In the eyes of the incumbent

By Rodrigo Basco, Ph.D.

Fugure“To whom do I select?”– Gustav said showing almost a frustrated face. It seems that the question had been moving around since we started our conversation. I knew I can’t respond to this question. “What are your real intentions?” – I asked him trying to cover the silence that evidently troubled Gustav.

Family business succession is loaded by economic and emotional symbols. Even though it is usually thought that family business succession is linked to a small group of family members, this is not a rule at all. At least not at the moment when the incumbent starts thinking about the potential successor, his or her intention could be to select a family or a non-family member. That is, even when there are active family members working in the firm as a potential successor, the intention could be to pass the management succession to a non-family member. Therefore, I wonder what factors affect the intention decision of selecting a family or non-family member as the future CEO previous to the final decision.

Intention means ‘a determination to act in a certain way’. Intention is an important dimension because it precedes the action and, of course, conditions the future course of actions.

After studying more than 500 Spanish firms to better know what factors affect the CEO intention to select a family or non-family member as future successor, I arrived to the following conclusions:

  • Those CEOs that perceive aspects such as age, blood tie, gender, and ownership as valuable show higher intention to select a family member than a non-family member as the future CEO.
  • Those CEOs that perceive aspects such as management capabilities and business experience as valuable show higher intention to select a non-family member than a family member as the future CEO.
  • However, the intention to select a non-family member as the future CEO is altered by the number of family members working in the firm. That is, while the number of family members increases, the intention of the incumbent to select a non-family member decreases even when the incumbent considers management capabilities and experiences as valuable.
  • Those CEOs that perceive aspects such as entrepreneurial attitudes (aggressiveness, proactiveness, risk-taking and so forth) as valuable show higher intention to select a non-family member than a family member as the future CEO.
  • However, the intention to select a non-family member as the future CEO is altered by the firm past economic situation. That is, while the economic situation moves from a bad to a good position, the intention of the incumbent to select a non-family member decreases and the intention to select a family member increases. That happens even when the incumbent considers entrepreneurial attitudes for the future CEO as valuable.

Business logic and family logic are in constant collision. The intentions of CEOs swing between obligations imposed by family logic and by business logic. That is, between the obligations regarding taking care of family members and the obligations regarding being competitive and efficient. Intentions change based on the context. What is good for the family is not necessarily good for the firm. However, just sometimes, what is good for the family is good for the firm as well.

But who knows what will be good in the near future, today’s intentions are blind precursors of actions influenced by the environment. That is, intentions are shaped by perceptions.

Advertisements
%d bloggers like this: