32 Section 2 Chapter and Lecture Notes
Chapter 6 Successor Development and Selection
Learning Objectives
1. To promote understanding of the key role next-generation members play in endowing
the family business with a new vision for the company in their generation.
2. To discuss the rewards, challenges and developmental needs of next-generation
leaders.
Chapter 6 Essence
A record number of next-generation members are taking over leadership of family–
owned and family-controlled firms. These younger leaders are demonstrating that they
are willing to make the sacrifices necessary to be the responsible leaders of growing
Section 2 Chapter and Lecture Notes 33
Ownership education is becoming increasingly important in the successor
development process. Business management education is also important and often
available in undergraduate and graduate business programs. Ownership education may be
promoted through entrepreneurship and family-business programs and through hands-on
experience in jobs with profit and loss responsibility in the family company.
Next-generation members are rewarded for joining the family business through the
career opportunities it represents relative to other career launchers whose families do not
own firms. Another immediate reward is the less time-consuming learning curve that
results from the transfer of knowledge that took place over years of family in business
membership.
leading to the final appointment of the successor.
Sibling team and cousin consortium stage family firms need CEOs to clearly establish
different roles, organization charts, shared goals, teamwork processes, and problem–
solving and decision-making approaches before transferring power. The next-generation
CEO needs to have the ability to lead.
Discussion Questions
34 Section 2 Chapter and Lecture Notes
1. Vision is a controversial word too soft and ethereal for many in management.
But why is it so important to a next- d a family
business? What do the experiences of Marriott, Madco, and SC Johnson have in
common?
Younger-generation members of a business-owning family are more inclined to
accept new technology, new managerial approaches, and greater risk. Earlier-
generation members tend to give more importance to what has made the business
2. What are the four primary motivations (or basis of commitment) for successors
to join the family enterprise? Please list them and discuss the different
implications.
1. More likely to join, stay, work hard, and
perform well.
3. What are the four performance dimensions of a family business as it faces
succession? Where would you place your own family business (or a family
business you know) within this model?
I. Warm hearts and deep pockets.
4. What are critical developmental experiences for successors? What are important
considerations in the appointment of a successor to the CEO?
Section 2 Chapter and Lecture Notes 35
Working for a salary or performing family chores, which promote the development of
a work ethic, are the most influential counterbalance to any experiences with wealth
and the advantages of wealth. But besides a work ethic, young next-generation
The multiyear succession process of next-generation members has included many
challenging assignments, particularly ones where the outcomes were measured in
profit and loss and clearly attributable to the successor. Early in their development,
these were usually outside the family business, where results were more objectively
and exclusively attributable to the performance of the successor, unbiased by family
influences. After joining the family enterprise, these assignments included profit
center and general management responsibilities that ultimately replicated the often-
conflicting demands on chief executives ultimately responsible for the creation of
shareholder value. The discipline created by this accountability determined readiness
and capability, not bloodline.
The process of deciding whether the potential successor was right for the job, for the
company, and for its strategic needs is a multiyear assessment process. It includes
assessments by outside professionals, such as psychologists, who coach the successor
through a 360-degree assessment. Successor candidates who have experienced these
processes and have been accountable for profit and loss, know themselves and their
strengths and weaknesses better. This degree of self-awareness is often hard for next-
36 Section 2 Chapter and Lecture Notes
success.
5. If succession is going to take place in the context of a sibling team or a cousin
consortium stage firm, what additional considerations are relevant?
Most cases of sibling and cousin teams in family businesses represent not a team as
CEO (like the office of the president concept or a CEO and COO split between two
siblings) but rather a team as top management. In other words, several members of
Relevant Case Resources
The Ferré Media Group case highlights the multiyear successor development and
successor selection process. This case is very brief and may be assigned to be handed in