Succession Planning: Identifying Recurring Barriers to Progress

by Paolo Morosetti

Demographic trends in Europe and the United States suggest that a growing number of family business leaders are now facing the realities of succession and retirement. In the coming decade, this will compel many family businesses to contend with the departure of their leaders, raising a crucial question: are current generations planning for succession in a timely manner?

What is succession planning?

Succession planning means taking the necessary steps and making preparations to ensure the harmony of the family and the continuity of the business through the next generation. These steps and preparations must account for the future needs of both the business and the family.

Without proper succession planning, the survival of a family business from one generation to the next could be at serious risk. Failure can manifest in several ways, including the following:

• The current generation may fail to nurture and develop the next generation, leaving the business in incapable hands. This approach can stem from a dynastic mindset when facing succession.

• The current generation may struggle to make forward-looking decisions, passing power to a next generation that lacks enough motivation or the necessary set of skills to lead effectively in the future.

• The current generation may fail to instil discipline in the process, perhaps hiding behind the idea of promoting the value of entrepreneurship, which is highly valued in family businesses. Unfortunately, this approach often leads to ambiguity and disorder, undermining the long-term health of the organisation and the authority of the next generation.

• The next generation may lack the commitment to take on responsibilities, influenced by calculative reasoning or a sense of duty to previous generations rather than a genuine sense of stewardship.

• The next generation may manifest a sense of entitlement that prevents it from developing its personal authority and the foundations of its leadership style.

• The current and next generations may struggle to build a cross-generational dialogue, often being more focused on proving that their respective views are superior. However, the key lies in co-creating the future together.

Although the outcome of leadership succession remains uncertain, the potential challenges along the way are welldocumented. Simply acknowledging these obstacles is already a meaningful step towards overcoming them and moving forward.

Roadblock 1: Ambivalence towards succession planning

Succession transitions bring about a range of significant changes for family businesses. Family dynamics must be redefined, traditional patterns of influence should be altered, and long-standing management and ownership structures must make way for new ones.

These shifts can provoke anxiety, bringing up emotionally charged issues that people would rather avoid or deny. As a result, the current generation may recognise the importance of succession planning but may hesitate to tackle it, as it forces them to confront difficult emotions or even their own mortality. In this sense, succession planning can feel like a premature death ritual.

When ambivalence towards succession planning exists, it is common for the current generation to develop complex rationalisations and compromises that prevent them from fully committing. They may also exaggerate the potential negative consequences of their retirement, imagining disastrous consequences. All these considerations in the minds of the current generation often lead to a tendency to maintain the status quo. This scenario satisfies an internal desire to retain power and influence over the business, which becomes yet another roadblock to change and a justification for delaying professional succession planning.

It is worth noting that every time succession planning is delayed, whether overtly or subtly, intergenerational conflict may arise. This often has the effect of worsening family relationships and creating friction when cooperation is most needed.

Addressing the challenge of ambivalence requires patience, skill, and persistence. It is essential to work closely with the current generation to help them grasp the importance of future planning. Conversations with peers can offer valuable perspectives, encouraging current leaders to confront their resistance to succession. Additionally, efforts to institutionalise the business—led by the current generation—can serve as a motivating factor. This allows them to ensure that their values and beliefs are carried forward, providing a form of tangible immortality.

Roadblock 2: Kicking the can down the road

One key barrier to timely succession in family businesses is the tendency to shy away from difficult discussions early on.

This reluctance is often driven by emotional complexities and a fear of sparking conflict within the family. Succession is about selection, and not all families are adequately prepared to assess and choose the most suitable candidate to lead the business within the family talent pool.

To address this issue, it is crucial that families foster open conversations about succession well before it becomes urgent. This helps de-escalate the potential emotional impact and encourages the adoption of a process-oriented approach, providing structure and discipline within a complex, multidimensional process.

