Family business succession: how men and women predecessors can bring credibility to their successors?

Author:Koffi, Vivi
 
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INTRODUCTION

Known for their major contribution to economic growth, family businesses represent close to 75% of all entrepreneurships in Canada. They generate about 45% of the Canadian net growth product, create employment for 50% of the labour market, and create each year 70% to 85% of all new jobs (Bruce & Picard, 2005; Deloitte & Touche, 1999). However, according to a study from Bruce and Picard (2006) on Canadian family business predecessors, 41% of them will transfer their business to a successor within the next five years, reaching a proportion of 71% in the upcoming 10 years. And only 35% of family business predecessors say that they have a well-established plan for selling or transferring their business, notwithstanding the fact that the successions are known to be a long and complex process with a very low success rate.

According to numerous authors, successful successions depend on identifiable factors. For some authors, the transition depends not only on the predecessor's will to retire (Lansberg & Astrachan, 1994) or to let go (Bruin de Pontet et al., 2007), but also on the succession planning (Sharma, 2004; St-Cyr & Richer, 2007) and on the successor's preparation and ability to operate the business (Venter et al., 2005). Others identify the predecessor's ability to build a good relationship with the successor (Cabrera-Suarez, 2005; De Massis et al., 2008; Gartia-Alvarez et al., 2002) as a basis for a stable future. Some researchers are more interested in the abilities such as the successor's skills to assume his/her leader's role (Mitchell et al., 2009; Venter et al., 2005), or in his/her degree of experience (Le Breton-Miller et al., 2004), or even in the successor's commitment, satisfaction, and motivation (De Massis et al., 2008). Finally, some researchers consider that in order a transfer be successful: a) sound and ethical values must be transferred to the successor (Gartia-Alvarez et al., 2002); b) assistance must be provided for the successor's development (Cabrera-Suarez, 2005); c) the successor must be feeling involved into the process (Haberman et al., 2007; Koffi, 2008); and finally, the successor must have credibility (Barach et al., 1988; Bayad & Barbot, 2002).

Despite of the mass of research conducted during the past 30 years on the problem of successions in family businesses, very few researchers have focused on the process of succession when the business owner is a woman, and even less on how she should proceed to set up her successor (Salganikoff, 1990; Sharma, 2004; Sonfield & Lussier, 2009). Particularly since in all likelihood many of the family business predecessors struggling with the difficulties of succession will be women. Indeed, Statistics Canada as well as Industry Canada report that more than 40% of the Canadian entrepreneurs are women (St-Cyr & Richer, 2007). In addition, the entire body of research realized on women entrepreneurship and their leadership style, from the study by Hisrich and Brush in 1984 to those of Buttner in 2001, shows that the behavior of women entrepreneurs towards their personal and business circles differs from those of their male counterparts.

So the specific leadership style and behavior of men and women entrepreneurs and the urgency to support their successors in a successful transfer of their family business is certainly important and relevant as a research topic in itself. Its main objective is to better understand and describe the different behaviors adopted by men and women predecessors of family businesses in transferring credibility to their successor in the eyes of the employees with which they have built their business, especially when credibility appears to be a necessity for the enterprise durability and survival (Barach et al., 1988; Sathe, 1985). In other words, what are the behaviors to be adopted by men and women predecessors to ensure the credibility of their successors? And, what could characterize a credible successor in the eyes of men and women predecessors, employees, and successors?

To answer these questions, the following section briefly presents an analytical framework on the stakes of succession in family businesses. The particularities of the women management style, the transfer process of family businesses, and the concept of successor's credibility are discussed. And the next sections present the methodology used to conduct the study, the results of the study, as well as the conclusion.

