Succession in the family business: how companies stay successful through generation?

Mychailo Wynnyckyj , Professor of management and sales management, teacher in Lviv business school of UCU (LvBS), and Lloyd Stauer, academic director of the Institute for family business, deputy dean of Business school of Alberta, in the article for the first journal of Lviv business school of UCU Insight LvBS Inside tell about when and how to transfer the business to the successors and what are the pitfalls of this process.

Mychailo Wynnyckyj, Professor of management and sales management, teacher of LvBS

When you need to think about the transfer of your business to the successors?

The difference between a good manager and top-manager is simple: the last one immediately after the foundation of a successful business thinks about the preparing of successors, who will become even more successful.

What are the main signs that it is the right time for the transfer of a business?

The business should be transferred, when the successor can consciously decide what he wants: to accept the family business or to stay in the inactive management and receive the legacy of the company as a property. Think of the company and as the object of property, and as the object of management. Company founder must be engaged in both, governance of the company and management. The next generation should not combine two positions. The management may be delegated. The property shall be managed.

How to prepare a successor?

The successor must understand how all stages of the company operate. Advice for successors: work for some time as loader, seller; try it in summer, in winter. Feel what is to be a performer before becoming manager.

Someone says that it is better to acquire experience from outside. But here there is the threat of a "transfer" of some certain cultural achievements from another company, where the "mines" may be laid.

"Overboard": how not to hinder to your successor to conduct the business – to release control?

You need to understand that the business is a "child" of the owner. And to transfer it to someone else by definition may be not easy. One of the ways to do this is to distract the founder with something else. And sometimes the founder of business therefore transfers it to the successor, because he has a new company or he has changed family status.

Lloyd Stauer, academic director of the Institute for family business, deputy dean of Business school of Alberta

When you need to think about the transfer of your business to the successors?

When creating or developing firms you should always remember about the "harvest" or "exit from the stage", therefore, the strategy of a potential succession should be created immediately.

What are the main signs that it is the right time for the transfer of a business?

  1. A sudden change in the macro-environment or in the industrial environment may cause the need to change the management.
  2. The new strategic direction/initiative may require a new management.
  3. The current "managing" generation may lose enthusiasm or energy to manage the firm.
  4. When you need to keep the interest and engagement of the next generation in the succession.

How to prepare a successor?

Many managers of the family business say that their training has begun in early childhood. It may be from full involvement into the family activities to the external formal business education. Among the values that should be passed are hardworking, decency, responsibility of management and altruism, ability to appreciate deeply your family business, as well as the family.

"Overboard": how not to hinder to your successor to conduct the business – to release control?

A feature that I like the most in a family business is its ability to adopt to the changes. I rarely come across the instances of the full transfer of authority and "elimination" from the business. Despite the formal transfer of authority and control, the next generation still finds respectful ways to take advantage of the wisdom of the previous one.

Read also. Blog of Dean of Lviv business school of the UCU of Sofia Opatska for the first number of the magazine Insight LvBS Inside # 1 "Delegation: make it difficult to simplify".

You may get a copy of the magazine Insight LvBS Inside # 1 on the reception of Lviv business school of UCU (LvBS),. Kozelnytkska St 2a, 3-rd floor.