Family Business
Issue No. 28 - April/May 2006
When its time to hand over the reins
by Mr Paul Smith
Family business transition and succession management specialist, Paul Smith of the Carnegie Management Group can see tough times ahead. Since 80% of businesses in Australia are family businesses, about six out of 10 businesses will change generations over the next 10 years.
The problem? Seven out of 10 family businesses have no effective plans for transfer of power and many principals are reluctant to acknowledge the need.
A recent study by Melbourne-based RMIT shows the total value of family/private businesses in Australia is about $3.6 trillion. During the next 10 years, control of some $1.544 trillion of that will transfer from:
1st to 2nd generation ($808 billion)
2nd to 3rd generation ($458 billion)
3rd to 4th generation ($278 billion)
Being the Executive Director of Carnegie Management Group Paul’s experience over many years as a business adviser is that succession can be very messy indeed. What do retiring principals want? What do inheritors expect? Who calls the shots? “Succession has got to be handled intelligently, sensitively and with a bit of dexterity. In fact we call it Transition,” Paul says.
“You have to focus more on the human issues — before the financials. You have to have your eyes open. It’s about being able to understand people — to read them — and obtain the best outcome possible in the situation.” he says.
“You have to take a systematic approach, but the outcome can be very different, for different families. The most profoundly critical issue for most is, which one comes first — the family or the business?”
Conflicts and crises often develop in a family business situation because the family lacks experience at resolving conflicts effectively. Entrepreneurs are self-reliant and determined, so family business founders tend to walk their own path. But if the vision of succeeding generations is choked it can reduce productivity and achievement, and foster a cul...
