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Identifying and Defining Crucial Leadership Competencies for
Leaders of Family-Owned Businesses during Succession
by
Maureen Cochran
A Research Paper Submitted in Paliial Fulfillment of the
Requirements for the Master of Science Degree
In
Training and Development
The Graduate School
University of Wisconsin-Stout
May, 2010
Author:
The Graduate School University of Wisconsin-Stout
Menomonie, WI
Cochran, Maureen F.
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Title: Identifying and Defining Crucial Leadership Competencies for Leaders of Family-
Owned Businesses during Family Business Succession
Graduate Degree/ Major: MS Training and Development
Research Adviser: Renee Surdick, Ph.D.
MonthrYear: May, 2010
Number of Pages: 43
Style Manual Used: American Psychological Association, 6th edition
Abstract
A contextual analysis was conducted in order to identify leadership competencies which
are essential to successfully complete the succession process in family-owned businesses. Three
approaches were utilized to collect input from family business owners in order to create a
collection of more field-based competencies; focus groups and two review requests (mailed and
e-mailed).This information was synthesized into a collection of 22 field-based competencies.
To expand upon these findings, a survey will be used to identify the importance level of each
competency during the succession process.
The Graduate School University of Wisconsin Stout
Menomonie, WI
Acknowledgments
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I'd like to give a special thanks to Dr. Renee Surdick who guided me through this long
research project. Dr. Surdick provided advice, guidance and support throughout the process for
which I am so grateful.
In addition, I would like to thank the people who have been there for me throughout
graduate school; professionally and personally. Throughout graduate school until now I have
had the pleasure of working under the supervision of Donna Weber who was a source of constant
encouragement. Finally, thank you to the most important people in my life; my husband and my
parents. They have encouraged and suppOited me so much even though I had to spend less time
with them. I am so appreciative of their respect for my pursuit of my professional goals.
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Table of Contents
Abstract ..................... ................................. .... ............................ ....................... ............................... 2
Chapter I: Introduction .................................................................................................. ...... ....... ... .. 6
Statement of the Problem ................................................................ ........... ..... ............ ......... 6
Purpose of the Study ... .. ................ ... ....................... .. ........................... .. .............. ..... ... .... .... 6
Assumptions of the Study ... ....... .......... .... ..... ......... ............. ... .... .......................................... 7
Definition of Terms ..................................... .. ................ .......... .. ................ ... ........... ..... ........ 7
Limitations of the Study ............. ... .......... ... ......... .... ........................ .. .. ..... .......... .. ....... ... ..... . 7
Methodology ................... .............................................. .. ............................ ......................... 7
Chapter II: Literature Review ....................... ... ..... ... ................ .. ............ ............. ..... ............ .. ....... ... 9
Competency development ......... .. ....................... ... ................. ............ ................................ 11
Structure of this research .... .......... ............. .. ................ .. .. ... ... .. ....................... ............ ... .... 13
Chapter III: Methodology ..................................................... .. ............. ........... .... ............... ... ....... .. 15
Subject Selection and Description ........ ..... .............................. ... .. ....... .............. ..... ... .. ..... . 15
Instrumentation .............. ..................... ..... .. ..................... ............................ .... ................... 15
Data Collection Procedures ...................................... .. ........................................................ 16
Limitations .... ...................................................................................................... .. ............. 16
Chapter IV: Results ....... .............................. .................. .. .............. .. ......... ............. ... .............. ........ 17
Item Analysis ......................................................... ... .. .............. ..... .... .. .... .......... ....... .. ...... 17
Leadership Competencies .. ... ............................ .................. .............. ................................ 18
Chapter V: Discussion ..... ...................... .. .. .... ..... ..................... .... ............ .. ......... ... .......... .... .......... 30
Limitations ................ ............... .. ........................... ...................... ..... ................. ... ............. 30
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Conclusions .. ....... .. ...... ............................................................. ........ ... .. ... .. ... .......... ........... 30
Recommendations ..................................................... ........ .......... ... ..... .... ....... .. .................. 31
References .................................................................................................................. .. .... .............. 32
Appendix A: Business Succession Planning Process for Family-Owned Businesses .................. 37
Appendix B: Leader Competencies from Literature for Family Business Successors and
Proprietors during Succession ....... .. ...... ....... .... .. ..... ....... ............. ...... ........... ... ..... .. ... ... ... 38
Appendix C : Focus Group Questions ... .. .. .. ... .. ........ ...... ..... .... .. .. .. .. ...... .. .. ... ... .... ......... ....... .... ..... . .40
Appendix 0: Leader Competencies from Literature and Focus Groups for Family Business
Successors and Proprietors during Succession ................... .. ... .. ...... .. ...... .......... .. ... ....... .41
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Chapter I: Introduction
Research suggests that one-third of first generation family-owned businesses survive to
the second generation. Of those who do make it to the second generation, one-third of the
businesses survive to the third generation ("Succession planning," 201 Ob). According to Bork,
Jaffe, Lane, Dashew & Heisler (1996), 85% of the crises in family-owned businesses come from
issues that are related to succession. It is evident that leaders of family-owned organizations
need more guidance as they approach this fragile time in their life. Succession planning in
family-owned businesses involves different dynamics than those found in other types of
organizations because of the uniqueness of the relationship between the proprietor and successor.
Statement of the Problem
This research is being conducted for the Stout Technology Transfer Institute (STTI).
STTI consultants often coach family business owners throughout the succession process. As
they have seen organizations struggle through this process, they sought a more formal
assessment process for determining what skills are essential for a family business leader in order
to successfully carry the business through succession. With a formal assessment, the coaches
will have the ability to assess clients and recommend professional development activities to
broaden their skill set. The present study is an early stage of this assessment development.
