, the complaint may be valid. Normally, however, the response has its roots in the reluctance of individuals and groups to tolerate change in their work routine or environment. So the older and younger generations may have the same basic corporate philosophy, and therefore the company culture remains constant, but new methods and updating may threaten employees. They may wish they could continue with "the old computer," "the old card system," "the old production scheduling," and the like. In this way the anxiety of the unknown is minimized.
The source of the complaint in the organization is an important consideration for the new leadership. This complaint generally begins to surface during the early weeks and months after succession, when the successor is attempting to gain the thrust and confidence of the predecessor, employees, family members, and important outside constituents (Goldberg & Wooldrige, 1993). If the predecessor begins to voice this concern, significant damage can occur to the leadership of the next generation. This may occur if the succession process did not go smoothly or if there was dissension over the choice of the successor. "We didn't used to do it this way" is a signal that cannot be ignored.

"The Old Man Still Has Veto Power."
One challenge that is frequently presented to the successor is that he is viewed as the titular head of the family business. The next generation has been installed, but stakeholders recognized that the "real power" remains in the hands of the predecessor. This perception of a lack of power can be very damaging to the successor and the development of a leadership posture. Confusion, conflict, and challenge to the rightful power of the new leadership of the company create a fertile environment for disaster for both management and the company The behavior of the older generation can compound this problem if it remains heavily involved in the day-to-day activities of the family business.
The problems may persist if major decisions are avoided by the successor or if key decisions can be vetoed by the older generation because it still maintains a "controlling" interest in the family business. This issue often centers on management versus ownership. If the two elements are not possessed by the successor, employees can think that decisions can be challenged by a "higher authority," the owner. This would be a significant departure from the ownermanager role of the former generation and its leadership authority.
"Why Do We Need to Keep Him Around?" It should not be concluded that family bonds are strong in each and every family. The record of unsuccessful succession is a testimony to the lack of trust, respect, and confidence that exists among many family members. The departure from the leadership of the family business may be a very traumatic event in the life of the older generation (Barnes & Hershon, 1976;Birley, 1986;Handler, 1990;Cohen, 1992). The family business provided a set of rewards that satisfied needs of the preceding generation in the business. To remove these summarily and not create a transition mechanism for continued satisfaction of those needs is unrealistic. The aftermath of a succession in the family business should take into consideration an inversion of "care giving" in the business and the family.
In a slightly different context, the children in a family are provided with a set of "care" elements to ensure their physical well-being, educational interests, and confidence, as well as being provided love, affection, belonging, and respect. These are the obligations of being a parent, and good parents assist their children in being successful. The converse of this care giving is required when the older generation retreats from the business environment. There must be a mechanism to provide these older family members with the care elements that they received from the company. The time horizon on each element of the care giving may vary, but the successor must recognize the needs of the predecessor. As the successor takes control, leadership, and ownership of the family business, there is a concomitant obligation for the succeeding generation to provide support for the older generation. In many cases, the older generation gained a significant portion of its identity, personal and professional satisfaction, and social standing from its position as owner of a business. The intangible "income" from these business connections more than likely cannot be provided after succession. To help ensure success after succession, attention needs to be given to providing a continuing infrastructure to the retiring senior generation.

Management of Conflict After Succession in the Family Business
To deal effectively with the residual conflict and stress in the family business and in the family units after succession, a proactive conflict-management process needs to be implemented by the successor generation. The assumption that succession has been successfully completed because of the newly installed management neglects the viewpoints and expectations of the diverse set of stakeholders in the family business. All stakeholders, from customers to employees, in-laws, suppliers, and bankers, need to develop a level of comfort with the new management. Therefore, a planning process to be used in postsuccession is recommended to manage succession process activities and at the same time monitor continuing conflict in the family business. Just as there is a tendency not to plan for succession (Lansberg, 1988), the absence of an ongoing process to monitor residual conflict and stress among stakeholders may hurt the successor's credibility with influential constituents (Bork, 1986;Handler & Kram, 1988;Barach, Gantisky Carson, & Doochin, 1988).
If succession is to be viewed as a process and not an event (Churchill & Hatten, 1987;Longenecker & Schoen, 1978;Goldberg & Wooldrige, 1993), the process must be fully understood and internalized by all those involved in the process. A straightforward seven-stage model of succession in family businesses based on the successor has been developed (Longenecker & Schoen, 1978): Stage 1: successor is aware of family business but not involved; Stage 2: successor connects first exposure to the business with what is heard and observed in the family unit; Stage 3: successor works in the family business on a part-time basis while in school; Stage 4: successor completes schooling and other work-related experience and works in the family business full-time; Stage 5: successor enters line management; Stage 6: successor becomes a staff manager, such as general manager or president; Stage 7: the incumbent turns over the overall responsibility and authority to the successor. The shortcoming of this diagnostic process is that it assumes that a successful succession process ends with the transfer of power and responsibility from the incumbent to the successor.
To portray the succession process accurately, the methodology should be further categorized into three time fields: Presuccession analysis. This phase of succession focuses on siblings before they enter the family business. It entails assessment of siblings' leadership potential in the family business context, as well as forecasting their probable entry into the family business and identifying essential background and training they should be encouraged to obtain, and consideration of the myriad of other preentry issues. This presuccession period is characterized by diagnostic analysis of potential successors and "managed" preparation for their successful entry into the family business.
