Session 5 & 6 - Succession in FB Flashcards
What is the role of a non-executive chairman?
A non-executive chairmen of the board does not occupy a management position in the company. The chair operates independently from the company, receives a plan and a proposal from the CEO, through the corporate secretary, and presents these to the board for approval
Reason why family businesses fail to do a succession planning?
It's never urgent Professional community Employee or family member push-back It's easier not to change How-to? Lack of courage from next generation Senior generation is worried about fairness FB succession planning is seen as an event, and not a process It costs to much
When can transfer of power be problematic?
CEOs don’t want to leave
CEOs fail to prepare next-generation members for leadership
Succession is triggered by illness or death of CEO
Which are the four different exist styles in family business?
Monarchs
Generals
Ambassadors
Governors
Define monarchs
Do not leave office until they are decisively forced out through death or internal palace revolt
This palace revolt may be in the form of ultimatums, the resignations of top officers, or the action of the board of directors
Define generals
Departs in a style also marked by forcible exit
The CEO leaves the office reluctantly, but plots his return and quickly comes back to the office out of retirement to rescue the company from the real or imagined inadequacy of his and her successor
The general enjoys being the returning savior and often hopes to remin around long enough to take the firm and himself to even greater glory
Define Governors
Rule for a limited term of office, then shift to other vocational outlets entirely after retirements
Despite their fairly graceful exit, governors maintain very little ongoing contact with their firm once they have left
Define ambassadors
Leave office quite gracefully
Frequently serve as post retirement mentors
May remain on the board, but they do not try to sabotage their successor
The link between governance and CEO succession
Clear separation of roles between the board, the family council and the CEO;
A family charter which sets of guidance, if not rules, for CEO succession;
Independent directors of the board who can bring an outside perspective;
A chairman who leads the succession planning process;
A nomination or selection committee
Which are the three post-succession issues in Family Businesses?
Conservative succession
Rebellious succession
Wavering succession
What does conservative succession mean?
The successor remains dependent on the old leader in many aspects of the management. The consequence might be conservatism and the organization becomes “locked in the past”
What does rebellious succession mean?
Rebellious successors reject the legacy of the old generation. They have a strong refusal for the past and its practices and wants to do things their own way.
What does Wavering succession mean?
The successor wants to introduce changes but is indecisive and doubtful as to how.
- -> the respect of the practices of the past and at the same time the willingness to show independence
- -> This ambiguous admixture might lead to dissatisfaction of employees (family andiron-family members), clients and key stakeholders in general
Organizational implications - conservative succession?
Strategy: stagnation, risk aversion, insularity
Organization and culture: tradition-bound, bureaucratic, centralized.
Governance: old guard still powerful
Performance: loss of market share, dying market
Organizational implications - wavering succession?
Strategy: Indecisive, inconsistent, start-stop
Organization and culture: Confused culture, conflict-ridden units
Governance: mix of old and new managers
Performance: abortive projects, shrinking margins