Purpose of the Study
The goal of the present study was to identify and define the leadership competencies
which are conducive to successful family business succession. This information forms the
foundation for future leadership assessment development so it was important for the
competencies to be supported by research on best practices and by incorporating input from
experienced family business owners.
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Assumptions of the Study
Family-owned businesses are unique in nature; this study assumes that there are
commonalities between family-owned organizations from which generalizations can be drawn.
A second assumption is that the family business owners who were asked to participate are
knowledgeable about what leadership competencies lead to a successful succession based on
expenence.
Definition of Terms
Proprietor. The proprietor is the owner of the organization.
Succession planning. Succession planning is the " identification and development of
potential successors for key positions in an organization, through a systematic evaluation process
and training" ("Succession Planning," 20 lOa) .
Successor. The successor takes over the proprietor' s responsibilities in the organization
when the proprietor leaves.
Limitations of the Study
More input would have strengthened the results of the present study. Since family
businesses are personal in nature it is sometimes difficult to get them to participate in a study
where they are asked to share or reflect upon personal experiences. According to Brockhaus
(1994), family business owners are typically not interested participate in research; especially in
studies which require participants to participate more than once. Finally, since only qualitative
data was collected, the researcher was limited to conducting a simple thematic analysis.
Methodology
In order to explore which leadership competencies are necessary during the succession
process, a qualitative study was conducted through a review of literature, focus groups and
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expert content validation. The results from each step of this process were analyzed and grouped
into themes with end the result of22 leadership-based competencies.
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Chapter II: Literature Review
Succession planning is an important part of strategic planning in organizations; it
involves creating a business strategy for how the transition of leadership occurs when an
organization is passed from proprietor to successor. The process is unique to each organization
as it should align with the organizational goals and plans for the future (Sambrook, 2005; Wang,
Watkins, Harris & Spicer, 2004). The succession process is one that requires a great deal of
planning and preparation. According to Sambrook (2005), an effective succession process can
take up to ten years to carry out. This speaks to the importance of setting goals early in the
process in order to anticipate the impending change in the organization.
The overarching goal of succession planning is for a good transition to take place so that
the organization can continue to grow and remain competitive in their market. In order to
achieve this goal, organizations need to be proactive about selecting and developing talented
individuals who make positive contributions to the organizational goals. Not only does
succession planning involve analyzing the current goals of the organization, but also their
projected goals for the future of the organization (Hammett, 2008).
The present study focuses on succession planning in family-owned businesses. In a
family-owned business the relationship between the proprietor and successor tends to be unique
because they are often related. Succession of a family business typically involves passing the
organization from one family member to another, often from a parent to their son or daughter.
As one might suspect, this can create different workplace dynamics which should be recognized.
According to Fiegener, Brown, Prince & File (1996), there are several factors which
influence differences between family and non-family firms . Proprietors of non-family-owned
organizations tend to place more importance on the successor's education and training which
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they bring from outside the organization, whereas, proprietors in family-owned organizations
tend to rely on personally mentoring, coaching and supervising the successor. Proprietors of
non-family-owned businesses are more likely to expose their successor to activities with
stakeholders, giving them more visibility in the organization. Finally, unlike in a non-family
firm, proprietors of family-owned organizations tend to involve their successors in the strategic
planning process very little prior to taking over the organization. The authors did not know
whether this was because of the proprietor's desire to maintain control over the direction of the
organization or because family-owned organizations place less value on strategic planning.
Given these differences between family and non-family owned organizations, one might assume
that their succession planning process may also differ.
According to Wang, et al. (2004) and Sambrook (2003) small family-owned
organizations are not likely to put very much planning into planning the succession of their
organization. They often lack the human resources infrastructure which is also means less time,
funding for and access to training opportunities. These small organizations are often reliant upon
on-the-job training (consistent with Fiegener, et ai. , 1996, discussed above) informal transfers of
skills or call upon the expertise of consultants to get through this process. Large organizations,
on the other hand, often have a board of directors who pay close attention to the succession
planning process; this typically offers a more objective view of the process.
In order to emerge from the succession planning process successfully, it is important for
organizations to identify whether or not the proprietor and successor have the leadership skills
necessary to carry the plan out. Hammett (2008) found that 90% of executives from around the
world said that leadership was the most important global growth factor. A leader ' s focus is to be
adaptive to changes and to develop their employees.
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While the focus of this research is on how the leader behaves, there is one important
thing to understand about followers. Followers develop expectations for future leaders based on
their past experiences. In other words, if someone had a kind leader with whom they worked
well in the past, they will expect the same of the new leader. Conversely, if one's former leader
was difficult to deal with, one would expect their new leader to treat them in the same way. This
sometimes creates a self fulfilling prophecy as the follower treats the new leader in the same way
that they treated the former leader (Ritter & Lord, 2007). This follower expectation is important
for successors to recognize as they step into a leadership role in their organization. The
proprietor's legacy may leave behind some feelings that will be impressed upon the successor
whether or not they understand the reasoning. In order to be prepared, it is important for the
successor to understand and recognize the proprietor's professional reputation.
Competency Development
Family-owned organizations often lack access to the tools that corporate and government
organizations have access to through networking and financial resources. The goal of this
research is to provide a tool for family-owned organizations to use in their transition of
leadership. Cantor (2005) recommends that leaders involved in the succession planning process
compare their organization' s culture and goals to a standard set of competencies in order to guide
strategic planning for the organization. The present strives to provide a base for the leadership
competencies against which family business owners can compare themselves and each other to
target areas for growth. Organizations with targeted growth areas can determine the best way to
proceed with training plans (Metz, 1998). According to Cantor (2005), without defining the
leadership competencies which are desired in a successor, selection decisions are often based on
industry-related skills. This may be effective at lower levels of the organization but leaders
require skills beyond those which have shown to be effective in a specific industry.
