Research Insights: Exploring how communication dynamics affect the succession process within family businesses

Last Updated on Tuesday, 28 May, 2024 at 9:34 am by Andre Camilleri

Sarah Bugeja completed a Master of Science degree in Management & Marketing at the Faculty of Economics, Management & Accountancy, University of Malta

Family businesses face specific strategic and competitive challenges and risks. Central to the survival of the family business from one generation to another is the reconciliation of the familial and organisational roles assigned to the family members within the business, the  tension between the incumbent leader’s and the successor’s involvement and their ability to compromise on vision, goals and expectations for the business.

Open and on-going communication between the older and younger generation family members has often been cited in strategic management and organisational research as a means to reduce uncertainty and increase overall succession readiness for both parties within the family business.

This study Exploring how Communication Dynamics Affect the Succession Process within Family Businesses draws upon real-life experiences of intra-familial communication dynamics within five leading family businesses, which had either recently finalised or initiated their succession process with second or third generations successors. The selected family businesses were either led by a single family or a group of partnering families and operated mainly within the food production, oil and gas, and pharmaceutical industries.

“The study revealed how the family business served as a bond linking the older and younger generations.”

The study revealed how the family business served as a bond linking the older and younger generations. The successors had been gradually immersed into the practicalities of ownership and leadership of the family business since their teens or early twenties through duties befitting their age, skills and education. The running and management of the business, as well as the work ethic, organisational culture and values had been transmitted by the fathers through open exchanges.

Orchestrating a mutually-agreeable succession process required both generations to adapt their communication practices strategically, through giving or withholding advice, nudging, positive reinforcement and the combined creation of narratives, even during informal family events or meetings.

These exchanges facilitated a substantial level of preparation, maturity and self-confidence for the successors to implement their vision for the family business, during and post-succession.

Despite the overall trusting personal and collaborative working relationship between the generations, the communication dynamics did not always automatically translate into clear succession plans with well-defined roles for the next generation.

The successors were primarily guided by their feelings towards their fathers, rather than their ambitions and plans for the business.  Reconciling the roles of father and business leader was not always achievable. Particular leaders perceived the business to be a burden on their heirs and opted to avoid direct communication about the future of the business.

Other older generation leaders intentionally abdicated from the task of choosing successors and left the next generation to decide amongst themselves while others were reluctant to choose between possible successors but accepted the onus to avoid potential family disputes.

The fathers’ self-identification with the family business, their self-perception as entrepreneurs/leaders and retirement plans also meant that, passing on the leadership baton to the younger generation and embracing organisational change were not easily accomplished.

Furthermore, any ingrained inadequacies in the familial communication dynamics between father and son/daughter exacerbated and prolonged the succession process, resulting in continuous conflict and clashes rather than focus on the strategy, sustainability and growth plans of the family business.

Relationships between family members such as siblings or cousins within succeeding generations were generally viewed positively with cooperative communication practices supporting such relationships. The influence of spouses on male successors was seen as detrimental to familial harmony and business continuity.

Moreover, maintaining amicable relationships with non-family business partners, within and external to the family business, called for adequate caution in the management of communication dynamics to  sustain the competitiveness of the family business and safeguard its future.

The study concludes with recommendations for family businesses, emphasising the need to prioritise communication over tax and estate planning and establish governance structures that facilitate formal and informal communication. Family businesses should also familiarise themselves with successful and failed attempts at succession due to communication deficiencies and plan accordingly.

Recruiting organisational psychologists and advisors knowledgeable about good practices, pitfalls and barriers to communication as well as the organisational, environmental and cultural contexts of the business would benefit the strategic transition of leadership of the family businesses.

This article is a summary of the student’s dissertation submitted in partial fulfillment of a Master of Science degree in Strategic Management & Marketing. The article is not officially endorsed by the University of Malta. The opinions expressed therein are solely those of the respective alumni and do not reflect those of the University of Malta.

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