First published in Private Banker International – June 2015

When things are going well in a family business there will be a balance of interests among the owners, the wider family and those who run the business.  Succession planning tends to make everyone feel off balance and there is an understandable desire to regain equilibrium as easily as possible.

Take the Murdochs for example. For decades, everyone accepted Rupert being in charge of an empire wearing different hats as major investor, business chief and family leader.  The recently revealed succession plan in 21st Century Fox is more of the same, with James being appointed CEO.

He is not quite stepping into his father’s shoes, and will be ‘first among equals’ in a sibling partnership of sorts. His father remains executive co-chairman with brother Lachlan. So in place of one Murdoch there are now 3, for the moment.

This decision followed a period of testing different family candidates, Prudence from Rupert’s first marriage then Elizabeth, Lachlan and James from his second.  That is wise, as entrepreneurial talent is not genetically inherited.

One wonders if outside candidates were considered or was it always going to be a family member in control?  Families differ about this. Some cannot entrust their family fortune to an outsider, while others find it easier to trust them and the family are happy to govern their enterprise rather than manage it.

There is no right answer and families need to be honest when making choices.  Favouring family is understandable but if it means a less able person in charge don’t complain later about the dividends or share price.  And always be watchful for the personal consequences of putting family in roles that they are not up to.

However, it is the seniors who matter more in succession than the next generation. Families should consider helping them how to cope with the next stage of their life because there will not be any change until they let go. Rupert unsurprisingly hasn’t quite let go and might never until the decision is taken for him, but James is probably used to this level of parental scrutiny.

But who will James be accountable to after his father is no longer here? He has 5 siblings and half-siblings and one wonders if they are going to be passive and accept being led, even parented, by their brother.

What happens with ownership is vital in succession.  One hopes that ownership governance among the Murdoch clan is as well organized as everything else in their empire, because if not…..

There are many things that enterprising families can learn from this unfolding succession.

  1. Make sure the family want to continue. Don’t assume that the next generation want to preserve their ancestors’ legacy. If they want something else, it is better to face up to this rather bind them into a life of relatively affluent misery that will be bad for the family and the business.
  2. Prepare both generations for the handover. The seniors need as much help with this as the next generation.
  3. Do the planning when both generations are able to work together and help each other.
  4. Be honest when making tough choices such as whether to appoint family or outsiders.

We will find out in due course if every stakeholder feels that this appointment is an acceptable balance of interests.  We can wonder which role mattered most to this 84 year old when it came to making decisions; father, owner or business leader?

Whatever happened you can easily imagine him saying, ‘succession ain’t for cissies.’

 

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