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Psychological aspects of succession in family business management

Matthias Filser
Montpellier Business School, Montpellier, France

256

Sascha Kraus
Institute for Entrepreneurship, University of Liechtenstein, Vaduz, Liechtenstein, and

rk Stefan Ma
tt-Ingolstadt, Eichsta tt, Germany Catholic University of Eichsta
Abstract
Purpose Family rms appear to be an attractive topic in a number of research areas. Probably the most important topic is still the succession process combined with possible hurdles and gaps. This paper aims to focus on the special variable of the psychological dimension. It attempts to summarize ndings and implications as well as suggestions for where potential research gaps are. Design/methodology/approach The paper is based on a two-stage research design. The rst step is a literature review. All articles published in the Family Business Review (FBR) between 1997 and 2011 were collected and analysed regarding their topics, ndings, and implications. As a second step, this knowledge has been applied to conduct a thorough literature analysis on psychological aspects of succession. Findings Psychological aspects are often used together with other constructs. The authors strongly recommend handling them as an individualized, highly complex topic, even if social, political, and other aspects are often mixed with psychological aspects and therefore difcult to discuss and separate. A separation of these factors will help researchers present ndings in a much clearer way. Research limitations/implications The main limitation of the article lies in the methodology itself, as the literature review solely concentrates on empirical papers that exclusively investigate psychological aspects with regard to succession. Nevertheless, the aim was to elaborate a focused psychological eld model in terms of succession. Likewise, critical aspects considering the family business system have been taken into consideration. Finally, a literature review is commonly seen as a post-work dead body. However, the implications show a clear, directed focus within family business research. The authors recommend an increase in the number of concisely formulated research questions instead of generic approaches. Practical implications Businesses should closely heed three imperative problem areas (individual, interpersonal and organizational) as well as the stage in which conicts arise (preparation, transfer/takeover, and continuation), if they want to be successful in the succession process. Originality/value The paper offers an overview of the limited number of existing articles and their implications that address the psychological aspects of the succession process. Furthermore, the psychological issues identied that cause conicts during succession are consolidated and categorized. Keywords Family business, Succession process, Psychological aspects, Family rms, Succession planning Paper type Literature review
Management Research Review Vol. 36 No. 3, 2013 pp. 256-277 q Emerald Group Publishing Limited 2040-8269 DOI 10.1108/01409171311306409

Introduction Family businesses are a prevalent and prominent company form within the economic and social landscape (Alcorn, 1982; Beckhard and Dyer, 1983; Dyer, 1986; Stern, 1986;

Lee, 2006; Kraus et al., 2011). The economical relevance of these family businesses is enormous: Ward and Aronoff (1990) have shown in their study that approximately 50 per cent of Americas gross national product is generated by family businesses. Furthermore, there are an estimated 10.8 million family businesses that create 58 per cent of the workforce (Poutziouris et al., 2006). Similarly, the proportion of family businesses in the UK and European Union is estimated to be 75 and 85 per cent, respectively (Harvey and Evans, 1994, 1995; Dunn, 1995). However, a number of studies have highlighted that the failure rate in the succession process is very high. Only one-third of family businesses survive into the second generation, and only about 10-15 per cent make it into the third (Beckhard and Dyer, 1983; Bierly and Chakrabarti, 1996; Solomon et al., 2011; Ward, 1987). These gures make clear the importance of a successful company succession and how relevant the topic is for todays business world. Therefore, it is not surprising that over the years, much has been written about family business successions (Chittoor and Das, 2007; De Massis et al., 2008; Royer et al., 2008; Venter et al., 2005). Sharma et al. (2003b) argue that research must focus not only on the willingness of the incumbents who transfer company control but also on the willingness of successors who take over the family business. Willingness is connected closely with familiness, which refers to the resources and capabilities related to family involvement and interactions (Chrisman et al., 2003, p. 468) and allows a trans-generational transmission of the vision and purpose of the family business (Chrisman et al., 2005b). Authors like Dyer (1986), Lansberg (1999) and Miller et al. (2003) also stress the issues of emotional factors in incumbent-successor relationships, as well as the complex social ties within the family. Succession in family enterprises needs to be achieved with a high level of awareness and diligence to ensure long-lasting rm survival. This involves a number of components. Careful planning in advance and a conviction about the signicance of a long-term orientation is a key factor for a successful succession (Lumpkin and Brighman, 2011). Of particular note is that nancial, tax, and legal aspects are often of primary focus within the process of succession planning, while psychological aspects are often neglected. Both the previous and future owners underestimate the emotions and conicts that might arise. And the origin of these can be of a multifaceted nature (von Schlippe and Kellermanns, 2009). As Frey et al. (2004, p. 35) state, although the emotional components of succession in family enterprises are widely discussed on a frequent basis, there are only a few investigations found within research that specically look at this aspect. There is a clear research gap within this topic. The following will therefore apply a literature review of the current state of research to summarize and structure implications regarding the psychological aspects of succession in family business management. This will in turn show possibilities for future research. The succession process The family business is probably one of the most predominant enterprise forms in the world (Bird et al., 2002; Corbetta, 1995; Davis et al., 2000; Davis and Stern, 1988; Gallo, 1995; Klein, 2000; Zahra and Sharma, 2004). Compared to non-family businesses, family businesses are a distinct form of enterprise, with the most notable difference being the unique overlap between the four areas of family, ownership, management, and individual relationships within the enterprise (Lansberg, 1999; Maerk et al., 2010; Pearson et al., 2008).