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In addition to identifying training needs, organizations can use the inventory of
competencies as a way to define their organization . Often, new leaders rely upon past
experiences to help themselves through new situations; this can be beneficial because it brings in
an outside perspective, however, this tendency can also lead to actions that are not appropriate
for their new role. Having a set of competencies for organizational leaders to stand by provides a
set of expectations that are clearly defined for the purposes of both employee development and
the retention of skills (Fulmer & Conger, 2004). This type of competency development is a tool
for both on-boarding with new employees and for a periodic gap analysis performed by the
employer. An alternative use for the gap analysis tool would be that employees could use it to
check their leadership performance against organizational expectations for self development
(Bernthal, et aI., 2004).
Wang, et al. (2004) identified successor development as one of the predictors of
organizational performance. Successor development is one of the areas in which family-owned
organizations typically fall short (Fiegener, et aI., 1996), which is why it is important to develop
tools for family-owned organizations to use in order to help facilitate successful successor
development and business succession. Wang, et al. (2004) recommends that organizations create
a "training charter" which would include a strengths, weaknesses, opportunities and threats
analysis of the successor and the organization. The training charter should address specific
training needs, plan of action and a plan for evaluation of training and retention of knowledge.
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Structure of this Research
The present study builds upon research that was conducted by a former graduate student,
Naveed Kabir (2007), from the University of Wisconsin-Stout who conducted research on
succession planning for the Stout Technology Transfer Institute (SIT!). Kabir's study closely
examined the process for business succession planning for family-owned businesses. The
authors of the present study took this research a step further by creating a visual representation of
the process that Kabir outlined in his research (Appendix A). This visual representation was
used throughout the study to refer to the stages in the succession planning process. The purpose
of this research was to provide a better understanding of the succession planning process to the
STTI consultants who work with succession planning clients.
Kabir's (2007) research showed a need for consultants to focus on coaching the
proprietor during the early stages of succession planning: business preparation, assessment and
strategic planning. During the second half of the process throughout the continued strategic
planning, development of a leadership plan, leadership development and finally evaluation, the
consultant' s attention needs to shift to focus on coaching the successor. A key portion of this
research focused on the development and follow-through of a strong leadership plan. This left
the authors with the question: what leadership competencies lead to successful business
succession in family-owned businesses?
There is little research which specifically focuses on leadership during the succession
planning process in family-owned organizations. In order to explore this research question the
authors used a process similar to the process used for the American Society of Training and
Development's (ASTD) 2004 competency mapping study (Bernthal, Colteryahn, Davis,
Naughton, Rothwell & Well ins, 2004). The authors of this competency study reviewed literature
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and conducted expert interviews seeking to define specific competencies for training and
development professionals. This formed their initial list of competencies which went through a
validation process to refine the list.
Other researchers have also utilized some of the methods outlined above for competency
identification. Kets de Vries, Vrignaud & Florent-Treacy (2004) and Barbuto & Wheeler (2006)
interviewed expelis to develop a list of competencies and had the expelis review the final list for
face validity. In addition, Ip & Jacobs (2006) performed a thorough review of literature to
identify competencies. Still, the methods used by Bernthal, et al. (2004) seem to be a more
comprehensive approach for competency identification.
The present study focuses on the first portion of leadership competency identification
through a review of literature on succession planning and family owned businesses with the
focus of leadership. An initial list of competencies was developed and used to help facilitate
focus groups with local family business owners. This process furthered the researcher's
understanding of leadership needs during the family business succession process.
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Chapter III: Methodology
This research is being conducted for the Stout Technology Transfer Institute (STTI).
STTI consultants often coach family business owners throughout the succession process. As
they have seen organizations struggle through this process, it was decided to develop a more
formal assessment process for determining what skills are essential for a family business leader
in order to successfully carry the business through succession. With a formal assessment, the
coaches will have the ability to assess clients and recommend professional development
activities to broaden their skill set. The present study is an early stage of this assessment
development.
In order to explore which leadership competencies are necessary during the succession
process, a qualitative study was conducted through a review of literature, focus groups and
expert content validation. These methods are discussed in this chapter along with a discussion of
qualitative data analysis methods used and the limitations of the study.
Subject Selection and Description
The total sample for this study consisted of twelve participants. The sample for the focus
group portion of the present study was a convenience sample of six family business owners from
the Chippewa Valley area in north-western Wisconsin; 37 family business owners were asked to
participate. Six people participated in the competency validation portion of the study; five
family business owners and one training and development professional.
Instrumentation
An initial list of 62 competencies (Appendix B) was developed through a review of
literature on succession planning in family owned businesses with the focus of leadership. These
competencies were used as discussion points at the focus groups. The family business owners
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were asked to review the competencies and then were asked six discussion questions (Appendix
C). The validation portion of the study did not require instrumentation other than the integrated
list of leadership competencies.
Data Collection Procedures
Thil1y-five sources of information were reviewed to develop the initial list of leadership
competencies. Two focus groups were held with family business owners at the University of
Wisconsin-Stout campus which lasted approximately an hour and a half each. After the
information from the literature and focus groups was integrated, the competencies were sent to
family business owners and one training and development professional for content validation.
Data analysis. Content analysis of relevant literature was utilized to develop the initial
list of leadership competencies. During the focus group, notes were taken. The comments from
the focus group were examined and themes were developed based on reoccurring ideas. These
themes were integrated into the literature-based list of competencies.
Limitations
The methods for this study could have been strengthened if the researchers had access to
a larger pool of willing paI1icipants; more input would have strengthened the results of the study.