Early conversations should involve clear communication regarding roles, expectations, and timelines. They allow current and rising leaders to align their visions for the business, ensuring a smoother transition process and providing an opportunity to assess whether family members are suitable candidates for leadership and under what conditions they might take on such roles.

Throughout the process, it is crucial to periodically remember a key principle of succession: successful leadershipsuccession does not necessarily require selecting a family member as the next leader. In some cases, external candidates may be a better choice for the business's future success.

Roadblock 3: Lack of discipline in preparing successors

Another barrier to timely succession is the lack of planned efforts to nurture and develop future leaders.

It is not uncommon for family businesses to assume that leadership will simply pass down through generations without any structured plan. The idea that leadership is a sort of "gene" that can be inherited is rather bizarre, yet some parents cling to it. "Since childhood, he/she has shown entrepreneurial aptitude!" is a phrase still proudly uttered by some parents about their children.

Leadership development is a disciplined process—it must be carefully planned, monitored during execution, and continuously refined in practice. It should begin early, incorporating education, mentorship, training, and opportunities to gradually assume more responsibility. Successors typically face various tests throughout their careers to gain the trust and support of key stakeholders and to be recognised and accepted by their followers. Adequate preparation is essential to building authority and confidence in their ability to lead.

Successful families are well aware of these considerations, and they implement leadership development programs early on, helping the next generation acquire the skills needed to lead effectively. Additionally, they may involve external advisors or mentors to provide objective perspectives and guide emerging leaders through their development journey.

Without a disciplined approach to preparing the rising generation, the succession process risks significant setbacks. Indeed, the current generation can easily claim that the next generation is not ready to lead, further postponing the transition and creating additional roadblocks.

Roadblock 4: Disorganised family dynamics

Family dynamics are often positive forces that can drive a family business, offering a long-term perspective. However, they can also play a pivotal role in determining whether a succession plan moves forward smoothly or becomes stalled.

Differing expectations among family members, sibling rivalries, or conflicting visions for the business's future can create significant resistance in succession planning. Without alignment in the overall direction, acceptance that succession is a merit-based selection, and a fair process, the succession plan risks either never getting off the ground or quickly derailing.

One approach to resolving these issues is the establishment of formal governance structures, such as succession planning committees. Otherwise, if the family has already put in place a family governance architecture, it can exploit mechanisms such as a family council to guide the process. Governance offers a formal platform for decision-making, which can reduce tensions and keep the family united behind the succession plan.

Roadblock 5: Lack of an exit plan

Leadership transitions often stall when there is no clearly defined timeline or process for current leaders to step down.

But when is the right time to exit? In determining this, the current generation must consider a range of factors, including its own financial needs, business cycles, strategic plans, personal readiness, successor readiness, ownership transition plans, and more.

Senior leaders may struggle with the idea of stepping back or fear that their identity is too closely tied to the business. To overcome this, it is crucial to start early and thoughtfully plan for the future—both for the business and the retiring leader. Offering senior leaders phased transition opportunities, such as moving into nonexecutive or advisory roles, can help alleviate the emotional burden of stepping down.

Furthermore, managing succession should be deeply regarded as a life purpose for the current generation. Only with this mindset can they find true satisfaction in both the process and its outcomes.

Conclusion

Succession planning is crucial for both maintaining family harmony and ensuring the continuity of the business, just as strategic planning is essential for gaining and sustaining a competitive advantage.

The recurring obstacles in succession planning are well known, but they can be overcome through a genuine commitment to building a lasting legacy and the deliberate design and execution of actions to make change happen.

Succession requires a focus on preparing both the business and the family to adapt to the future while fostering dialogue and collaboration between the current and next generations. Adaptation does not conflict with strategic planning; in fact, every organisation must plan for the future while staying flexible to unexpected and emerging events. This is equally true for family businesses: if the goal is to achieve a state of readiness and make timely decisions, only a well-defined strategic approach will enable the family and the business to remain agile and responsive to changing conditions.

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