Although family enterprise owners may have a large amount of emotional capital invested in it and wish to see it continued by their children, it may be self-defeating to force a family management transition if the right circumstances do not exist.
Perhaps none of the children has the ability needed to run the business, or maybe rivalry between them is so extreme that none would accept one of the others as leader. If, after an honest assessment, the conclusion is that there is little chance of a successful management transition to the next generation, owners should begin to look for some alternatives.
Dividing the business - assuming the business can be structured to allow a demerger, the next generation can take over different parts, which then develop independently. But companies should not take this route purely for family reasons - it must also make good business sense (
Don’t miss this week’s podcast with Srinath Rajam on this very topic).
Selling the company - when a transition within the family is not achievable, an owner may be better off selling the business rather than forcing the succession issue.
Appointing non-family managers - The central issue is one of trust - will the family’s principal store of wealth be safe in the hands of an outsider? However, family members in the business, aware of the problems they would have in filling the role, often prefer reporting to a respected professional manager.
Employing a bridge - If the obstacles to family succession are temporary (for example, if the successors have not yet acquired the experience to take over), a caretaker can be appointed to run the firm until the transition within the family takes place.
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