Since family businesses are personal in nature it is sometimes difficult to get them to participate
in a study where they are asked to personal experiences. In addition, since only qualitative data
was collected, the researcher was limited to conducting a simple thematic analysis.
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Chapter IV: Results
The purpose of the present study was to identify and define a set of core leadership
competencies which are important integral to the successful succession of family businesses. To
begin, the researchers reviewed literature on leadership as it relates to succession planning and
family-owned businesses. From there, an initial list of leadership competencies was developed;
this was used as a starting point when the researchers held focus groups with family business
owners to make the research based competencies more field-based. Finally, the 22 competencies
that emerged from literature and focus groups were reviewed for content validation, yielding a
literature and field-based set of competencies.
Item Analysis
Sixty-two leadership competencies were identified through a review of literature
(Appendix B). The most frequently mentioned competencies were business knowledge and
acumen and strategic planning. This list of competencies was grouped into seven categories in
order to manage this large list: general leadership qualities and skills, relationships, business
knowledge, workforce and talent development, management skills, ethics and personal attributes.
Through the focus groups, the competencies were examined by family business owners for
accuracy and input. Six local family business owners participated in two focus groups which
were held at the University of Wisconsin-Stout. Participants were asked to review the research
suppOlied competencies and give feedback on their relevance. In addition, participants were
encouraged to add competencies which they felt were missing. The qualitative data from the
focus groups was coded and grouped into themes. These themes were integrated into the
existing list of competencies. The result of this process refined some of the existing
competencies and added 28 more competencies to the list, making a total of 90 leadership-related
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actions and behaviors which are thought to be important during succession of a family-owned
business (Appendix D).
After compiling the results from the literature and focus groups, the researchers went
through the process of grouping the actions and behaviors together to create a more meaningful,
field-relevant and complete set of competencies. The information was refined down to a set of
twenty-two solid leadership competencies which are important for a successful succession in
family-owned businesses. The list of competencies was reviewed by six individuals (five family
business owners and one training and development professional) for content validity. The few
suggestions that were received from the validation process were incorporated into the final list of
22 leadership competencies.
Leadership Competencies
Twenty-two leadership competencies were identified through literature, focus groups and
content validation. These competencies capture the skills, actions and behaviors that promote a
successful succession in family-owned businesses (Bernthal, et aI., 2004; Boyatzis, 2008).
Establishes vision and strategic plan. The leader of a family-owned organization
should be one that leads with inspiration, is proactive and provides direction to followers.
Collaborating with key personnel, the leader works to establish and follow a vision for the
organization and a strategic plan (Hagen & Hassan, 1998; Kets de Vries, et al. 2004; Roddy,
2004; Sugrue & Lynch, 2006). In conjunction with the vision and plan, the leader needs to build
commitment and guide stakeholders and employees towards achieving organizational growth
goals (Kaplan-Leiserson, 2005). The establishment of this vision and plan creates a roadmap for
the organization, shows personal responsibility on the part of the leader and clarifies
organizational guidelines for allocating awards, recognition, hiring and promotion (George,
Sleeth & Siders, 1999; Gibson, 2003).
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Establishing a vision and strategic plan for family organizations is especially important as
the leader of the organization approaches succession. Not only does the successor need to learn
how the organization currently operates; they should be actively involved and have a good grasp
on where the organization is heading in the future. According to Hagen & Hassan (1998),
planning a strategic direction for the organization is the number one leadership component which
affects all others and it is the key to long term growth and survival. In addition to establish a
plan, the leader needs to have the ability to drive change efforts and innovation in the
organization.
Drives change efforts and innovation. As technologies continue to improve and doing
business across the globe becomes more accessible, organizations can expect to continue to
change to keep up (Sugrue & Lynch, 2006). Leaders of family-owned organizations need to take
risks to promote business growth and to sustain the business long-term. According to Gibson
(2003), organizations need to "routinely consider the unthinkable" (p. 32). Gibson isn't
necessarily arguing that organizations need to have a plan for every situation one could think of
but to be receptive to and ready for change.
Leaders need to facilitate teamwork and motivation as they coordinate, delegate power
and empower employees to accomplish work goals (Ibrahim, Soufani, Poutziouris & Lam, 2004;
Kaplan-Leiserson, 2005; Kets de Vries, et aI., 2004; Sambrook, 2005). This trusting and
collaborative relationship is crucial in order to have the foundation to face organizational change
as a team (Furst & Cable, 2008). During times of change, the leader should maintain and
evaluate the organization's strategic plan to ensure that it remains realistic and timely for the
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future of the organization even during changing times (Kets de Vries, et aI., 2004). During the
succession planning process there are a lot of changes; the proprietor needs to involve the
successor in discussions about these changes and about future directions.
Executes personal leadership. In order to embrace and lead change, the family business
leader needs to embrace their personal leadership. The leader should demonstrate self
awareness, honesty, confidence and fosters trust and commitment through authentic character.
A successful leader expresses and reads emotions accurately (Kets de Vries, et aI., 2004) and
seeks feedback on how they are perceived so that their behavior can be modified as necessary.
This type of leader serves as a role model, sets high standards for themselves and others and
takes responsibility for action and inaction. Finally, it is important for leaders to take personal
leadership when it comes to their education by pursuing opportunities continuously in order to
stay current in one's field of expertise (Sambrook, 2005).
Fosters open communication. The ability to communicate is an extremely important
competency for leaders to have and practice (Hartman, Conklin & Smith, 2007; Sugrue &
Lynch, 2006). Leaders in family owned organizations should demonstrate open and honest
communication by sharing with and listening to others and create an atmosphere where others
feel comfortable being open. Leaders should communicate concisely and effectively in verbal
and written communications (Kaplan-Leiserson, 2005).