THEORETICAL CONTEXT

The Relational Mode of Women Business Predecessors

There has been no consensus until now on the different management styles adopted by both men and women. For the liberal feminist, men and women are all equal as they are endowed with rationality and the same management capabilities (Hollander, 1992). For the post-structural feminist, however, masculine and feminine identities are a socially constructed phenomenon based on mechanisms of separation and hierarchy-building (Ahl, 2006; Bruin de Pontet et al., 2007; Butler, 1990; Ely & Padavich, 2007). As for the researchers interested in social feminism, they postulate that basic differences exist between men and women. These differences may be at the advantage of women, especially on the basis of interpersonal and communication skills (Chodorow, 1978; Gilligan, 1986). Given the present study seeks to understand the gender particularities, the social feminist view was retained for its contribution to the understanding and distinction of the means used by men and women predecessors in bringing credibility to their successors.

The works from Brush (1992), Buttner (2001), and Robinson (2001), indicate that women entrepreneurs adopt a behavioral style more oriented towards participation. Women entrepreneurs make greater effort than men entrepreneurs do to fit both work and family into their lifestyles. Inversely, men entrepreneurs show their preference for an enterprising mind, and tend to prefer a role of supervision to one of collaboration. According to Eagly et al. (2003) and Rosener (1994), the study of Riebe (2005) on 27 successful business predecessors indicates that women adopted behaviors related to collegiality and democracy in order to be successful. Based on the relational theory (Fletcher, 1999; Miller, 1986), Buttner (2001) did a case study on the behavioral style of women entrepreneurs. Buttner's results show that women entrepreneurs benefit from a sense of connection in order to adopt behaviors promoting the growth and development of individuals. These behaviors can be regrouped into four categories: a) protective, where women entrepreneurs protect and support their employees; b) mutual empowerment, where they try to provide fulfilment for their employees by allowing them to accomplish and contribute to business activities; c) accomplishment, where women entrepreneurs use their relational skills to improve their own professional growth and efficiency at work; and d) team building, where women seek to set up appropriate conditions so that a group lifestyle be flourishing.

As mentioned by Rapoport and Bailyn (1996), as well as Fondas (1997) and Weisinger (1998), Tsui et al. (1997) found that organizations that privileged relational practices were very efficient, showed lower absenteeism and turnover rates, and reported a higher level of honesty. In accordance with these findings, many authors indicate that women adopt, more often than men do, a transformational leadership style that emphasizes the development of individuals (Bass & Avolio, 1994; Eagly et al., 2003; Rosener, 1994). Four characteristics refer to transformational leadership: a) visionary, reflecting the leader who carries a vision; b) inspirational, meaning that the leader transfers to others high expectations towards his/her vision and passion; c) intellectual stimulation, where the leader appeals to rigorous problem solvers; and d) individual mentoring, meaning that the leader gives to each employee a particular and personal attention. However, how are these behaviors manifested in the context of succession?

The Succession in Family Businesses

Cadieux and Brouard (2009) state that we can speak of transfer only when an enterprise ensures continuity with a successor established by the owner who is retiring. Research indicates three types of transfers: a) a family transfer, while an owner transfers the enterprise to a family member; b) an internal transfer, while an owner transfers the enterprise to one or several non-family members; and c) an outside transfer to another party, while an owner is unsuccessful in finding a family member, or internal member, and has to look outside to choose a successor.

A study on family transfers, known as successions, shows that it is often a two parts process: direction and property transfer (Hugron, 1992). Directional transfer is defined as a dynamic process involving four phases and functions during which the roles and functions of the owner and successor (a family member) are intertwined to ensure a smooth transfer (Handler, 1990). Examples of such roles and functions are one's overall philosophy, management style, responsibility, attitude, power, and leadership potential (Cabrera-Suarez, 2005; Danco, 1982; Hugron, 1987; Lajeunesse, 1989). In the initial phase, the owner introduces the successor to the operations of the enterprise and raises his/her interest. Subsequently, the integration phase allows the successor to have a part time position within the enterprise. At the co-management phase, the successor chosen for his/her competencies and interest (Haddadj & Andria, 2001), and who have a good relationship with all parties (Lansberg & Astrachan, 1994), officially joins the enterprise. The successor familiarises with the company by working alongside the employees and the family owner (Hugron, 1992; Lajeunesse, 1989). At this stage, the successor gains credibility, which is extremely important, as argued by Barach et al. (1988). The owners...

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