Family business succession: what are the ways used by the men business managers to legitimize their successors?

Author:Koffi, Vivi
 
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INTRODUCTION

For Aronoff and Ward (1994) as well as Bruce and Picard (2005), the family businesses represent a model for the future, not only because the values they convey and their commitment in their respective communities on the redundancy and cultural plan (Astrachan & Shanker, 2003; Deloitte & Touche, 1999), but also because they establish a driving strength of the economic growth. Indeed, only in Canada, they represent about 75% of all the companies, with approximately 45% of the Gross National Product (GNP), and they provide work for 50% of the workforce (Cadieux & Brouard, 2009; Family Firm Institute, 2003; Le Breton-Miller et al., 2004; Richer et al., 2004; Sharma, 2004).

However, most of these companies face a problem of transmission. According to the results of the study conducted by Bruce and Picard (2005), 41% of the business managers are going to transfer their company before the next five years and this proportion will reach 71% in the upcoming 10 years. But only 35% of the business managers have a plan to sell or transfer their family business. Bruce and Picard (2005) also argue that 10 years are needed approximately to prepare the succession in good conditions. In addition, according to the Oeuvre Suisse d'Entraide Ouvriere (OSEO) (2005), only 20% of the family companies succeed in the passage of the first to the second generation in the six years following the transfer by the manager.

The success of the transmission is depending on a variety of factors. It is associated, not only to the predecessor's decision to leave (Lansberg & Astrachan, 1994) or to let go (Bah, 2008; Brun de Pontet et al., 2007), but also to the succession planning (Sharma, 2004; St-Cyr & Richer, 2005), and to the successor's ability to take the lead (Venter et al., 2005). Other authors emphasize the predecessor's skill to establish good relations with his successor (Cabrera-Suarez, 2005; De Massis et al., 2008; Gartia-Alvarez et al., 2002).

Other studies have been performed on the successor's skills to assume his leader's role (Mitchell et al., 2009; Venter et al., 2005), but also on his experience (Le Breton-Miller et al., 2004), commitment, satisfaction, and motivation (De Massis et al., 2008). For other authors, some dynamics should not be neglected, for example, the transmission of good values to the successor (Garcia-Alvarez et al., 2002), the successor's development (Cabrera-Suarez, 2005), the importance for the successor of feeling integrated throughout the process (Haberman et al., 2007; Koffi, 2008), and the predecessor's disengagement (Bah, 2008; Cadieux, 2007). Finally, a particular and growing importance is accorded to the acquisition of legitimacy which, according to numerous authors, is a success factor of the business transmission (Barach et al., 1988; Culliere, 2010; Koffi, 2008; Sathe, 1985).

The need to support the predecessors in a successful succession brings all its relevance to the main objective of this research. This objective is to grasp the predecessor's behavior to legitimize his successor. Several studies indicate that the men business managers adopt a different leadership from those of the women in a similar position (Bass, 1990; Eagly et al., 2003; Koffi, 2008). The diversity needed to face the complexity in the transmission of companies justifies the interest to analyze the succession behaviors according to the predecessor's gender. In this study, the specific objective is then to understand and to describe how the men family business managers near to retire bring their successors to gain their legitimacy in the company, while this legitimacy seems to be very important for the timelessness of the company (Barach et al., 1988; Sathe, 1985).

In other words, what would be the winning behavior to be adopted by the predecessors to support the acquisition of legitimacy by their successors? What would be the characteristics of a legitimate successor? In order to answer these questions, our approach consists to present, first, a framework of analysis explaining the stakes in the succession problem. This framework is based on the transmission of family businesses, on the concept of successor's legitimacy, and finally, on the notions of leadership behavior of the men business managers. Second, the qualitative methodology used to conduct the study and the results got are then described. And the paper ends with a discussion about the results.