Succession mechanism. This phase of succession focuses on the successor in his or her career path in the family business. It encompasses the progression of managerial positions held in the business as well as the informal network of influence that is acquired by the successor as he or she moves through the formal hierarchy of the company. This validation of "worthiness" of the sibling to assume the leadership of the company may be important among key stakeholders outside the company, and it is clearly vital to other family members. Sorting out the relative merits between "competing" siblings for leadership would be a significant subphase of this stage of the succession process.
Managing the post-succession process. This stage of the succession process would make an assessment of the conflict or damage in relationships brought about during the succession of power in the family business. A means to address the conflict and ambiguity that have resulted from the selection of a new leader is essential. To assume that after a successful succession "it is really the end of problems" is not realistic and may doom the succession and its management to failure in the long run. Succession should not be viewed as an event but rather as an ongoing process where the transfer of power is an inflection point, not the end of succession. Successful transfer of power to the next generation of leadership should not be construed as the elimination of conflict, emotion, and stress within the family business or the individual family unit. Post-succession issues are as important as understanding the presuccession issues such as evaluation of sibling candidates, training siblings, establishing interest and motivation to enter the family business, and the like.
For the post-succession process to be implemented successfully, both the past incumbent and the successor need to endorse and participate in post-succession monitoring (see Figure 1). This is particularly critical if ownership was not passed with the management succession. In the two-step succession process where management and ownership changes occur at different times, we expect the management change to occur first. In this situation the succeeding manager will likely have a strong need to devote time, energy, and resources to improving the relationship between new and past management specifically to ensure completion of the process. Of course, because this expenditure of time, energy, and resources will likely have little positive impact on the family business operations and perhaps may be distracting, this is yet another incentive to transfer ownership and management more or less simultaneously.
The first step in the planning process is to make an objective assessment of how the business and family units made it through the succession process. This diagnosis may have to be undertaken by an objective third party to the family business and the family units, such as the business's accounting firm, lawyer, business consultant, or outside board member. The goal of this assessment is to uncover any remaining discontent in the family or among key employees relative to changing management.
The first means to repair damaged personal as well as professional relationships is to delineate the new roles of each member of the management group. This process could start with a recasting of the formal organization chart and a redefinition of the responsibilities of each position. This clarification of roles should improve relationships and stimulate leadership in the organization in the functional areas of the business as well as forcing the new leadership to think strategically. A critical aspect of this stage of the post-succession planning is determining and agreeing on the level of involvement of the past incumbent in the family business. As was discussed earlier, this territorial imperative of the successor may be compromised by the past incumbents inadvertent proximity to key employees, major business decisions, or outside stakeholders. The level of involvement and time commitment of the past incumbent are critical variables to be calibrated to help ensure the ongoing success of the  succession process. It would do little to have authority passed from one generation to the next without negative consequences only to have the process unravel in the years after the leadership transfer. A necessary dimension of the post-succession planning process is an audit of the status of the family business. It should not be assumed that the business will progress into the future on the same path as it has in the past. In many ways, the family business may be transformed into a new company: there may be an altering of existing internal, as well as external, relationships; the culture may be modified to fit the personality of the successor; and new influence networks may be cultivated with outsiders. The magnitude of these changes may be dependent on the type of change mechanism that brought about the succession: (1) natural evolution-consistent case values and not conflict generated due to succession to the next generation; (2) self-guided evolution through organizational therapy; (3) managed evolution through hybrids, or (4) managed "revolution" through outsiders (Schein, 1983). Therefore, key dimensions of the business need to be benchmarked at the point of the transfer of power within the family business. Just as a financial audit will pinpoint the change of leadership, other starting points need to be established so that progress and changes in strategy may be evaluated for their effectiveness.
The last two elements in the post-succession planning process are identification of changes that are needed to improve the business and monitoring of the change process in it. What needs to be modified in the business now to help ensure the success of the new generation of leadership for the future? The successor must recognize how to effect change in the company and what role he or she plays in that change process. Even evolutionary change should be managed by the successor, recognizing that a change in one dimension of the business has consequences throughout the family field of influence. After succession, primary stakeholders may have highlighted sensitivity to changes undertaken by the successor. Therefore, the successor should be judicial in the rate and amount of change undertaken in the family business. The wave of change is a ripple effect throughout the stakeholders and may have an additive effect on the family business. Resistance to change may be the result of not anticipating the interconnective nature of the stakeholders or their need to have change defended by the successor. Unanticipated change and revolutionary change, such as the loss of a major customer, resignation of key employees, and product failure, are normal occurrences in business and will continue to disrupt the family business. The longitudinal nature of change, that is, the evolution, the slow pace of changes to the core of the family business, needs to be managed by the successor with as much care as unanticipated shocks to the family business. Knowing the consequences of one's actions on all the family entities is an important dimension of being an effective family business leader. The last stage of the process is to establish a monitoring process to ascertain the rate and impact of premeditated change in the family business initiated by the successor.