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This creates a situation where the family acts not just as a social unit but also as an economic one (Basu, 2004). Since the beginning of family business research, authors writing on it have agreed that family businesses have two different faces. On the one hand, they are able to create resources that are very difcult to imitate. On the other hand, they face the threat of not being able to transfer these resources to the next generation (Hughes, 1997; Ibrahim et al., 2001; Kets de Vries, 1993; Olson et al., 2003). The succession process arguably represents the most critical issue family businesses are faced with. After all, succession constitutes the central issue that needs to be addressed in order to ensure a family business survival from generation to generation (Applegate, 1994; Harveston et al., 1997; Ibrahim et al., 2001). The success of a succession can be determined by the subsequent positive performance of the rm and ultimate viability of the business, or by the satisfaction of stakeholders with the rez et al., 2001; Dyer, 1986; Handler, 1990; Morris et al., succession process (Cabrera-Sua 1997; Sharma et al., 2001). Succession is a multidimensional process inuenced by an enormous palette of variables. The factors that are the most studied in the family business literature are incumbent related factors which refer mostly to the founders reluctance to plan for succession due to a number of issues, including the founders strong sense of attachment to rez et al., the business, fear of retirement and death, and lack of other interests (Cabrera-Sua 2001; Handler, 1990; Lansberg and Astrachan, 1994; Levinson, 1971). Other related factors focus on the successors business skills, managerial capabilities, knowledge of company operations, and attitudinal predispositions towards running the business (Barach and Ganitsky, 1995). The literature regarding process factors addresses the extent to which succession depends on aspects such as the successor selection process, the nurturing and development of successors, corporate governance structures, and shared visions (Dyck et al., 2002; Lansberg, 1999; Sharma et al., 2001). Financial factors relate to external nancing as well as taxes, which both inuence the succession process. Succession is strongly related to nancial risks and investments (Chittoor and Das, 2007; Davis and Harveston, 1998). There are of course a number of external variables (contextual factors) that also inuence successions such as market demand conditions, the state of the economy, buy-out offers from potential investors, and nancial pressure from lenders and other resource suppliers (Morris et al., 1997). An additional category is concerned with personal relationships within the family between its members and non-family employees (relationships factors). The principal issue here concerns trust, cohesiveness, and communication among family members (Chrisman et al., 2005a; Kets de Vries, 1993; Ward and Aronoff, 1990). Refusal of the head of the family business to let go or to share power with other family members, as well as resentment on his/her part are important topics requiring further investigation (Handler, 1990; Keogh and Forbes, 1991). The importance of shared values and agreements regarding loyalty and/or common traditions are emphasized within this topic (Davis and Harveston, 1998; Dyer, 1986; Le Breton-Miller et al., 2004; Nelton, 1991), along with factors such as commitment, loyalty, and family turnover (Handler, 1990; Morris et al., 1997). Methodology and research design The state of current research and the concomitant model outlining psychological aspects of succession in family businesses is determined based on a two-stage research design.

First, by conducting a thematic analysis of all the articles that have been published in the Family Business Review (FBR) between 1997 and 2011, the previously investigated research topics and implications were collected, evaluated and categorized. 1997 was chosen as a conceptual starting point of the thematic analysis. In this year, a concise milestone was set by Gersick et al. (1997) with the introduction of the family business system, which clearly illustrates its complexity and prevailing interrelations. The family business system was used for our model, and elucidates psychological aspects regarding succession in family businesses. A major nding which supports the study conducted here is that the importance of research on the succession process is indisputable. In spite of this, the examination of psychological aspects has so far not been extensively considered in empirical studies. In a second step, a literature review was conducted on the empirical investigations on psychological aspects of company succession in family enterprises that were published in all scientic publication channels before 2012. Here, databases including ABI Inform/ProQuerst, EBSCO, Emerald, ScienceDirect, and Google Scholar were browsed in February of 2012 to identify the foundation of our literature review. For the search, publications needed to feature keywords such as family rm/business, succession, psychology, emotions, and conicts in their titles or abstracts. Additional sources were incorporated into the analysis using, e.g. the references found in the articles from the database search. Finally, the research design was constituted to focus the investigation solely on psychological aspects with regard to succession in family enterprises. Exclusive investigations that elaborate empirical insights were considered as a means to gain substantive implications. Current state of research 314 papers were examined for the thematic analysis, of which 181 featured a theoretical background. Around 8 per cent (26 papers) had a connection to the topic of succession (Table I). Having obtained this knowledge, the authors then commenced a deeper literature exploration on psychological aspects. However, investigations published in FBR that exclusively observe psychological aspects regarding succession in family businesses and the emotions that accompany the succession process are relatively rare. Although emotions and conicts arising within the process are often discussed in theoretical elaborations, only a few empirical studies exist with a specic focus on this topic. For the following literature review, only empirical studies examining at least one psychological aspect that considers company succession in family businesses were taken into consideration. Table II shows the state of research that prevailed up to the point of our study. Baldegger and Pock (2007) investigated among other issues the reasons for failed takeovers in Liechtenstein. Here, premature discontinuation of the succession process can be attributed to the successors lack of qualications. Furthermore, varying ideas about a business future direction, especially when factoring in the varying perceptions of the predecessor and successor, lead to conicts. Personal differences are a reason for failed successions, which means that failure can to some extent be attributed to emotions. A company owner who is not willing to let go of what hes dedicated his life to is a major factor for conict. This is accompanied by the fear of a loss of status

