NEW YORK, Dec. 17, 2015 /PRNewswire/ -- Leadership succession can be stressful for family businesses as they work toward a successful transition. As some of the largest and most durable businesses in the global economy, the most successful family businesses manage to remain innovative, flexible, focused and growing for decades, if not centuries. Succession planning is not easy, but it's a vital part of an organization's future. For a smooth succession, leading family businesses create the best possible environment, and begin laying the groundwork for the process long before it is needed. EY and Kennesaw State University turned to the world's longest-lasting family businesses to uncover their approaches to succession planning, and included these results in a joint report titled, Staying power: how do family businesses create lasting success?
A carve-out from this - titled Preparing or Procrastinating? How the world's largest family businesses undertake successful successions - reveals four key best practices used by the world's largest family businesses to promote successful successions, generation after generation. The study surveyed 525 family businesses – 25 of the largest family businesses in each of the 21 top global markets.
"We believe organizations can learn a tremendous amount by understanding the way family businesses approach succession. By implementing similar strategies in their own firms early on, companies can lay the groundwork for a longer, more profitable future," said Carrie Hall, EY Americas Family Business Leader.
The four key practices are:
- Clearly defining who is responsible for succession
- The majority of family businesses that do not have an appropriate succession strategy end up as part of the 97% that don't make it past the third generation. However, a stark difference arises when looking at the most successful family businesses: 88% of those surveyed in Staying power: how do family businesses create lasting success? have clearly identified who is responsible for succession, implying that they have a clear procedure in place to handle leadership transitions. This procedure is put in place well in advance.
- Focusing on next-generation preparation, but not necessarily on outside work experience
- It's an established fact that taking time to prepare the next generation is imperative to a smooth succession. This study found that family businesses with the most succession experience tend to place a greater emphasis on educating and preparing the next generation. Because of the complexities involved in succession, the study overwhelmingly showed that if more family members understood how the business was run, the better it was for succession. This rang true regardless of who was in charge of the succession itself.
- Nurturing an entrepreneurial culture
- In many ways, an entrepreneurial culture defines the company's ability to change, grow and adapt to its environment, which is key to attracting top talent and successful successions. The majority of companies surveyed recognized the importance of having a culture of innovation that promotes informed risk-taking, agile decision making and rapid market response, all of which can give family businesses an edge over publicly held competitors.
- Working to attract top talent
- Successors in family businesses are not always family members, and the importance of great talent is often overlooked. Attracting high performers and developing them into family business leaders gives businesses more options for leadership positions. Family businesses have an inherent advantage when attracting top talent, with many unique traits that make working for one desirable, such as flexibility, adaptability, speed of change, human approach, emphasis on long-term relationships, and desire to take a very long-term view of people and investments.
"How long-lived family businesses approach succession planning can serve as a model for other family businesses as well as companies that aspire to maintain an entrepreneurial spirit, innovate and grow consistently through leadership changes," said Joe Astrachan PhD, Professor of Management and Entrepreneurship, Kennesaw State University.
Read the insightful reports based on this survey ey.com/stayingpower.
- Staying power: how do family businesses create lasting success?
- Women in leadership: the family business advantage
- In harmony: family business cohesion and profitability
About EY's Strategic Growth Markets Practice
EY's worldwide Strategic Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we've helped many of the world's most dynamic and ambitious companies grow into market leaders. Whether working with international, mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed.
About EY's Family Business Services
EY is a market leader in advising and guiding family businesses. With almost a century of experience supporting the world's most entrepreneurial and innovative companies, we understand the unique challenges they face — and how to address them. We offer a personalized range of services aimed at the specific needs of each individual business — helping it to grow and succeed for generations. Our Family Business Global Center of Excellence is a powerful resource that provides access to our knowledge, insights and experience, connecting family business owners to their peers through the strength of our global network.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
About the Cox Family Enterprise Center
Since 1987, the Cox Family Enterprise Center at Kennesaw State University has been dedicated to the education, recognition and research of family businesses. As one of the first university-based centers of its kind, the center remains focused on connecting people, ideas and knowledge to create a dynamic community to transform the family business ecosystem and further economic development.
About Kennesaw State University
Kennesaw State University is the third-largest university in Georgia, offering more than 100
undergraduate, graduate and doctoral degrees. A member of the University System of Georgia, Kennesaw State is a comprehensive university with more than 32,000 students from 130 countries. In January 2015, Kennesaw State and Southern Polytechnic State University consolidated to create one of the 50 largest public universities in the country.
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This news release has been issued by Ernst & Young LLP, an EY member firm serving clients in the US.