Throughout the succession process, open communication between the proprietor and
successor is essential. The time during which the proprietor and successor are working together
is a very impoliant time for transfening knowledge about the organization. Not only does the
successor need to learn about the inner workings of the organization and how to drive overall
success; they also need to transfer "tacit knowledge" (Sambrook, 2005). Tacit knowledge is
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basically the type of knowledge that one calIDot learn in the classroom; tacit knowledge is the
"procedural knowledge" about the day-to-day activities in the organization (Sternberg, 2007).
Analyze and resolves issues. As a pa11 of being ready for and accepting of change, the
leader of a family-owned business needs to have the ability to analyze and resolve issues;
sometimes with only a moment's notice. The leader should consider ilIDovative strategies and
use sound logic to make decisions in a timely manner (Kaplan-Leiserson, 2005; Roddy, 2004;
Sternberg, 2007). In addition, the leader needs to have the ability to deal effectively with
complex challenges by bringing others into the discussion, seeking input and examining issues
(Hartman, et a!., 2007; Ibrahim, et a!., 2004). As the proprietor and successor work together,
they should discuss the proprietor's methods for analyzing various issues that tend to arise in the
organization and what has or has not worked in the past. In addition, the proprietor should
introduce the successor to key contacts who can help them out if they ever have an issue for
which they need to seek help from within or outside the organization.
Builds relationships and networks. Building relationships and networks with people
throughout the organization, stakeholders, and key contacts from other organizations is very
important, especially for new leaders. An engaged and successful family business owner shows
genuine interest, respect and compassion for others, valuing individual differences. In addition
to developing positive relationships with employees and customers (Gibson, 2003 ; Groves, 2007;
Hartman, et a!., 2007; Kaplan-Leiserson, 2005; Roddy, 2004; Sugrue & Lynch, 2006), this leader
should have a strong network of resources and involvement in community and professional
organizations (Cantor, 2005). Establishing these types of networks opens up opportunities for
collaboration, sources for opinions or new ideas and provides recognition for the organization.
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Exhibits organizational savvy. The leader of a family-owned organization is one that
develops relationships with others and strives to understand people's varying agendas and
viewpoints. This ability to understand others broadens one's perspective, provides additional
insight on potential options, and expands their ability to make informed decisions about the
organization. The leader needs to understand the perceptions and needs of the group in order to
draw connections between other's needs and those associated with the broader goals for the
industry.
Leads family business courageously. The proprietor of a family-owned business needs
to step forward as a leader to build and sustain an inherent confidence and working relationship
with the successor; this is essential for a successful succession. By developing open and frequent ·
dialogue, sharing information and ideas, and building towards the resolution of differences, the
successor and proprietor will have an open and productive relationship. This type of relationship
should be extended to the employees of the organization in order to bring them in as a part of the
team. This capacity to lead is important for the successor to emulate as well as they learn to
work as a team with people at various levels of the organization (Ibrahim, et ai., 2004).
The leader of a family-owned organization needs to effectively deal with family
dynamics while focusing on the needs of other employees and the organization as a whole,
maintaining integrity, infusing knowledge in others and seeking to resolve complex issues. This
level of dedication can sometimes require the leader to put the business, customer and employee
needs before their own needs. Keeping this in mind, it is still very important for the leader to
maintain a healthy life balance; this is something which the proprietor and successor need to
discuss (Kets de Vries, et ai. , 2004)
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Exemplifies investment in the family business. Even though the family business leader
needs to maintain a healthy life balance, they also need to exemplify and investment in the
family business. They should display their passion for and devotion to the mission and vision of
the business and a willingness to invest time and energy into their position to drive
organizational success (Hariman, et aI., 2007; Sambrook, 2005). Family business leaders should
bring education and experience from industry to the position and demonstrate significant depth
of interactions in various areas of the organization (Hartman, et aI., 2007; Kaplan-Leiserson,
2005). Finally, the leader should empower non-family management in order to ensure long term
success of the organization regardless of ownershi p potential. If the employees are competent
and knowledgeable about their duties, during times of turbulence and uncertainty the leader can
trust that their followers will carry their part.
Foster shareholder relations. As discussed above, frequent and open communication is
very important in organizational relationships; this concept extends to include relationships with
stakeholders. Positive working relationships with key stakeholders are impOliant for success in
family business succession in order to keep them abreast of business growth and challenges that
have been faced. In order for employees to understand the need for good customer service,
family business leaders should align their thoughts about and desires for the organization with
those of the shareholders. This collaboration also enables organizations to work with
stakeholders to reach a common goal (Kets de Vries, et aI., 2004). As the successor learns more
about shareholder relations, it is important for them to recognize and appreciate the work that the
proprietor has done to grow the organization through the help of these networks. This
recognition will help the successor strengthen their relationship with the proprietor and will help
them appreciate how the organization arrived at its current state.
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Global mind-set. As discussed above, today's organizations have to adjust to a more
global environment where business is often conducted from across the world. Family-owned
organizations may find themselves in a vulnerable situation as they have less financial resources
with which they can keep up with technological advances that enable global business. While
global operations may seem like something that only larger organizations need to be concerned
about, in order to remain competitive, family business leaders need to have a good understanding
of global politics. Having an accurate understanding of what is happening in the world and how
that influences the operation of the business is key to long term success (Kets de Vries, et aI.,
2004; Sugrue & Lynch, 2006). Organizational leaders have an obligation to make the best
decision for the organization while taking into consideration any global implications (Roddy,
2004).
Manages ambiguity in succession relationship. There tends to be a great amount of
ambiguity and uncertainty when it comes to the relationship between the proprietor and
successor. Certain issues could be sensitive to one or both parties since there is a great deal of
personal investment in family businesses. For example, the proprietor might not be very
receptive to new ideas that the successor comes up with regarding future directions for the
organization if they are different from the intended future direction of the organization.