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Topic

Findings

Times mentioned 1st theoretical background included: 181 2nd without theoretical background: 133 1st place: agency theory: 37 2nd place: stewardship theory: 13 3rd place: resource based view: 12 4th place: resource dependence theory/ family system theory: 10 ex aequo 1st place: business and management 2nd place: nancing 3rd place: psychology 4th place: sociology 1st place: succession models: 14 2nd place: three-circle model: 10 3rd place: development model: 9 4th place: FIRO model/life cycle model: 5 ex aequo 1st place: 26 articles

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How many papers showed a 314 papers were theoretical background? analysed What kind of theories did we nd? 60 different theoretical backgrounds In which areas are these theoretical backgrounds established? Which models are the most used? 60 different models

Table I. Issues analysed within publications in FBR from 1997 to 2011

Which topic was discussed most?

Succession

after succession. These emotional difculties lead to a less objective perspective of the entire succession process. Furthermore, the time needed for the realization of a cooperative leadership style during this transition is a critical factor of success or failure. The succession process takes an average of three years. So the potential for conicts increases the longer it takes particularly when there are varying ideas about the companys future direction. Birley (1986) conducted a study in the USA by surveying students whose parents own a family rm. They were asked whether their parents pressured them to take over the family enterprise, and/or inuenced their decision about what to study. Here it was found that the potential family-internal successors made the decision solely on their own. The inheritors surveyed described the pressure coming from their parents as gentle, inadvertent, indirect, or just plain non-existent. Therefore, it can be stated that from a psychological perspective, the pressure to ultimately take over the business is made by the inheritors themselves. If there is a clear communication about succession prior to it becoming an issue of how and who it will be, predecessors experience this event with fewer concerns. According to a Canadian study conducted by Bruce and Picard (2006), there are conict potentials concerning succession which can be categorized as soft factors. Several business owners indicate that their company success is dependent on their involvement. Therefore, a large amount of business owners wish to stay in the company even after retirement. They are either willing to serve as a consultant or continue occupying a leadership position. It is assumed that the process of letting go is a personal challenge that is attributed to an emotional connection to the business. Nevertheless, family-internal conicts regarding the companys orientation are a further issue, most notably when the perceptions of family members vary. So the length of time the succession process takes is seen as a critical success factor, because different perceptions of how to run the company as well as its future direction might vary to a great extent over time.

Author(s)/ institution (year) Country Liechtenstein Completed succession Survey Selection criteria Method Results

Company type

Baldegger and Pock (2007)

143

Second and third sector

Birley (1986)

221

Not specied

USA

Students whose parents own a family Survey business

Bruce and Picard (2006)

4.311 Not specied

Canada

SME

Survey

Chung and Yuen (2003)

24

Manufacturing

China

Completed succession

Interview based on survey form

Davis and Harveston (1999)

1.002 Multiple

USA

ANOVA test

Davis and Harveston (2001)

1.002 Multiple

USA

Survey regression

The reasons for failed succession include varying perspectives and personal differences regarding the companys future The decision on whether to take over a company is entirely left to the potential internal successor. Parents do not force descendants to be the next in line to lead the company It is difcult for the business owner to let the business go. This represents the greatest difculty regarding the succession process All of the survey participants, second-generation entrepreneurs, consider a lack of professional competence on the part of successors to be the greatest problem when it comes to succession If the company founder remains in the company after the succession process has been completed, conict increases signicantly Increasing interaction between family members increases the occurrence of conict

Fattoum and Fayolle (2009)

Real estate, packaging, electronics, Tunisia glazing, groceries, international trade

Family enterprises with at least ten employees, in business since at least ten years and an annual turnover of at least USD 2 Mio Family enterprises with at least ten employees, in business since at least ten years and an annual turnover of at least USD 2 Mio. Respondents had to be the owner Family enterprise, successor works in company

Interview case study

Frey et al. (2005)

1.342 Second and third sector

Switzerland

None

Survey

The characteristics of the relationship between the former owner and successor changes with each step of the succession process Psychological aspects are among the main reasons for failure in the succession process (continued )

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Table II. Psychological aspects of company succession in family enterprises current state of research

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Author(s)/ institution (year) Country Switzerland None Survey interview Selection criteria Method Results

Halter et al. (2009)

Handler (1990)

Haubl and Daser (2006)

Laakkonen and Kansikas (2011) USA and Finland

Miller et al. (2003)

Morris et al. (1996)

ttimann et al. Ru (2005)

Table II.
USA Family enterprises Interview Germany Women as successors, SME, completed succession Interview Similarity of two family rms in two different countries Interview Canada Randomly selected sample from publicly available information three personally known rms Pilot study USA Completed succession Survey form Switzerland Less than 250 employees, succession in the past/next ve years Web-based survey Interview Emotions change over the course of succession. The succession is seen more positively when looking back at the process The relationship between parents and their children can have a signicant impact on the success of the succession process The designated successor needs to distinguish him/herself during the succession process, and needs to tackle a number of conicts. A prompt conict resolution is critical The continuing inuence of the founder generation on family businesses can pose a threat for evolutionary variation if the next generation is unable or unwilling to assume full responsibility for the decision-making process Intergenerational successions are affected by excessive attachment to the past, an overly dependent and conservative successor, a rejection of the past by a rebellious successor, an incongruous blending of the past and present, and/or an unsure and wavering new leader Relationships that are based on trust and respect support and promote company succession Successors anticipate problems that result from emotional uctuation on the part of the former owner, and the difculties this person has in letting go (continued )

