Succession in family firms is a suitable moment to implement strategic changes to guarantee the continuity of the family firm

Succession in family firms as a suitable moment to implement strategic changes

BDO Best Contribution to Practice Award

University of Hasselt – 5th International Family Business Research Forum

September 2022

Family-controlled enterprises have experienced difficult times in the last decade but they have shown resilience and strength.  

The recent turmoil: the banking crisis, the war in Ukraine, the rising scarcity and purchase prices of commodities, the war for talent, the European energy crisis … will all have an important impact on the economic outlook for the coming months and years. Family firms will have to cope with and will have to formulate answers to these challenges.

But they should not be overwhelmed by pessimism.  The DNA of family firms is to realise dreams, stay strong in difficult times, work hard/play hard, demonstrate a “can do”-mentality and is characterized by an attitude of “never giving up”.

BDO plays an active role in making the bridge between new academic insights on the well-functioning of family firms and bringing these insights into action using viable and pragmatic advice and initiatives. 

Family entrepreneurs are suspicious when confronted with woolly and flashy presentations when smashed with technical jargon, … but they are ALL EARS when it comes to pragmatic and applicable advice which they can embed in their day-to-day practice.

We would like to highlight interesting findings in recent research of the University of Mannheim (Germany) presented at a Family Business Research Conference of the University of Hasselt:

• Family firm succession offers a special window of opportunity for the next generation to reinvent and rejuvenate the firm. 
• The performance of family firms often deteriorates in the pre-succession phase. In BDO-supported academic research and our day-to-day activities, we observe a higher level of resistance to new initiatives when the succession phase is near. Blindness does occur because inertia is driven by the historical recipes of success.  This is the reason why family firms are sometimes lacking behind in the adoption of new technologies in rethinking their business model to become more sustainable and in dealing with higher environmental, social and governance requirements and expectations. 
• The selection of a next-generation CEO should be based on a good evaluation of the skill set of the new CEO, addressing as well as hard as soft skills. He or she will have to identify and amend misfits in structuring the organization given the environment in which it is operating. The new CEO can act as a catalyst. 
• This research stresses the necessity to induce change to cherished habits and routines, which are grounded in family tradition (<<we did it always that way>>). There is a window of opportunity to define corrective actions and to start with productive unlearning from its history. 
• Better preparation and selection of a new CEO skilled will lead to the necessary changes and will positively boost the performance of the company.

The research referred to is "Fusing Contingency Theory and Upper Echelon Theory: For a New Perspective on the Critical Juncture of Family Firm Succession" by Baris Istipliler, Jan-Philipp Ahrens, Annegret Hauer, Dennis Steininger, Michael Woywode (University of Mannheim  & Technical University of Kaiserslauteren

If you would like to new more, please get in touch via e-mail jan.oosterlinck@bdo.be