Theoretical model of communication approaches in family-owned businesses during generational transition

Abstract

Family-owned businesses are unique kinds of enterprise. Due to their nature they face number of specific challenges. The most demanding task determining success of small and medium-sized enterprises is generational transition on CEO position. Incumbent CEO who leaves office must foster up a replacement who will continue to develop the enterprise and fulfill corporate vision. For small and medium-sized family-owned businesses it is significant that incumbent moving out from her/his current CEO position must have direct influence on a successor (who must be prepared for take over the leadership role) because successor is oftentimes a relative, generally an offspring. The purpose of this initial study is to describe a theoretical model of approaches of communication and succession process during generational transition communication between incumbent and successor with aim to prepare future leaders for effective communication with family business' stakeholders. Manners and strategies on how incumbent prepare successors for being business leaders are variable and depend on culture and environment, but all approaches generally involve practices such as leading, consulting, couching and training. A genuine communication flow model describes dependencies between incumbent owner/leader, successors and stakeholders. Non-family enterprises hire ready-made managers fitting specified agreed-upon criteria who are expected to lead the company in the future. Family business and incumbent have substantial responsibility regarding selecting and upbringing an individual not only capable in roles of a family business leader and owner but also a kind of a parent. Incumbent leader must therefore carefully guide successors, show and teach them how to take over the corporation and be accepted by stakeholders as a natural leader in the business.