Company type

931

Multiple

32

Multiple

53

Multiple

Not specied

16

13 large and well known companies three small and personally known companies

102

Not specied

352

Not specied

Author(s)/ institution (year) Country Canada Completed or pending succession Survey regression Selection criteria Method Results

Company type

Sharma et al. (2000)

177

Not specied

Sharma et al. (2003a)

76

Member rms of the Canadian Association of Family Enterprise

Canada

Incumbents and successors of one FF Survey MANOVA test regression Succession expected within the ensuing ve years, or has occurred within the preceding ve years

Smyrnios and Dana (2006) USA

1.000 Multiple

Australia

Solomon et al. (2011)

10

Not specied

Survey Turnover . USD 1 mio Not located in the public or agricultural sector Founders or second-generation family Interview business owners

Venter et al. (2003)

332

Agriculture, retail, service

South Africa

None

Survey regression

Vera and Dean (2005)

10

Not specied

USA

Daughters who have taken over a familys business

Interview

The more competent the successor, the more willing his predecessor will be to step aside for him The attitude of the incumbent/ successor affects the incumbent/ successors satisfaction with the succession process. With regard to this insight, communication is key to the success or failure of a succession process More than half of company owners would like to work beyond the retirement age of 65 Succession is facilitated when the business owner is open and curious, in good health, and not fearful about retirement Trust and harmony signicantly affect the level of satisfaction during the succession process Father-owners were willing to relinquish control to their daughters, and tended to focus on company well-being and not their own self-identity. Mother-owners did not willingly relinquish control or make succession plans

263

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Table II.

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Chung and Yuen (2003) present a list of problems that might arise in the succession process within Chinese family rms, although they only mention those problems that are of a psychological nature. A lack of leadership competence of the successor is an issue through which conicts arise. Competence was in fact identied to be the most important prerequisite regarding the choice of a successor. However, the question of whether or not competence exists is closely associated with an objective evaluation of the internal successor. Furthermore, gender and age (i.e. the oldest child is the rst to be considered to take over the company) were important issues for the selection of a successor. A lack of trust results if the successor does not meet the necessary requirements. Here, the potential exists for conict to be magnied, impeding both the succession process and company success. Davis and Harveston (1999) investigate the effects of company succession with regard to harmony within family rms over three generations. With psychological aspects, it is seen that the potential of personal and professional conicts is signicantly greater when the company founder still exerts inuence or remains in the company. Furthermore, conicts arise due to the dominant generational shadow of prior generations. This is because after the succession process has been completed, employee loyalty or important knowledge of critical routines and operating procedures might be lost, thereby endangering the companys further existence. An unwillingness to let go might be due to a lack of trust and the prior generation feeling that they are indispensable. In addition, Davis and Harveston (2001) conducted a study on intergenerational conicts in family enterprises which investigated the inuence of family members regarding the degree and frequency of potential conicts resulting from family relationships. The study shows that a high level of interaction between family members reinforces the degree of conict among all generations and/or groups involved. The more family members there were working in the company, the higher the potential for conicts within all of the generations involved. This might be due to different perceptions regarding goals and actions. However, family members not actively operating in the daily business of the family rm may play an important role in promoting peace. Furthermore, it is found that social interaction among family members increases the intensity of conicts. The reason for this might be a lack of boundaries between the family and the business, allowing personal disagreements/conicts to be carried over into professional interaction. Using a three-phase model, Fattoum and Fayolle (2009) examine changes in the relationship between founders and successors over the course of a family-internal succession process. The rst phase in which the succession process is initiated sees a tense relationship, as there is no ideal way to comfortably handle the interaction between predecessor and successor. In the second phase the establishment of a partnership accompanied by harmonized actions appears. Here, the relationship between both actors is more amicable, and is based upon involvement and trust. Finally, the third phase sees the retirement of the predecessor. The atmosphere is again tense, as the predecessor is now expected to step back and hand over responsibility. In this stage, fear can arise, which in turn can cause conict. This is particularly difcult for successors in Arabic and Muslim societies, where patriarchal structures still tend to be part of the daily routine in which the father is trusted to make the decision in every area of

life and business. In this particular case, conicts arise because of psychological aspects and cultural factors. Frey et al. (2005) analyse various aspects that hinder the succession process. Surveying 1,342 Swiss family rms, it is found that emotional and/or psychological aspects (future vision, qualication, acceptance among employees, and personal differences) constitute the decisive factors causing failed company successions. Different perceptions of the predecessor and successor regarding the future direction of the company are the main area of conict. Furthermore, an early initiation of the succession process is linked to emotional problems in most cases, as the predecessor is faced with the issue of letting go. Here, open communication and a clear notion regarding the future direction can reduce conicts. The involvement of an independent, competent consultant can help reduce conicts during the succession process. A consultant can serve to mediate and provide support in a conict-laden relationship between the predecessor and successor as well as among family members. It should however be kept in mind that this investigation was unable to draw a solid conclusion:
The emotional component is publicly discussed on a frequent basis, yet there are only a few investigations found within research that specically look at this aspect. There is a clear research gap with this topic (Frey et al., 2005, p. 35).

