The Succession Issue in Family Businesses QUIZ

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The Survival Rates

1) True or False? The family business sector is characterised by an alarming deteriorating survival rate.

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TRUE

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Reasons Why
2) Why are family businesses a failing sector? (A)Poor or no succession plan (B) Conflicts within the family (C) Different visions between generation

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The Succession Process

(A) Poor or no succession plan

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The Survival Rate

3) Which portion of businesses survives to the transition from the founders to the second generation of owner - management?

(A) One fourth overall (B) A half overall (C) One third overall

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The Succession Process (C) One third overall

Researchers argue that only about one third of family businesses survive the transition from the founders to the second generation of owner-management. Moreover, of those who do that, only about one third tend to survive the transition from second to third (and beyond) generation of ownership.

(Poutziouris, 2000)
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The Survival Rate

4) What is the main barrier to an effective succession plan? (A)Lack of preparation of the successor (B) Incumbet does not want to let go of power (C) Willingness to be the successor (D)Conflicts between family members

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(B) Incumbent does not want to let go of power The incumbent feels a strong connection to the business and struggles to let someone else to make all the decisions he/she did before. He/she wants still feel involved in the day to day decision making process.

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The Succession Process

5) How long does the succession process take on average? (A)One year and a half (B) Six months (C) Three years (D)Up to two years

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(C) Three years

The Succession Process

The succession process takes an average of three years. The potential for conflicts increases the longer it takes particularly when there are varying ideas about the companys future direction. *+ 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.

(Baldegger & Pock, 2007)

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The Successors Prerequisites

6) Focusing on Chinese family firms, which of the following is NOT considered a prerequisite in choosing the family business successor? (A)Competence (i.e. leadership) (B) Experience (C) Gender (D)Age

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(B) Experience A lack of leadership competence of the successor is an issue through which conflicts arise. *+ Furthermore, gender and age (i.e. the oldest child is the first 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.

(Chung & Yuen, 2003)

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Succession Planning
7) Which of the following is NOT one of the main succession planning objectives? (A) To efficiently and fairly distribute assets from older to younger generations; (B) To pass control of the business in a way that will ensure effective business leadership; (C) To increase the likelihood of co-operation among stakeholders in businesses; (D) To maintain and promote family harmony.
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(C) To increase the likelihood of co-operation among stakeholders in businesses;

According to Davis (1997), succession planning has three main objectives: (1) to efficiently and fairly distribute assets from older to younger generations; (2) to pass control of the business in a way that will ensure effective business leadership; and (3) to maintain and promote family harmony. Sharma et al. (2001) and Morris et al. (1997), suggests that well developed succession plans can increase the likelihood of co-operation among stakeholders in businesses.
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Conflicts
8) True or False? A high level of interaction between family members relieves the degree of conflict among all generations: the more family members in the company, the lower the potential for conflicts within all the generations involved in the business.
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FALSE

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Davis and Harveston (2001) conducted a study that shows that a high level of interaction between family members reinforces the degree of conflict among all generations and/or groups involved. The more family members there were working in the company, the higher the potential for conflicts within all of the generations involved. This might be due to different perceptions regarding goals and actions. Furthermore, it is found that social interaction among family members increases the intensity of conflicts. The reason for this might be a lack of boundaries between the family and the business, allowing personal disagreements/conflicts to be carried over into professional interaction.
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The Passage of Status

9) True or False? Male successors tend to give the predecessor less time to complete the withdrawal of all company action than female successors do.

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TRUE

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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.

(Haubl & Daser 2006)

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Transfer Lenght
10) True or False? A study demonstrated that family-external successions required more time than internal ones.

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FALSE

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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 official delivery of property is determined by a contract having a specific deadline, even though the predecessor often does not retire on the set date.

(Ruttimann et al. 2005)

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List of References (1/2)

Baldegger U., Pock M. (2007) Unternehmensnachfolge im Fu r stentum Liechtenstein 2005-2006. Empirische Ergebnisse und Handlungsempfehlungen Institut fu r Entrepreneurship, Vaduz Chung W., Yuen K. (2003) Management succession: a case for Chinese familyowned business, Management Decision, 41 (7), pp. 643 655 Davis P. S., Harveston P.D. (2001) The phenomenon of substantive conflict in the family firm: a cross-generational study, Journal of Small Business Management, 39 (1), pp. 14 30 Filser M., Kraus S., Mark S. (2013) Psychological aspects of succession in family business management, Management Research Review, 36 (3), pp. 256 277 Haubl R., Daser B. (2006), Familiendynamik in Familienunternehmen: Warum sollten To c hter nicht erste Wahl sein?, Bundesministerium fur Familie, Senioren, Frauen und Jugend, Frankfurt
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List of References (2/2)

Poutziouris, P. (2000), Venture capital and small and medium-sized family companies: an analysis from the demand perspective, in Poutziouris, P. (Ed.), Family Business Tradition or Entrepreneurship in the New Economy?, Proceedings: 11th Annual Family Business Network World Conference, FBN, London, pp. 255-82. Ruttimann R., Hallier C., Fuchs K., Nageli M., Liebermann F., Gartmann A., Kundert R. (2005) Unternehmen Zukunft: Generationenwechsel bei KMU in der Schweiz, Zurcher Kantonalbank, Zurich

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