Scotland, AJ 2010 'Factors that influence positive succession outcomes and longevity in long lasting Australian family enterprises', DBA thesis, Southern Cross University, Lismore, NSW.
Copyright AJ Scotland 2010
Purpose: Fifteen per cent of Australian family firms survive beyond the third generation; a mere 4% survive beyond the fourth generation. The purpose of this research is to examine the success stories; four family firms that have survived beyond two generations and are thriving. What has allowed these companies to achieve positive succession outcomes and greater longevity?
Methodology: I conducted four case-oriented studies of third and fourth generation family firms, using semi-structured, in-depth interviews with one key person in each organisation. Due to the exhaustive nature of in-depth qualitative research, only four family firms were selected. All were chosen because they were third generation or beyond. The aim of the research is to explore the key factors that contribute to longevity in Australian family firms. One approach could have been to examine companies that had failed, and to explore why they had failed. I decided to focus on companies that had survived, and to explore how and why they had managed to do so. I chose to interview only one person in depth in each company, because my preliminary over-the-phone discussions suggested this would elicit more candid information.
Findings: Nine key factors have been identified that contribute to positive succession outcomes and greater longevity:
1. The ability of the outgoing owner to effectively pass the baton to the new leader(s) of the incoming generation.
2. The ability to adapt, innovate and seize opportunities.
3. The ability of parents to encourage teamwork rather than destructive sibling rivalry.
4. The wisdom of parents to leave their shares directly and equally to their children, regardless of whether they work in the family business or not.
5. The ability of the parents to recognise that equality is equity.
6. The ability of each successive generation to avoid the 20 classic warnings.
7. The ability of the parents to encourage positive psychological development in the children.
8. The ability to apply the principles of corporate governance.
9. The ability to adopt most if not all of Ward’s 50 lessons.
All of these key factors converge at the intersection of strong effective leadership and strong family values based on trust and fairness. I argue that strong family values are a subset of effective leadership. Thus, in the final analysis, effective leadership will aid survival in family firms more than luck or any other superstition that we might be tempted to add to the list.