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Although psychological aspects are not considered to be a major area of conict either before or after succession, the study shows that they can be a main reason for succession process failure. Halter et al. (2009) investigate emotional and nancial aspects with regard to the succession process. A survey of 931 Swiss rms found that the emotional bond to the enterprise results from the fact that business owners invest a large amount of time and effort to build up and maintain their rm. In many cases, an entire life is dedicated to the rm, and identication with it is essential. Furthermore, a certain status is attributed to the position of owner/manager as well as the companys achievements. As a result, a company succession can cause fear prior to retirement. This perceived loss of status, duties, and challenges is accompanied by hesitation. The emotional conicts that a predecessor needs to deal with often cause conict and hinder or extend the succession process. Even though the problem of letting go might last throughout the entire succession process, letting go of the company has also generated positive feelings according to those respondents who have already completed succession. Although those who have not yet retired have in fact experienced positive feelings, it is still not easy to pass through the nal phase of letting go. Handler (1990, p. 26) found that mutual respect and understanding are key factors for a positive succession process. She formulates the following hypothesis: H1. The more a next-generation family member achieves mutual respect and understanding with the predecessor in the succession, the more likely it is that the individual will have a positive succession experience. Nevertheless, a positive succession process is a subjective phenomenon, and perceived as such by each individual family member. The success of company succession is highly dependent on the personal relationship between the parents and the child taking over the company. Mutual respect plays a central role for an effective transfer. Furthermore, a lack of intergenerational understanding is mentioned as the main

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reason for dissatisfaction, making respect and understanding the critical factors for a positive/negative succession process. Frustration is attributed to a lack of communication and understanding on the part of the predecessor. So clear and open communication (i.e. proper notions of the future direction, and feedback to the successor) facilitates a positive succession process. Haubl and Daser (2006) examine success factors in different phases of the succession process, indicated as a passage of status. Issues that emerge when the company owner leaves the rm are investigated in this study. For the predecessor, the withdrawal of all company action is a decisive event and important step. Daughters tend to give this step more time than sons do. However, the older the company owner is, the clearer it becomes to him that the last phase of his life is dawning. The challenge of letting the business go and handing over control is a major source of conicts. If the predecessor continues to inuence business decisions, the successor is confronted with the challenge of coping with the predecessor, while at the same time guiding the rm in its future direction. Conicts also arise when attempting to develop a foundation of trust among the employees. Here, competence is a key factor through which respect and loyalty are earned. Sibling rivalry is also identied as a factor through which conicts can potentially emerge. A clear communication and distribution of power on the basis of competencies is a key to avoiding conicts among potential successors. In a multi-country study of one American and one Finnish family rm, Laakkonen and Kansikas (2011) investigate evolutionary changes in family business succession. Interviewing family members (founders, spouses, and children), insights are obtained regarding succession preparation with two generations. It is assumed that a gradual and steady transfer of the management and ownership to the next generation keeps a business alive. Nevertheless, the interviewed successors were reluctant and not convinced of their ability to run the business solely on their own from day one of succession. With psychological aspects, Laakkonen and Kansikas (2011) highlight that the harmony between the founder and next generation fosters a continuity that is concomitant with a thriving succession. However, the closeness between these two parties might prevent evolutionary variation if the next generation does not implement its own interests and apply an entrepreneurial attitude. Furthermore, the continuing inuence of the founding generation on a family business can pose a threat for evolutionary variation if the next generation is unable or unwilling to assume full responsibility for the decision-making process. Based on an inductive study, Miller et al. (2003, p. 528) exposes the problems found with failing successions. Conducting a pilot study with 16 family rms that have completed the succession process, Miller examines three different succession patterns: conservative, wavering, and rebellious. It is assumed that intergenerational successions are very much plagued by problems of passage which suggests an inappropriate relationship between past and future. Miller et al. (2003, p. 528) specically observes that this passage arises from an:
[. . .] excessive attachment to the past, by an overly dependent and conservative successor, a rejection of the past by a rebellious one, or an incongruous blending of past and present by an unsure and wavering new leader.

Morris et al. (1996) conducted a cross-sectional study in the USA to determine the characteristics of succession processes in family enterprises. The entrepreneurs surveyed

