Succession in family firms a difficult issue

Succession planning is proving difficult in family-owned businesses according to a survey by PwC. Image: Stop Selling Vanilla Ice-Cream

"Fourteen percent of the next generation has taken business degrees to help prepare themselves for success or management and 34% have done training courses," the PricewaterhouseCoopers (PwC) report on family businesses released last week said.

"And they're looking to apply what they've learned to the family firm. They want to implement more rigorous processes, especially around disciplines like finance and budgeting; they want to clarify roles and responsibilities and document them better," the study found.

More than 200 family businesses, including 20 from South Africa, participated in the survey, which also showed that most of the participants said they were looking forward to running the business in future.

"Promotion to chief executive is also no longer automatic for the next generation, with a growing number of family businesses being prepared to make tough family succession decisions," it said.

It also revealed that 73% of young people in family-owned businesses said they were looking forward to running the business one day, but only 35% thought that was definite, and as many as 29% thought it was only fairly likely.

It said some in the older generation tended to over-estimate how well they have run the business, while under-estimating their children's capacity to do this as competently as they did.

"This sort of impasse can slow down decision-making, and lead to the phenomenon of the 'sticky baton', where the older generation hands over management of the firm in theory, but in practice retains complete control over everything that matters," said Andries Brink, the National Private Company Services Leader for PwC.

source: Sowetan via I-net Bridge