Reflection: Professionalization and its effect on succession within Family Businesses.
During our trip to Dubai, we had the outstanding opportunity to meet with several family businesses and their members who discussed succession plans as well as the overall organization of their businesses. During each meeting we had I was able to observe how business and family structures change specially when talking about succession. As well as the way in which the company’s see’s its effect of their long term goals and strategy. Every family business we spoke to had a different approach on how to succeed, for instance one of them was building a family office, while others had very specific requirements on the procedures and steps the successor had to follow , and some of them where more open to what their successor was capable of. I was also able to notice that in each company succession strategy varied tremendously when going from second to third generation and it mostly depended on how professionalized the company was. I was also able to observe the importance of education and outside experience and the effect it had on the roles members took when entering the business.
A great example of the implementation of professionalization in succession was with one of the larger family businesses we had the honor of visiting. This company is entering to their 3rd generation of succession, but had a very large number of family members who want to join the business. During our meeting it was very interesting to hear the way in which the company was dealing with the incorporation of family members. Do to the increasing number of family members wanting to join the business, board members decided that in order for new generations to enter the company the Family Office would have to implement interviews and tests to make sure those who are entering the company are able to cherish it and continue to follow the companies strategy and long term goals. We were lucky enough to be able to meet with a family member who wanted to join the family business but had to go through the bureaucracy of the Family office in order to reach his final interview. It was interesting to hear and get a better understanding of why he was forced to work outside the company and have to make a series of interviews to be able to join the company. I personally thought this was so interesting and different to my own experience in relation to family businesses. It also gave me an understanding of how crucial business strategy comes into place when deciding who will join the business and what they have done to ear their place. After listening to our speaker it was clear why such a large company would want to take control of such a large family that who ever gets control over it has to be the best of the best.
In contrast we have another company that is entering in its companies 2nd generation and is looking to pass it on to his first and only son. When talking to him he made it seem as if he had just included the son in to the company and was allowing him to do whatever he wanted. But if you looked further into what the father was saying we could tell that it was very hard for his son to be accepted into the company and for his ideas to be taken seriously. The son was also required to work outside the company for seven or eight years working outside the family business. Even though this family sounded very lax it was obvious that they have certain requisites for the son to be allowed into the company. We could see that in another company the father was able to incorporate two of his offsprings into the business after they graduated from college and had prior experience. Its important to note that even though there is no family office education and experience always comes first, and this I believe is part of professionalization even though it is not explicit with a family office the parents and heads of the business make this a requirement. Succession is always a very difficult task especially due to the fact that most companies fail when they reach third generation and fourth generations. It could be seen that in another group that was entering their third generation, they did not have a specific family office, but there is a lot of support from all of the heads of departments because they are recognized as family. They also promoted getting higher education such as a Masters and gaining 3 or 4 years of experience in a very hard market to learn the most possible in order to enter the business. Even though it is not explicit this is also professionalization in a certain way because there are guidelines to what members can and cant do.
Overall it was so interesting to observe how dynamics change through out families and succession and the effect it would have on the overall company. I also understood the professionalization does not have to be explicitly written down as a family office but it can be imposed within the company structure by the necessary requirements put in place by the board or the head of the company. This trip also gave me a completely perspective of what to expect when exerting a family business and how different it is compared to others. Furthermore it gave me a better idea of what succession requirements will be needed for my self if I decide to join the family business. I was able to learn the importance of education and outside experience as well as having a good understanding about the industry before being able to join the company.
