What is business succession anyway?

 

The most "corporate" definition of business succession appears to be the following:

A deliberate and systematic effort by an organization to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future, and encourage individual advancement (Rothwell, 2001, p. 6).

It stresses management turnover but ignores the ownership transfer side of business succession.

There is an ownership-focused definition out there, though:

The transfer of a business that results from the owner’s wish to retire or to leave the business for some other reason. The succession can involve a transfer to members of the owner’s family, employees, or external buyers. Successful succession results in a continuation of the business, at least in the short term (Martin et al., 2002, p. 6; SBS, 2004, p. 7).

This one, alternatively, omits management turnover and stresses the ownership transfer problem of business succession.

In my second entry of this blog I modified the line pointing out that business succession “… in broad terms, it is a process through which companies plan for the future transfer of ownership and/or top management …” (Ip and Jacobs, 2006) into yet another definition that attempts to reconcile the first two:

Business succession is a transfer of ownership and/or top management in companies (Ip and Jacobs, 2006).

To present it graphically I constructed the grid shown in Figure 1:

Figure 1. Generic types of business succession.

Important - The term “owner” does not necessarily refer to a founder of a company. It merely indicates the one who owns a company (i.e. holds a major stake of shares) at the time of succession. My research design will, most probably, require partitioning a premier and subsequent business successions. In that case replacing the “owner” with the “founder” should explicitly imply that a company’s first succession is meant.

References

Ip, B., Jacobs, G. (2006), “Business succession planning: a review of the evidence”, Journal of Small Business and Enterprise Development, Vol. 13 No. 3, 2006, pp. 326-350.

Martin, C., Martin, L. and Mabbett, A. (2002), SME Ownership Succession - Business Support and Policy Implications, Small Business Service, London.

Rothwell, W. (2001), Effective Succession Planning: Ensuring Leadership Continuity and Building Talent from Within, 2nd ed., AMACOM, New York, NY.