This speaks to the importance of building an effective "give and take" relationship
between the proprietor and successor. Both the successor and proprietor need to demonstrate
their desire for success which means sharing the burdens and goals of the organization and
facing times of uncertainty and adversity. Both the proprietor and successor need to display their
ability to be flexible to adjust their frame of mind to fit present, future and perceived situations
so that times of stress and change do not cause chaos or hurt feelings.
25
Fosters healthy organizational culture. A healthy organizational culture is key to
employee satisfaction and ultimately, organizational success. According to Hagen, et ai. (1998),
culture can have various affects on the organization in the areas of talent development and
management, employee attitude, an employee's pride in their product and/or service and trust in
upper-level leaders. A family business leader needs to foster a healthy climate with regard to
how employees interact with one another and outsiders both within and outside of their normal
environment (Groves, 2007). Additionally, leaders need to build a corporate culture complete
with stated and unstated values, customs, rituals, symbols and expectations for member behavior
(George, et ai., 1999); these are attributes of a successful organizational culture. It is the leader's
responsibility to familiarize others in the organization with the intended organizational culture in
order for others to follow it (George, et ai., 1999) and to build and lead a management team who
will carry it out.
Builds and leads management team. The leader of a family-owned organization needs
to build and lead a management team who will work effectively with the successor and other
employees to help them grow (Ibrahim, et ai., 2004; Kaplan-Leiserson, 2005 ; Sugrue & Lynch,
2006). As discussed earlier, it is important for the proprietor to empower their management team
in order to ensure the long term success of the organization. In addition, the both the successor
and proprietor should take a hands-on approach at work and in management meetings in order to
stay in tune with what is happening at various levels of the organization. Having the leaders and
management team involved at various levels of the organization will help them continue to strive
for immediate and long term success.
Asserts results driven environment. Being a leader takes more than coming up with a
good idea and running with it. Leaders need to work with their management team, employees
26
and stakeholders, using research methodology, statistics and empirical evidence to support
decision making (Sugrue & Lynch, 2006); especially during the succession planning and the
implementation of the process. In order to drive the organization to success, the leader should
effectively analyze and resolve issues, embrace new creative ideas and weigh risks against
opportunities when faced with important decisions (Ibrahim, et aI., 2004). All of these qualities
foster a results driven environment with an emphasis on pleasing the customer and achieving
organizational goals.
Exhibits time management skills. An essential skill for any leader is the ability manage
one ' s time effectively. During family business succession it is especially important for the
people who are involved in the process to set up a timeline. Having a timeline will help the
succession planning team to stay on track and it will put them in a position where they need to
think about each step of the process and how it will be carried out.
It is important for the leader of a family-owned business to be reliable and both mentally
and physically accessible when needed. Managing one's time effectively will help the leader to
be consistently reliable because they have thought about what is happening next. While it is
important to anticipate what will happen next, the leader needs to remain accepting of changes as
they are likely to occur. Finally, the family business leader should feel comfOitable delegating
tasks and directing work activities appropriately, without wasting other' s time (Kaplan-Lierson,
2005). The proprietor should gradually delegate more tasks to the successor as they learn more
about their role in the organization as this will aid their professional development. The
proprietor should also teach the successor how and when to delegate tasks so that they can
continue this practice.
27
Builds organizational stewardship. Naturally, the leader of a family-owned
organization needs to keep the future sustainability of the organization in mind as they consider
strategic planning. The leader should be responsible for utilizing employee's skills and invest in
their development by providing opportunities for stretch assignments (Bernthal, et ai., 2004;
Fulmer & Conger, 2004; Groves, 2007; Roddy, 2004) and other educational or professional
development opportunities. In addition, the family business owner is responsible for the
development and monitoring of property planning and financial resources. Property and
financial planning become very important assets for the proprietor and successor to discuss when
planning for succession.
Demonstrates technical knowledge. In today's fast paced environment, it is essential
for family business owners to keep up with technology in order to compete with the competitors
in their field of work (Sam brook, 2005). In addition, leaders need to keep an open mind when it
comes to considering different strategic approaches to running the organization and they must be
willing to make improvements to processes as necessary. Using strategic indicators and
competitive analysis to benchmark, the organization should strive to align the organization with
the market.
Displays financial and legal accountability. One key piece to organizational
sustainability and improvement is the leader's insight into the business (i.e. "business acumen")
and the financial state of the organization (Kaplan-Leiserson, 2005). The leader of a family
owned organization should understand and align the business model to the strategic plan for the
organization. The leader should serve as an expert on processes within the organization and on
budget-related decisions. During the succession process it is important that the proprietor
demonstrates open communication with the successor about organizational finances and
28
expresses the importance of leaming about and remaining updated on legal and regulatory
standards. In addition, the proprietor and successor should discuss strategies for financial
accountability and legal scenarios or situations that could potentially arise. Based on experience,
the proprietor should coach the successor on how to be a legally accountable leader.
Fosters coaching to develop others. During the succession process, the proprietor needs
to build and maintain a coaching relationship with the successor in order to ensure the transfer of
knowledge and to prepare for the proprietor to let go. Coaching is essential throughout the entire
organization at all times for employee development, not just during succession planning (Groves,
2007; Roddy, 2004). This provides opportunities for successor and employee growth while
building positive relationships in the organization.
The leader of a family-owned organization needs to be able to assess the strengths and
identify developmental needs in others and provide feedback (Hartman, et aI. , 2007; Kets de
Vries ,et aI. , 2004). Along with the feedback, the leader should offer development opportunities
through professional development activities and stretch assignments (Bernthal , et aI. , 2004 ;
Fulmer & Conger, 2004 ; Groves, 2007; Roddy, 2004). Stretch assignments are job assignments
where the employee takes on a different and possibly more challenging role in order to "stretch"
their abilities, experience different parts of the organization, meet new people and develop skills.
