On Friday, April 24th, the Family Business’ Chair (CEFUV) held its first virtual session (webinar) within the Family Business Course: Key Aspects for its Competitiveness and Durability. This corresponds with the 8th session of the course. Taught by Tomás González (Director of the UV Chair of Business and Humanism), the session dealt with “Succession Planning in Family Business”.

Tomás began the session by highlighting the importance that plan and the regulatory framework of the succession (family protocol) have, but business families must also remember the key value of the proper context in this succession. Succession, in Tomás's words, is especially complex and important to the sustainability of the company when it comes to succeeding the 1st generation, the founders. Success depends 10% on the characteristics of the family itself and 90% on the management carried out.

Tomás stressed the value of preparing company and family for different events that may appear, since these events (if not planned) will provoke reactions leading to conflicts. Thus, 85% of the problems reported in the succession process are related with lack of common interests and harmony problems. Management succession must be clear and anticipated to be effective, otherwise it may lead to ineffective collusions and an adverse selection process (the most capable possible successors do not enter and this passes into the hands of the least prepared). Tomás also highlighted the 4 characteristics that determine how the Change will be:

1. Attitude: Proactive vs. Reactive.

2. Depth: Incremental vs. Strategic (alter the essence of the organization).

3. Circumstances: Timely (at the planned time) vs. Fundamental (sudden).

4. Speed: Slow vs. Fast.

The ideal process would involve proactive, incremental, timely and slow change, but external factors and circumstances may force or make other approaches advisable.

The session continued remembering what it means to be a healthy business family, one in which all members have a responsible commitment to the family and the company, thinking first about how they can contribute, before imagine what they are going to receive. This means time spent listening should be twice the time spent speaking, and not taking things for granted. To ensure this, potential successors need to be taught, from an early age, what it means to be a member of the business family. It is also necessary to make a decision, equity based, on the succession, leaving the future direction to the most skilled, ensuring fair compensation to the rest (either through inheritance, shares without the right to vote ...). Finally, succesors' training must involve a Formal Education, an initial period of Internal Experience (to become familiar with the company) and a phase of External Experience (to demonstrate their worth in an environment where their surname means nothing).

Tomás highlighted the role of external directors in the succession. Outsiders facilitate succession by serving in successors’ selection process, assisting successors’ landing (by providing necessary knowledge), and establishing fair remuneration policies. External’s role is even more important when there is a steep age differential between predecessor and successor, given the problems for the second to acquire the necessary preparation in time, so the external acts as a “bridge” in this transition.

Tomás concluded by recalling the need to model the context and circumstances of succession for it to be successful. For this it is important have written, with general knowledge and acceptance, the protocol, dividend policy and access criteria to the company and its address. Besides, as company or family increases in its complexity, their management structures must also grow in complexity, in order to avoid new risks.

CEFUV wants to thank Tomás González and our students for their willingness to make the necessary changes and the University of Valencia for the material supply to carry out this activity.

• 
• 
• 
•