Succession Planning For Small Family Business Commerce Essay

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There is a time in every business, when succession planning is evident. However, it is rather a complicated process, and in fact, a large number of small businesses do not maintain a particular plan for its succession. But for any normal transition of a business from one generation to the next, a succession planning is desperately needed. Without a succession plan, family businesses would face a huge risk of uncertainty in terms of passing the business to the next generation. Most likely the business of any small firm will survive and thrive if the succession planning is properly prepared in order to pass to the next 'leader'.

Before I go the succession planning, I would like to define the small business for the purpose of this research: In this research small business will mean that there are not more than fifty employees in the organisation. And also these small firms will be most likely be managed by the owner of the organisation and it will operate either single or limited range of market.

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Succession planning is significantly important to the business organisation in order to minimise its cost of taxes. On the other hand, succession planning is beneficial for the wealth of its successors. Succession planning can also reduce the anxiety or tension level of the successors and it can be a powerful tool to manage the conflict between the successors. 'A well-developed succession plan is like the smooth graceful exchange of a baton between runners in a relay race. The new runner still has maximum energy; the concluding runner has already spent her energy by running at maximum speed' (Zimmerer and Scarborough, p-522-23, 2005).

Although researchers [Poutziouris and Chittenden (1996), in Burns, P. 2001, p-361] observe that four out of five family businesses are managed by the first generation, which benefits from the entrepreneurial drive of the founder. However, less than one third of founders successfully pass ownership and management control of the family business to the second generation. Only 10 per cent of second generation family firms are transferred to third generation and less than 5 per cent ever reach beyond the third generation of family management.

Regardless the following facts, it is established that succession planning is important for any business at some point. But it is apparent that there are several levels of complexity in terms of planning any succession. 'Succession planning is the cognitive process of creating a plan to replace managers in small businesses and also the firm's owner when the time comes' (Anderson and Dunkelberg, p-546, 2006). Company to company the process and style of succession planning varies; it can be simple or complex, also it can be short or elaborate. Within a succession plan it is very important to identify the roles and responsibilities of the next successor or the manager. Also it needs to be clear that which methodology is going to be taken to identify the successor or the leader. A successor can be chosen internally or externally within the family business.

There are lots of benefits of succession planning for small family business:

To minimise the risk of possible failure of the business after the prime figure fail to operate the business.

To help the organisation from paying huge amount of tax.

To maintain the business as it is, as there are 'family affairs' between the members, who are also active informed and committed to run the business.

To maintain the business better than 'outsiders', as family members may already have practical experience to run that business.

However, there are also disadvantages and difficulties of the succession planning within the small family businesses environment. Although, there are lots successful examples of succession planning within the family business, but psychologists still believe that there are potentiality of conflicts between the father and son relationship. Maybe there are unconscious rivalry between the father and his sons. Freud in this context described (Freud 1991, p.371) the child tenderly attached to the parent of the opposite sex, while its relation to the parent of its own sex is predominantly hostile. In the context of succession planning, although it seems that father wants to pass his business to his son but still father may wants to control his son because of his unconscious feeling of a dominant character. But in fact there are not many research evidence available to verify the possible rivalry of father-son or the mother-doughter relationship.

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After considering various issues of the succession, as a student researcher I still think that by following an effective succession plan, the entrepreneur will be able to protect the business, to maintain a sustainable profit margin and to maintain the culture of the organisation, which will be also very helpful to retain a long-term business strategy for the organisation.

A formal approach of succession planning which should include the strategic planning process is a very important element for the success of any family business. The first step is to articulate the mission statement to ensure that the owners have clearly formulated and communicated the vision of the organisation. The organisation's culture and values are desired throughout the organisation. In practice, the need of written mission and visions is denied by most of the entrepreneurs. However, the written mission and vision in any organisation ensures the commitment of the entire organisation to accept and implement that vision. As family members are also part of the organisation, they also understand the effectiveness and participate in the organisation vision.

Ultimately, the strength of the strategic planning process has a direct impact on the future transition of the business to the next generation. Assuming a healthy, structured, and analytical debate in the preparation of a business plan, the risk of family differences arising as to what direction the business strategy should go is either eliminated or greatly reduced.

The goal of this research is to identify the problems faced during transformation from one generation to the next and study the methodologies used in succession transformation. The shortfalls will be analysed and recommendation will be designed in order to overcome these shortfalls. It must be emphasized that this is but one part of the process: a well-defined succession plan must be supported by appropriate estate and tax planning as well.

9. Research Design (including methods) or critical approach:

Methodology: In this research, I will follow semi-structured and in-depth interviewing technique in order to gather the information. I have chosen the semi-structured method, as I believe this technique can help me to gather some information from the interviewee, which is maybe very new to me. And I think in-depth interviewing will give me lots of insights about this subject, which might will be very beneficial for me as I do not have prior experience of research in this field. In addition, this may will help me to identify new areas of further research.

Also since semi-structured technique is vivid and fluid, so it will allow me to have an informal and interesting conversation with the interviewee in order to gather the information of the research objectives. I also believe that, this technique will not be 'boring' for the interviewee as I will not be recording information during our conversation.

However, I understand that as my interviewing technique is not structured, so that could lead me to some point which is not relevant to the research. Also my data may will not be as accurate as the structured one, since I will be recording data after the interview. In addition, my research may won't be able to produce any quantitative data, and that will be difficult to process and analyse.

In this research my data will be collected from ten small sized business organisations in UK and it will be gathered by interviewing the owner or the manager of the organisation. The organisation will be chosen in a selective method, however it is not ideal for collecting data, but in order to carry out this research within very short period of time, ten chosen firms will be taken.

Design:

This section provides an overview, in which the details of the current research study will be done. The research topic will also be divided into three major sections to discuss here:

Part one consists the measurements of effectiveness of Succession planning in which the description of the impact on the following areas will be done.

How to transform company's mission and vision

How to transform leadership

What should be changed with this transformation

What should not be changed with this transformation

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In the second part of the report, a detailed description of the impact of others factors on succession planning will be gathered.

Competitive performance

Customer service

Quality of resources

Flexibility

Resource utilization etc

The third and the final part consists description of research techniques and recommendation to improve the effectiveness of Succession Planning.

10. Ethical issues: I have not found any potential problems in relation to this research.

11. Special resources required: Not applicable for this research.

12. Time table of the main stages of study: 10 weeks