Succession Planning in SMEs

Abstract

This study reports the results from a survey of 368 family-owned small to medium size enterprises (SMEs) with regard to the importance, nature, and extent of succession planning. By categorizing SMEs according to their annual revenues, total number of employees, and number of family members employed within the firm, significant differences were found between larger and smaller firms. Consistent with extant literature, the findings reveal that most family members join the firm for altruistic reasons. Issues related to family relationships were rated as significantly more important in firms in which more family members were employed within the firm. Moreover, for firms with less than US$1m in revenues, a high priority is placed on selecting a successor who possesses strong sales and marketing skills. The findings show that regardless of their size, it is important for family-owned businesses to develop a formal plan for succession, communicate the identity of the successor, and provide training/mentoring to the incumbent CEO.

The Impact of Managerial and Adaptive Capabilities to Stimulate Organizational Innovation in SMEs: A Complementary PLS–SEM Approach

“…Succession planning is a systematic process of recognizing and developing future business leaders to grow competitive advantage-based knowledge. Successful succession planning is a critical issue for SMEs [47]. To perform better, a firm needs more than resources and capabilities; it also requires the tacit knowledge that is embedded in firm's routine in order to successfully coordinate and mobilize existing and future resources and capabilities [39].…”

Educating Succeeding Generation Entrepreneurs in Family Businesses – The Case of Slovenia

“…In their research, [50] found that business transitions occur more smoothly when the heirs are better prepared, and post-transition performance is positively affected by the heirs' education level. The preparation of a competent leader is also seen as an important part of succession planning, which is expected to improve the probability of the success of the transition process [27,50,51,59] and refers to the deliberate and formal process that facilitates the transfer of ownership and management control. The process of preparing a competent leader should also include knowledge transfer between family generations [57] as the transfer of tacit knowledge from a founder to a successor has been identified as one of the key processes in developing and protecting knowledge and guaranteeing the continuity of a family business [7].…”

Knowledge Accumulation in Family Firms

“…Succession is described as "the lengthiest strategic process for family firms" (Barach and Ganitsky, 1995, p. 131). It is considered to be a slow multistage process that involves an increasing participation of the successor and a decreasing involvement of the predecessor until the real transfer takes place (Churchill and Hatten, 1987;Cabrera-Suarez et al, 2001;Motwani et al, 2006). Succession is so central and crucial to the existence of the family firm that Ward (1987) defines a family business as a business that will be passed on from generation to generation.…”