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Succession planning is an issue too often overlooked by Australian family businesses, according to a new report from EY.
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Succession planning overlooked by family businesses, says EY
04 June 2015
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The report, Staying power: how do family businesses create lasting success?, launched by EY and Kennesaw State University’s Cox Family Enterprise Centre, surveyed 25 of the largest family-owned businesses in each of 21 global markets, including Australia.
EY’s Oceania family business leader, Ian Burgess, said the results show Australian family businesses rank poorly in a number of key areas, including succession planning.
Family businesses, as an essential source of prosperity and stability both for local and for global economies, need to ensure they are not putting their heads in the sand when it comes to succession planning, he added.
EY’s Oceania leader for family office services, Richard Boyce, said that with half of all the Australian family businesses surveyed still in the hands of the first generation, having a strong and clearly defined succession plan in place is essential to their continuing success.
“Succession is arguably the most critical issue a family business has to face, yet it is often one of the most difficult to navigate. Complicated family dynamics and the emotional connection that business leaders and family members feel towards their companies can make addressing the issue a potential minefield,” Mr Boyce said.
“Our survey found that Australian family businesses most commonly left succession planning in the hands of the CEO (42 per cent), followed by owners or family council (32 per cent). This is in contrast to the global results, where 44 per cent of businesses surveyed said their board of directors had primary responsibility for succession planning.
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“If the intention is for the business to remain in family hands, succession must be considered a process, not an endpoint. It needs to be embedded into the day-to-day operations of the business, through training and education of the next generation. Succession is also about creating an enduring business model that can evolve and innovate, therefore the leadership required to be able to last through generational change is far more sophisticated and experienced than ever before,” Mr Boyce said.
“Family members must be willing to address the issue of succession planning head on through an open and ongoing dialogue. Getting this right will free up the CEO, board and council to focus on the wider business,” he said.
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