were questioned regarding the relationships within the family and the business prior to and during succession. Here it was found that a moderate level of conict among family members exists prior to company succession. In general, the relationship between the family members are described as positive and widely based upon trust, respect, a close bond, and cooperation. There are however indications of underlying conicts. Despite the positive results, there is still the capability to decrease any tensions that have had a negative impact on business activities, as well as the contradicting interests of family members. Tensions between the individual family members that negatively impact business activities could not specically be conrmed. Family issues and tensions as well as their detrimental effect on business activities and success should be avoided at all costs. The study investigates not only the family relationships prior to a company succession, but also the characteristics of the succession itself. With regard to the succession process, conicts/problems appear within different emotional spheres. A moderate level of difculty and frustration, along with pleasant experiences and even joy were identied. One cause of frustration can be when the predecessor does not let go or step down, even though he/she had promised to do so. Nevertheless, the results indicate that a positive, open, trust-lled, and respectful relationship among family members facilitates succession before and during the process. ttimann et al. (2005) shows that collaboration within the succession The study by Ru process between father and son as well as mother and daughter tends to take longer. Most family-internal successions last more than two years. Family-external successions required less time than internal ones. Transfers to a family-external person take less than two years, and most of this time is spent for the transfer of immaterial property such as knowledge and existing networks. The cooperative phase of leadership is often informal, as the ofcial delivery of property is determined by a contract having a specic deadline, even though the predecessor often does not retire on the set date. An extended period of cooperative leadership could be seen as critical, because it provides fertile ground for conicts, particularly when competencies and areas of responsibility are not clearly expressed. The danger that the predecessor continues to make decisions is without question the most critical issue regarding the succession process. Here, the problems of letting go and the questioning of competencies arise. Therefore, a clear distribution of decision-making power reduces the potential for conicts, facilitates the process, and helps to force the actual succession. Sharma et al. (2000) observe the correlation between the desire of the predecessor to step down and the existence of a competent successor. There are a variety of reasons that describe predecessors hesitation to retire. Here, both nancial and psychological factors play a role. There is the fear of being faced with the last phase in life or the awkwardness of not knowing what to do since there has never been any other interest besides work. In terms of nancial concerns, the successor might be able to reduce these kinds of worries, and therefore speed up the predecessors willingness to step down. Nevertheless, the second aspect of what to do with the newly acquired time is an issue that can only be addressed by the predecessor him- or herself. The fear of not knowing what to do with an abundance of newly acquired time is a major reason why predecessors have difculties letting go, which brings with it a potential for conict. Sharma et al. (2003a) explore predictors of satisfaction in the succession process. Satisfaction is measured from the perspective of both the incumbent and the successor.

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Variables such as the propensity to step aside, the willingness to take over the agreement to maintain family involvement, and the acceptance of the individual roles are discussed regarding their positive effect on the satisfaction with the succession process. This study provides a profound view of succession with regard to psychological aspects. On the basis of a regression analysis it is stated that incumbents and successors believe that their satisfaction levels are more strongly inuenced by the other partys attitude than by their own (Sharma et al., 2003a, p. 680). As a consequence, the attitude of each stakeholder involved affects the satisfaction with the succession process. Regarding the aspect of letting the business go, the investigated incumbents in their analysis had a higher willingness to step aside than expected by the successors, which in turn is directly linked to the willingness of the successors to take over. Consequently, if the propensity to let go is given, the willingness to take over is greater. It can therefore be assumed that the attitude of the incumbent/successor affects the incumbent/successors satisfaction with the succession process. Sharma et al. (2003a) on the other hand state that with regard to this insight, communication is the key to the success or failure of a succession process. According to an Australian study by Smyrnios and Dana (2006), the majority of the surveyed business owners were willing to face the succession process, although only half were mentally prepared for a transfer or retirement. The uncertainty of what happens afterwards causes a lack of preparation and a resistance to initiating the succession process. Not surprisingly, more than half of the respondents wish to work in the company after retirement. A strong identication with the company is a major reason for the inability to let go, which in turn can lead to conict. In their investigation, Solomon et al. (2011) interview ten business owners that are facing succession. In spite of a pending succession, nine out of ten participants were still active presidents and/or CEOs. Solomon et al. (2011) identify four inuences that constitute a business owners so-called approach to succession: the business within through which intra-psychic dynamics of differentiation and control are captured; marriage through which traditional gender roles that shape succession are described; adult children by which the circumstance of having a natural (accidental, organic, passively groomed) successor is examined; and the vision of retirement that captures the impact of an owners life perspectives after succession. With psychological aspects, the fourth inuence is the most pertinent aspect for our review. Here, we nd that most of the participants were afraid of stepping down, and did not indicate a high willingness to let go of the business in their current role as business owner. Consequently, Solomon et al. (2011) state that succession is facilitated when the business owner is open and curious, in good health, and not fearful about retirement. The study by Venter et al. (2003) illustrates that an increased amount of trust in the ability of the successor has a positive effect on the overall satisfaction with the succession process. Furthermore, a positive correlation is identied between family harmony and satisfaction with the succession process with all of the parties involved. A well-functioning family relationship and harmonious atmosphere increases the chance of a successful generational transition. Owners often have difculties communicating issues that concern succession. Since succession is generally a difcult topic that requires an open, honest exchange of opinions, conict within the family will inject an additional facet of complication into this transitional period.