In addition, stretch assignments can be used to determine whether or not an employee would be a
good fit in a different area of the organization (Cantor, 2005; Sam brook, 2005).
Cultivates performance development. Coaching is one way that leaders can cultivate
performance development; it is important for the leader of a family-owned organization to have
skills in the area of training and organizational development (Hagen, et aI., 1998). As discussed
earlier in this chapter, small family-owned organizations often lack the human resources
29
infrastructure; this is an area in which many family-owned organizations need guidance
(Sambrook, 2003). Performance development is especially important during succession planning
as the successor learns as much as they can about the organization.
The leader of a family-owned organization needs to establish sound and effective hiring
practices and carry that through to performance development using instructional design. The
leader should demonstrate knowledge of strategies for improving human performance which take
different learning styles into consideration and strategies for aligning performance development
with organizational goals (Kaplan-Leiserson, 2005; Sugrue & Lynch, 2006). Finally, the
outcomes of human performance strategies should be evaluated for continuous improvement to
ensure the employees are effectively learning.
Drives ethical integrity. The ethical integrity of the leader of any organization
ultimately drives the goals and decision making within the organization (Hartman, et ai., 2007).
It is crucial for the leader of a family-owned organization to be an ethical, virtuous role model
(Hagen, et ai., 1998); adhering to standards for professional, personal, moral and ethical
principles. The ethical leader strives to positively impact the organization by incorporating
ethical principles and practices into everyday decision making and aligning their values with the
mission of the organization (Hagen, et ai., 1998; Roddy, 2004). The proprietor and successor
need to discuss different ethical situations that have arisen or could potentially present
themselves in the future in order to prepare the successor for those uneasy situations that may
arIse.
30
Chapter V: Discussion
Through literature, focus groups and content validation, twenty-two leader competencies
were identified as being important during the family business succession process. The proposed
competencies provide a basis for dialogue, planning, and guide family owned business through
an effective succession planning process. This study incorporated the feedback and insight of
leaders offamily owned businesses along with literature to formulate competencies that
hopefully, reflect their roles and responsibilities of leaders.
Limitations
The methods for this study could have been strengthened if the researchers had access to
a larger pool of willing participants; more input would have strengthened the results of the study.
Since family businesses are personal in nature it is sometimes difficult to get them to paliicipate
in a study where they are asked to share or reflect upon personal experiences. According to
Brockhaus (1994), family business owners are typically not interested participate in research;
especially in studies which require participants to participate more than once. Finally, since only
qualitative data was collected, the researcher was limited to conducting a simple thematic
analysis.
Conclusions
The final group of twenty-two competencies is reflective of the competencies that family
business leaders need to exhibit throughout the business succession. The initial list of
competencies was quite large and the researchers expected that the focus group participants
might tell us that some of them are not very relevant for them. On the contrary, the experienced
professionals confirmed that all of the research-suppOlied competencies were important and
added even more essential actions and behaviors.
31
The focus groups were an essential part of this process as it allowed for the literature
based research to be grounded in field practices. These competencies will inform then next stage
of the study as the researchers continue to narrow down which leadership competencies really
contribute to a successful family business succession.
Recommendations
If one were to re-do the current study, the researchers would recommend making more
efforts to expand the participant pool in order to involve more family business owners.
Involvement with organizations which bring together and/or support family businesses will
likely increase their willingness to participate. In addition, if the researchers had access to
incentives, this would have been another potential way to involve more participants.
To build upon the present study, the researchers plan to further the understanding of these
leader competencies by exploring their importance. Using an online survey, family business
owners will be asked to rate the imp0l1ance of each competency during the succession process.
In addition, participants will be asked to identify which competencies are impo11ant during each
of the five stages of succession. Knowing that family businesses are unlikely to participate in a
study multiple times (Brockhaus, 1994), a new population will need to be explored.
Beyond identifying the importance of competencies and the stages during which they
become the most important, the Stout Technology Transfer Institute would like to have a 360-
degree leadership assessment developed out of this research. Using this assessment, they will be
able to help their succession planning clients in more effective and directed ways.
32
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Appendix A: Business Succession Planning Process for Family-Owned Businesses.
proposed Leadership Succession Steps
Check in between each step before moving on to the next in order to determine whether or not you're ready to move on
Business
Preparation
-Obta in buy-in from
propri etor on t roe
process
-Bus iness description
& ar.alysis
- Famil~' & business
cor.s i 6erati ons
--axation
corsi oerations
-Back up ir.rorr:;ation
-Leaders hip support
-Soccession goa ls
~ Assessment r-.
-Whoa rethe
successor choices
-I den"ify hig h
potential success ors
-Interviews
-3&0 feedba ck
-Com m inee
-Survey
-Leadersr.ip
assessment
-What are training
needs?
