Family firms failing in succession plans

A survey of family businesses has found that only 51 per cent have a formal succession plan in place.

The survey also found that 94 per cent of family businesses considered succession as the single largest threat to their business, and that 46 per cent anticipated a change of ownership in the coming five years, with the business moving to a new generation of the family.

The survey, by PricewaterhouseCoopers, involved 55 family businesses ranging in size from those with fewer than 25 employees and an income of less than €2 million, to those with more than 100 employees and an annual income of more than €20 million.

Just half of the businesses surveyed had a formal management succession plan in place, and 63 per cent felt they would consider a non-family manager as a potential successor. Three-quarters of those surveyed felt the next generation in their family had the appropriate competencies to work in the family business, while a similar number felt they had used non-biased criteria in selecting a new business leader in the past.

In relation to conflict, the survey found that 39 per cent believed the main cause of conflict was the issue of which family members could or could not participate in the business.

Only 20 per cent of those surveyed had a family council to deal with issues to do with family and ownership, while 61 per cent had no rules in place setting out who could join the business.

More than half of the businesses surveyed (60 per cent) had made provision for the offspring or spouses of family members who had died or become incapacitated.

The survey also detected a need for greater attention to be given to areas of corporate governance, such as board meetings and procedures for the appointment of new directors.

The survey can be downloaded free from www.pwc.com/ie/bws.