THEORETICAL CONTEXT

The Succession Process in the Family Businesses

The succession process in the family businesses has two dimensions: ownership transfer and direction transfer (Hugron, 1992). The direction transfer is presented in four different phases in a process during which both the predecessor's and the successor's roles and functions evolve in an overlapping way (Handler, 1990). In the first phase, the initiation phase, the predecessor shows to his successor the functioning of the company while trying at the same time to raise his interest. This initiation phase continues until the successor's social integration phase, where he might perform part-time functions within the enterprise. In the third phase, the joint reign phase, the legitimate heir makes his entry in a more official way into the company. This legitimate heir is not only chosen according to his skills and to the interest demonstrated (Haddadj & D'Andria, 2001), but also according to the quality of his relation with the predecessor and all the other actors (Lansberg & Astrachan, 1994). During this joint reign phase the successor gets acquainted with the company, he is recognized by working closely with the employees and the predecessor (Hugron, 1992; Lajeunesse, 1989). It is at this stage that the gains of legitimacy, of which Barach et al. (1988) underline all the importance, are essential. The predecessor then plays precise roles with the successor (Cadieux, 2004). He is transferring to him the knowledge, the philosophy of life, the philosophy of management, the responsibilities, and the power (Hugron, 1992; Lajeunesse, 1989) until he completely retires in the disengagement phase, the last phase (see Figure 1).

But, what is the process to follow when the predecessor, not only attached to his company but also in search of its timelessness, decides to retire and to leave the enterprise to his successor? The latter must manage employees who often saw him being born and growing, and besides, are acquired most of the time at the particular cause of the father. According to Barach et al. (1988) and Koffi and Lorrain (2005), a problem of legitimacy is then raising. This problem is examined in the next subsections.

The Successor's Legitimacy

The transmission of companies raises some questions concerning the legitimacy of the rescuer because any management component of an enterprise is founding its power status on a legitimacy system. In the case of family companies, at our knowledge, the concept of legitimacy has not been studied from an empirical view. The family transmission is a process of redefining the bases of the power given the successor acquires an entity of which the identity is already established (Riot et al., 2007). In addition, the family company is widely influenced by different coalitions which pursue specific objectives and which have this capacity to condition the social acceptability of the leader's decisions (Deschamps & Paturel, 2001; Culliere, 2010). The successor's legitimacy is then handled in a perspective of social acceptance, interpreted as the right to manage, and granted to the successor by the predecessor and the employees given these ones consider, according to his charisma and the tradition, that the successor will satisfy their expectations.

In accordance with Petit and Mari (2009), we defined the leader's legitimacy as being:

"The recognition (formal/informal; explicit/implicit) by internal and external stakeholders of its right to govern the company: this recognition leans on the faith the aforementioned stakeholders in the validity of the power of the leader towards values and towards standards shared about the direction (the management) of company" (p. 18).

In this way, it seems convenient to consider the foundations of the Weber's notion of legitimacy, since there is a combination here of the personal characteristics and the attribution of power. For Weber (1971), legitimacy is the central pillar of the domination. Being interested into the social activities which have a sense for the individual, Weber (1971) defines action as a behavior driving the meanings for the actor. According to him, the social action gets organized in social relationships: when several actors are in interaction, the sense of action of each relates to the attitude of the other one, such that the actions are mutually directed the ones towards the others. The social relationships containing oppositions, conflicts and compromises, and the need to dominate, play an important role in the legitimacy.

This brings to three legitimization systems. According to Weber (1971), the first one, of legal rational type, is linked to the function and not to the person. This legitimization system is based on the faith in the legality of the regulations and the right to give directives which is attributed to the leader. These normative rules define the way that we can promote a law or name a responsible person acting within the limits of his authority. The right is established by the pact (multilateral decision) or by the granting (unilateral decision) in a rational view (Culliere, 2008) of which the primary objective is to be followed by the community members. The one that obeys makes it in the respect of pre-established laws and rules.

The second legitimization system, of traditional type, is founded on the daily belief to the sacred character of the social order, such as it appears, and on the legitimacy of those who are called to exercise authority by these means. It is the observation...

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