-m,eMN -areas for
improvem ent
Strategic
Planning
-SWOT Analysis
-S-lOyear vision
~how to
execute the plan
\.. .J "' i
Development H Leadership ~I of Leadership Development ~
Plan
-Devel opr,; erlt of a
Leadership Plan
-Successor
development goals
-Stakeholder
involvement
-career planning
-J ob rotations
-Coa chi r.g &
m entoring
-Leadership
com petency
developm ent
-Other necessary
training (based on
needs assessment)
-'Increase high
potential people' s
vis ibilityin the
organization
-Check in with
proprietor
Focus on coaching proprietor Focus on coaching successor
Evaluation
-Performance review s
& evaluations
-Readiness to lead!let
goscale
-Succession analysis
(w ere goals met)
-Are there ar.y [l",ore
training needs'
-Refine plan
37
38
Appendix B: Leader Competencies from Literature for Family Business Successors and
Proprietors during Succession
Competency
Ad8:ptability Adheres to the law Articulating the value of learning in business terms Bias for action Building relations in the organization
Bl:Is~ness knowl~_d_ge. §l (l~~men_
Change management ---
Commitment to the organization
Competitive Ana~y'sis Creative problem solving Customer orientation Developing human capital/leaders
Driving for results Effective communication Emotional competence Emphasizing ethical practices Evidence-based practice Exploiting & maintaining core competencies Facilitator
- - -Flexible, forward looking leadership Fostering innovation & creativity Global perspective
Good understanding of family & business interaction Healthy organizational climate Hiring talent Human performance improvement Improving work systems & processes
~structlonal design Integrity Interpersonal effectiveness & versatility
Is a role model for values & ethical practices
Knowledge ~X busines_s ethics Leadership Learning technology}nfrastructure
Frequency in literature I
2
8 3
1
2 2
2
3 3 2
2 2
4
2
Competency '-----
Listener
Management
Measurement & evaluation - - -- - - _._-_ Monit.s>ring employee & organizationaly erformance
_ Organizational character
Organizational development
Org~!1iza.!i 0!1a~stewardshi2
Outsour~.ing relationsJ1ip management
Personal character
_~ersuasion, influence & negotiation
Political savvy
Positive attitude toward employee~ & stakeholders
Public speaking - --"'----
Relationship management
Researchlanalytica.!.2.kills
Science of learnin.K_
Seek external feedback/evaluation ---
Self development ---
Frequency in literature
I
2
3
1
I
1
2 1
2 1
3
Setting employee goals ~~---------~----------------
Social character
~ategic pla!!l1ing
~ustaining effec~ve corporate culture
Tactic knowledge -----------Team leader
Time management ___ _
Trust
Values aligned with the business
Visiona!)'_
7
3
39
40
Appendix C: Focus Group Questions
Focus group participants were asked three questions about the competencies which were
identified through literature.
1. Would you add anything to these definitions?
2. Do you have suggestions for a more effective way to organize the competencies?
3. Are there any competencies which you don't believe belong in the category under which
it is listed?
4. Are there any competencies which you don't believe to be important?
5. Would you add any other competencies?
6. Can we logically combine any of these competencies?
41
Appendix D: Leader Competencies from Literature and Focus Groups for Family Business
Successors and Proprietors during Succession
This table depicts the competencies from literature and focus groups in raw form before
they were re-grouped and validated.
Competency
Ethics Adheres to the law
Emphasi~ing ethical practices
Is a role model for values & ethical practices
Knowledge of business ethics
Understand shareholder expectations
General leadership skil/~ Flexible, forward looking leadership
Visionary
Accepting change~
Adaptability
Attend management meetings
Bias for action
Competition between successor & proprietor
Customer orientation
Effective communication
Experience outside the or~anization
Facilitator
Healthy organizational climate
Integrity
_ !<~eping up with legal issues
Leadership
Letting go
Passion
Persuasion, influence _& negotiation
Political savvy
Projecting self confidence
Recognize own weaknesses
_Reputation managemen~ __
~isk-taking
Frequency in literature
o
1 3 o
o 1 o 2
3
o 2
o 1
o o 3
1 o o o o
Frequency in focus groups
o o 2
o 1
o 3
o 1
o
o 4
o 2
o
o 2
2
o
3
Competency
Generalleadel's!!...~p skills, continued Strategic planning_
Team leader
Ti~e management
Understanding yo_ur r~
Knowledg!
Articulating the '01ue of le_arning in busine~ terms Business knowledge & acumen
Competitive Analysis
Education
Experience within the o~g~~ization Global perspective __ _ _
Involvement in local organizations/Family business resource centers
Management skills
Chang~ managemen_t _
Cre~tive problem solving Driving for results
Evidence-based practice
Glass ceiling management _
Lmproving work systems & processes
Instructional desig£l
Learning technology infrastructure
Manag~ment
Measurement & evaluation - ---
Open with finances
Organizational development
Organizational stewards hi p
Recognize & appr~_cia~e acc0!!1plishments Research/analytical skills
Personal Attributes . Commitment to the organization
~ood understanding o[ family & ~~siness interaction
Sel~ development
Values aligned with the business
Developing a professional identity
Listener
Frequency in literature
Frequency in focus groups
--
7
1 0
1 8 -1 0 0
0
3
2 3
1 0
2
1 o
o
1 -3
1 0
---4 -0 0
--
0 1 0 8
10 0
3
1 0 --- ----0 0 --- -I
0 0 0 0
1 --I 0 2 0
0 2
0 0 1 0 ---
42
43
Frequency Frequency in in focus
Competency literature groups
Personal Attributes, continued Organizational character 2
- --
Personal character 1
~ub~speaking 0 Seek external feedback/evaluation 0 Social character 1 Tactic knowledge 0 Relationships Positive attitude toward employees §G stakeholders 1
Building relations in the organization 2 0
~hemistry 0 Emotional competence 2
Establishing a network of resources 0 Honesty 0 Internal and external mentoring 0 1
Interpersonal effectiveness & versatility 2 0 Observation 0 1
--
Outsourcing relationship management 0 Relationship management 2
Successor needs to earn their position 0 Teamwork 0 Trust
Workforce and talent development Build your own management team 0 1
--Developing human ca~ital/!eagers 2 0 ~xploiting & maintaining core competencies 2 0 Fostering innovation & creativity 4 0 Hiring talent 3
Human performance improvement 0 Monit~ring employee & organizational performance 0 Science of learning 2 0 Setti~g employee goals 0 Sustaining effective corporate culture 0