Consequently, an open communication as well as a harmonious atmosphere facilitates a supportive framework to plan and achieve the succession process. Vera and Dean (2005) study the specic circumstance daughters face regarding succession by interviewing ten female business owners. A major nding regarding this more or less unexplored issue is that there are different relationships between fathers and daughters, and mothers and daughters (this is a prerequisite for providing a structured and detailed answer on this issue). The respondents mentioned good personal and professional relationships between fathers and daughters, while the relationships between mothers and daughters tended to be more difcult, as mothers were more perfectionist and feared the loss of control. Vera and Dean (2005, p. 335) state that a succession is more tedious when daughters succeed mothers than when they take over for their fathers. While father-owners were willing to pass on control to their daughters, and tended to focus on company well-being and not their own self-identity, mothers-owners were not willing to hand over control, or conceptualized succession in terms of a plan instead. However, the majority of maternal successions were forced by the mothers severe illness. Psychological eld model (PFM) within family business succession research Within the scope of the literature review, various psychological aspects with regard to family business succession have been identied. The nature of these identied psychological aspects is multidimensional. As there is no overall model addressing any psychological aspect elaborated by empirical investigations, the aim here is therefore to develop a structured model. Using the ndings and implications of the publications analysed, we created a model that contains the psychological aspects through which potential conicts arise. This classied the identied aspects into three categories: individual, interpersonal, and organizational issues (Figure 1). Furthermore, the stages in which the identied conicts arise are elaborated and assigned to categories within the family business system by Gersick et al. (1997). Individual As the literature shows, for business founders and owners, it is quite typical, and all too often difcult, to let go of a lifes work (Bruce and Picard, 2006; Davis and ttimann et al., 2005; Sharma et al., Harveston, 1999; Frey et al., 2005; Halter et al., 2009; Ru 2003a). The reason for this unwillingness is often attributed to the future perspective of the predecessor or a loss of status, the personal fears of not knowing what to do upon retirement, and the lack of challenges once working life is over (Baldegger and Pock, 2007; Fattoum and Fayolle, 2009; Halter et al., 2009; Sharma et al., 2000; Solomon et al., 2011). Interpersonal Doubt might arise about the successor not being able to adequately ll the new leadership position. This is accompanied by a lack of trust in the predecessor concerning his/her competencies, especially with regard to family-internal succession (Chung and Yuen, 2003; Davis and Harveston, 2001). For instance, this fear can lead the successor to imitate the leadership style of the predecessor, and result in a lack of acceptance and/or authenticity. Because the successor selection should however be objective, believing in the

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Figure 1. Psychological eld model

competencies of the successor is critical and even inevitable, so encouraging the successor to prevail is advisable. Furthermore, interpersonal differences and perceptions and generational gaps often exist between the predecessor and successor (Baldegger and Pock, 2007; Frey et al., 2005; Vera and Dean, 2005). Interpersonal differences might arise due to varying notions which are a major cause of conicts during the succession process (Baldegger and Pock, 2007; Bruce and Picard, 2006; Frey et al., 2005; Handler, 1990; Haubl and Daser, 2006); the key to avoiding them is open communication and consent. In addition, rivalry is an issue that might arise within family-internal successions (Haubl and Daser, 2006; Morris et al., 1996). Impartiality is sometimes not given, as a successor might be predetermined within the family. This might foster conicts among siblings, since someone got the nod over his/her brother/sister. Furthermore, the future owner is confronted with the situation that he/she has always been regarded as the son or daughter of the business owner and thus enjoyed a certain status. Therefore, the successor has to gain recognition and respect among employees. With this in mind, an objective selection of a successor is imperative. To avoid potential conicts, this decision should be made based upon competencies and qualications to the greatest extent possible. Organizational An issue that needs to be faced regarding succession are the rudimentary or non-existent boundaries between family and business that can hamper the succession process (Davis and Harveston, 2001). Social interaction among family members increases the

intensity of conicts. Therefore, the set of boundaries might positively impact the outcome of succession, and facilitate the process of the former business owner letting go. Furthermore, eluding potential conicts requires a clear distribution of decision-making power during the succession process (Laakkonen and Kansikas, ttimann et al., 2005). If the predecessor still retains decision-making power, a 2011; Ru lack of trust in the competencies of the successor might arise. Moreover, open and clear communication is an issue that affects succession before, during, and after the process. Likewise, discreteness might affect the attitude of a potential internal successor because he or she might be perplexed or even intimidated when confronted with the issue of succession. This is why it is necessary to generate a culture of open and clear communication (Birley, 1986; Frey et al., 2005; Handler, 1990; Haubl and Daser, 2006; Sharma et al., 2003a; Venter et al., 2003). PFM summary The illustration of the elaborated psychological eld model (PFM) has shown that psychological aspects are attributed to individual, interpersonal and organizational conicts and occur in different stages with regard to the succession process. When looking at the family business system within our model, disagreements mainly prevail in the overlaps between the dimensions of family, business, and ownership. So by addressing psychological aspects within family business succession, the fostering of awareness is inevitable when it comes to the stages in which conicts might appear. Moreover, the persons/parties concerned need to be taken into consideration to overcome and avoid various conict potentials. The practical side of our model makes it obvious that a permanent ow of information is inevitable, and is optimally accompanied by open communication and consent. To foster consent, the integration of reexive processes might be of help to achieve optimal solutions with regard to the subsistence of the business. Finally, prophylactic actions in the preparation phase might be an approach that helps minimize conict potentials. Discussion and conclusion The majority of empirical research conducted to date has only dealt peripherally with the topic of psychological aspects in family rms, and has hardly ever had it as a primary point of focus. Our study has shown that individual questions and their answers are attributable to emotions that arise or conicts that emerge before, during, and after succession has been completed. Therefore, the question regarding the point of time business owners complete the withdrawal from the company is not necessarily the result of a psychological aspect of succession. The investigation by Solomon et al. (2011) of business owners that face succession is one of the only studies conducted which analyses emotional aspects arising before succession. When the phase of letting go takes more time than expected, it is safe to assume that conicts and emotions are in play. The vast majority of the empirical studies identied do not deal exclusively with emotions, conicts, or other psychological aspects of succession in family enterprises. This shows just how little this topic has been empirically investigated with it as the sole focus. Only the studies by Handler (1991), Davis and Harveston (1999, 2001), Miller et al. (2003), Sharma et al. (2003a, b), Vera and Dana (2005) and Solomon et al. (2011) predominantly deal with psychological aspects. As already recognized by Frey et al.

