KENNESAW, Ga. | Feb 2, 2024

Researchers' Insights on the Inevitable Phenomenon Every Family Business Faces

Q: When should a family business start succession planning?

A: A great question without a single obvious answer. New ventures that are still finding their way in establishing their unique identity as viable businesses likely won’t generate significant returns from preemptive succession planning.

Most problems arise when family firms start succession planning too late causing hurdles in the continuity of their business strategy.

A good first step is to identify potential successor(s) and ensure they are engaged and integrated into the business framework long before the actual succession event takes place.

While a founder may know who their best successor is, other firm stakeholders should also be aware and give buy-in on this decision. Once a successor is identified, succession planning can begin in earnest even if the event is many years away.

Before identifying a successor, long-term strategic planning may be a better approach, here founders can identify and evaluate different variations and alternatives to succession that still align with their long-term vision and goals for their family and business.

Family business succession is the process of transferring leadership and ownership within a family-owned business from one generation to the next. It is a critical aspect of sustaining a family legacy, ensuring continuity, and balancing the unique dynamics of both family and business stakeholders—making it pivotal for the long-term success of the enterprise.

Involving multiple generations in the ownership, governance, and management of a family business is crucial. 

This practice is vital for sustaining the dynamism, creativity, and overall success of family businesses over an extended period.

Succession events are a focal point in family business research.
They are extensively studied as they offer insights into the future of the business or its portfolio. Additionally, these events coincide with crucial decisions related to family wealth transfers, professionalization, and strategic shifts.

Achieving successful succession is challenging despite available professional support. 
Despite widespread professional guidance and best practices, ensuring a smooth transition is a notable accomplishment. It often involves a lengthy succession planning process, addressing both the preparation of current leaders for an exit and the grooming of future leaders for upcoming responsibilities.

Stakeholder engagement is crucial for continuity. 
Ensuring the involvement of stakeholders throughout the succession process—which could be mistaken as a primarily familial process—is essential. This engagement is key to supporting the continuity of the family enterprise.

It's all in the planning. Successful succession is a multiple-step process that requires a strategic and intentional plan.

Liberation Station, the first black-owned children’s bookstore in North Carolina, is an exemplary case of how early succession planning steps sculpt a family legacy well before the first ownership transition.

Virginia Scott-Miller founded the bookstore and chose to engage her two children in the daily operations.

Langston (11) and Emerson (7) read every book cover to cover and offer personalized recommendations to customers.

This collaborative effort enhances the bookstore experience and fosters a shared vision within the family—laying the groundwork for a seamless transition when the time comes.

The journey of Estée Lauder underscores the complexities of combining family legacy and business strategy.

Estée Lauder has experienced a market share decline and supply chain struggles. Questions about the company's future—and succession—have come to the forefront.

Estée Lauder is currently led by nonfamily member Fabrizio Freda. Freda's tenure has seen remarkable growth, doubling revenue in 12 years. As discussions about his successor gain momentum, the spotlight falls on potential candidates.

Among them is Jane Lauder, the chief data officer and a granddaughter of the founder. Her inclusion in the conversation adds an intriguing family dynamic to the mix.

The Lauder family, with an 86% voting power stake, holds significant influence, but the trajectory set by Freda’s leadership cannot be ignored.

Discussions continue, creating a compelling narrative of how succession planning shapes the future of even the most established family enterprises.