Academic journal article Journal of Small Business Strategy

Family Business CEO Succession: Examining Personal Retirement Expectations

Academic journal article Journal of Small Business Strategy

Family Business CEO Succession: Examining Personal Retirement Expectations

Article excerpt

INTRODUCTION

Popularly quoted research suggests that only 30 percent of family owned businesses survive the transition from founder to second generation leadership (Grassi Jr & Giarmarco, 2008) and an even smaller number survive into the third generation (Chrisman, Chua, Sharma, & Yoder, 2009; Kets de Vries, 1993). In fact, despite a growing number of studies of cross-generational survival rates (Knowlton, 2010; Parrish, 2009; Sharma & Irving, 2005), researchers have yet to resolve many issues pertaining to transition. Although the many causes of business failure also apply to family businesses, failed succession events can be even more devastating for a family owned business (FOBs). Thus, attention to the process of family business succession is warranted.

Like other scholars, we hold the view that leadership succession is a process, not an event (Longenecker & Schoen, 1975, 1978; Davis & Harveston, 2001; Chittoor & Das, 2007). That process incorporates several distinct phases including initiation, integration, joint reign, then withdraw (Cadieux, 2007) (for a detailed review of succession literature, see Le Breton-Miller, Miller, & Steier, 2004). Further, many agree that a slow succession process is considered wise (Brenes, Madrigal & Molina-Navarro, 2006).

Within the succession literature, predecessor-related factors previously investigated include the incumbents' anxiety regarding mortality, his/her ability to trust the successor, openness to new ideas, quality of relationship with successor prior to, during, and post succession (Chittoor & Das, 2007). Given the relationship barriers naturally in place during such events, the satisfaction of the retiree is of prominent importance (Klein & Kellermanns, 2008). In this study we seek insights into retiree satisfaction and well-being expectations prior to retirement. Next we review the family business literature with respect to succession broadly and retiree well-being specifically. We then develop our related hypotheses. We test those hypotheses using a sample of family owned businesses in India. Finally, we discuss our findings and their implications before offering concluding remarks and suggestions for future research.

LITERATURE REVIEW

Personal Retirement Expectations

Few business owners like to think about the time when they won't be at the helm of their companies. This frequently leads them to postpone the succession planning process. Many family firm owners are unwilling to plan for eventual leadership changes, making such transitions less likely to be successful (Cabrera-Suarez, De-Saa-Perez, & Barcia-Almeida, 2001; Miller, Steier & Le Breton-Miller, 2003; Putney & Sinkin, 2009). Incumbent concerns can lead to succession stagnation or even sabotage of the process (Sharma & Irving, 2005; Ward, 1987). To better understand this particular piece of the succession process, we investigate concerns of the potential retiree. Although several variables impact the succession process, we seek insights into concerns that incumbents have regarding their own well-being (herein we refer to the incumbent, predecessor, or retiree interchangeably).

Although some family business research has focused on the founders in lieu of successor consideration (Cater & Justis, 2009), a considerable body of literature pertains to successors. In their review of succession literature LeBreton-Miller et al. (2004) demonstrated that the majority of empirical research concentrates on successor motivations as opposed to incumbent motivations; with 40% of the literature on successor, 25% on the incumbent. While we feel that neither consideration has been neglected, and that both are important, our focus centers on incumbents considering succession.

Incumbent considerations of and subsequent hesitations to retire due to discomfort dealing with their own mortality are well established. For example, Cadieux used semi-structured interviews of 10 Canadian firms to develop a qualitative typology of predecessor roles governing the joint management phase of succession (Cadieux, 2007) showcasing that incumbents are suffering from role shift as their new roles replace old ones. …

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