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(2005, p. 35), there is still a research gap both in literature and empirical studies with regard to the psychological aspects of succession. Conict is the greatest destroyer of value in family enterprises (Hennerkes, 2005, p. 58). It can particularly occur during the succession process when the emotions and challenges that need to be overcome manage to become a major factor. The spectrum of psychological aspects includes the interpersonal relationship between the predecessor and successor, the imaginary line between family and business, and the knowledge-creating and decision-making hierarchy. As the implications/results of the studies analysed show, it is important to address and communicate company succession at the earliest date possible. This allows the predecessor the time needed to start doing things that allow a life after retirement (i.e. outside the company), which in turn will help the predecessor, when the day nally comes, to hand over the business to the successor. Early planning of succession also facilitates the process of passing over a lifetime of work into the hands of another. Nonetheless, the former owner of a company may need a while to let go. Even still, it is important to have a competent and reliable successor. This basically makes an objective successor selection mandatory. With this in mind, difculty might arise if several candidates, especially internal ones, are an option. Sibling rivalry in particular can cause struggle regarding the question of who the proper successor will/should be. As frequently mentioned above, the prerequisite should be the demonstration of professional and social competencies required for the job. Incompetence leads to a lack of trust, and might cause a delay regarding the takeover, or even lead to company failure. A lack of trust on the part of employees might also affect the acceptance of the successor. To summarize, family rm successions are associated with a range of psychological conict potentials that need to be carefully taken into consideration. It is not always inevitable that the predecessor and successor will have a similar perception and aim to pursue the same goal. Emotions and conicts should never be underestimated when considering the succession process. The keys to a successful family-internal succession are strong and solid family ties, not to mention clear boundaries between family and business. Furthermore, when conicts of any nature arise, open communication and commonly achieved solutions are crucial for overcoming them and ensuring continued success. As any research, also this article has its limitations. Especially the search terms limit our methodology, as the literature review solely concentrates on empirical contributions that exclusively investigate psychological aspects of succession. However, the aim was to elaborate a focused PFM in terms of succession. Therefore, aspects such as trust, jealousy, suspicion and avarice, which are attributed to both the elds of psychology and sociology could not be taken into consideration with regard to our literature review. Likewise, the family business system by Gersick et al. (1997), which forms one of the major foundations of our article, has been the topic of some criticism. For instance the rm age and thereby the generation that currently controls the family business as well as their personal propensity and education are not considered in this model. In this regard, e.g. Rutherford et al. (2006, p. 329) state that [. . .] rms that are small are rst- or second-generation family rms, have signicant tension, and are controlled by one family member. Firms that are large and old are third-generation rms. Firms that are growing and middling in size have educated and growth-oriented owners [. . .] and [. . .] high levels of strategic planning [. . .].

Nonetheless, we believe that the assignment of each exposed potential psychological conict aspect to the stakeholder, respectively, category affected fostered the understanding and plausibility of our model. Furthermore, it allowed providing precise implications regarding the stakeholders concerned. As illustrated, a relatively small amount of empirical analyses exist that exclusively deal with the psychological aspects of company succession in family enterprises. Therefore, research is urgently needed in this area to better understand the different emotions, perceptions, and feelings of the parties involved. Focused investigations of psychological aspects with regard to succession in family enterprises would generate progress and yield important insights. A critical focal point is to constitute steps that can help establish the measurability of emotions and feelings. Qualitative empirical investigations might allow a better understanding of the effects of conicts and emotions within the succession process. Here, the experiences of predecessors and successors concerning emotions and conicts should also be specically addressed. There are further perspectives and issues that need to be taken into consideration. It would certainly be interesting to analyse how sibling rivalries that emerge within company succession can bias the process. Another investigation topic could be the emotions felt by employees when a generational succession occurs. From a strategic view, the temporal variable seems to be the most important one. This is based on three aspects: rst, humans have a clear problem concretely determining what a real long-term orientation looks like in practice. Second, as our model depicts, most psychological conicts appear either in the transfer/takeover or in the continuation phase. It might be of value to dedicate the greatest detail of the investigative scope to the preparation phase. The exploration of actions that are undertaken in early stages to prevent future conicts might also be a good idea. Doing this could allow psychology research to provide insight into how predecessors think about the implementation of prophylactic actions to counteract potential conicts. Third, there is a huge gap in the literature when it comes to the post-succession phase in family businesses. There are no existing and effective models, theories, and psychological assumptions of re-starting a business, even if it is within the own family. Therefore, the authors see an enormous need to intensify the research in terms of real psychological aspects, and highly recommend psychological aspects as a single research approach. The existing generic approaches are often insufcient and, to be blunt, watered down. Results in this area can and should be discussed in a number of varying ways. The authors suggest testing whether a single research stream is more effective in explaining the behaviour within a family rm instead of a broader, more formulated generic approach. To advance this research topic, the following questions could be addressed to identify solutions through which psychological conicts within the succession process can be reduced or prevented: what actions can be undertaken to positively affect the succession process from a psychological perspective? Are reective processes an approach to reduce conict potentials within the succession process? Does the implementation of prophylactic actions positively bias the succession process and, if so, how can they be constituted? How do successors think about prophylactic actions in the succession preparation phase? Finally, psychological aspects with regard to succession in family businesses open the way towards a wide array of issues that offer solid opportunities for future research. The authors hope that the insights elaborated in this paper will contribute to gradually lling this academic void.

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