Succession planning in family business

By on May 8, 2012

Succession planning can be defined as “An ongoing process of identifying future leaders in an organization and developing them so that they are ready to take up leadership roles [1].”

Transition of ownership in a family business

Family business can be defined as any small, medium or large scale business in which majority of ownership or control lies within the family [2]. Family business succession on the other hand is the process of transitioning the management and ownership to the next generation.

Basic steps involved in succession planning process include [1]:

  1. Assess the organizational needs.
  2. Determine key positions which are to be transferred.
  3. Identify the competencies of key positions.
  4. Identify the family members and assess their capabilities.
  5. Create development plans for the next successor.
  6. Monitor, measure and report the progress after succession and plan for improvements (if required).

To sum up the process of family business, owners have to first assess the organizational needs and lay down the objectives for the company and strategies which will be adopted to meet the objectives. Next, step would be to determine the key positions which have to be transferred which depends on number of offspring owners and if they are ready to take over the responsibility simultaneously or within a gap of few years. Once the positions are decided, competencies of key positions have to be identified which would help in identifying and developing those competencies in the future successor. Finally, plans should be laid out as to when the transition should take place, what are the requirements of a successor, how will the key skills be developed, etc. Once the throne is passed, performance of the successor should be reviewed and improvements are implemented wherever necessary.

Deciding the transition date

The decision of when to announce the future successor of the business entirely depends on the family. But if the announcement is made early, it helps in reassuring the employees, suppliers and clients, allows siblings to adjust with the decision and make alternative career decisions either to match up the needs of their own business or if they plan to do something of their own. It will also enable the current owner to plan for their retirement [2].

According to research done all across the world, very few family businesses survive transition of family business, the reasons reported in these reports include:

  • Lack of viability in business.
  • Lack of planning.
  • Little desire of owner to pass the throne.
  • And reluctance of offspring to join family business [2].

These factors make transition process difficult for family as well as the internal and external stake holders.


  1. Christee Gabour Atwood, (2007); “Succession Planning basics”; What is succession planning? Pg: 1-13.
  2. Nancy Bowman, “Transferring Management In the Family-Owned Business” Baylor University; Waco, Texas.