Let me first explain what were the core research questions, the methodology and finally the findings and insights from this research. There were two-fold objectives; on the one hand we wanted to study and compare the successor development practices within the local family businesses with the rest of the world and with the literature research. On the other hand we wanted to understand the succession phase practices and activities, especially in the context of kinship or Baradari culture.
The literature review also provided some insights into successor development practices and succession phases in the western world. We discovered three-stages for successor development Stavrou’s (1998) pre-entry, entry and succession phase. Since this research has several new areas, such as succession processes in kinship culture and successor development practices within the local cultural and social context, therefore grounding theory approach through case study was adopted. Moreover, it was difficult to separate the phenomena of study from the context the best was found to be in-depth case research.Several case studies were conducted and both kinship-based businesses and non-kinship family businesses were included.
Operational Definitions
Family Businesses: Businesses owned, control and managed by families.
Kinship Culture: A collectivist (kinship) culture is one where there is a ‘preference for a tightly knit social framework (norms) in which individuals can expect their relatives, clan, or other in-groups to look after them in exchange for unquestioning loyalty’ (Hofstede, 1984).
Kinship Business Families: In this kinship system, matrilineal and patrilineal blood relations and marriages are included as modes of relevant affiliation. The benefits of this kinship include sources of capital, pooled resources lower employee turnover, cohesion, and social support (Peredo, 2003). Kinship based familiy businesses are those kinships where memebrs of kinship predominante the family (owned and managed) businesses. It is expected from the young / next generation of successors to join family business or estabilish own businesses once they reached adulthood.
Successful succession: Before presenting the research findings it would it would be important to discuss how successful succession has been defined and measured. The most common definitions of successful succession are:
(a) The subsequent positive performance of the businesses and ultimate viability of the businesses. (Miller, 2004); (b) Satisfaction of the stakeholders with the succession process (Cabrea-Suarez et al.,2001; dyer, 1986, handler, 1990; Morrise et al.,1997; Sharma et al., 2001); (c) Friedman (1984, 1986) specifies the company’s reputation, turnover and the succession process as being relevant (Goldberg, 1996); (d) They experience profitable business as well as family harmony. In other words, they enjoy high cumulative stocks of both financial and emotional capital that may help sustain the family and business through turbulent economic and emotional times (Sharma, 2004). For this research successful succession was defined as the Harmony within the family during and after the succession and the continuity of the businesses after the succession’. Case studies were conducted, at Lahore, Karachi, Faisalabad, and Gujarat,
Findings: Findings from case researches indicate that successor development practices within family businesses were not very different from the literature research findings. However, succession phase activities; transferring equity and leadership roles were delayed until the final succession or until the division of the business. Role adjustments of both successor and father during the succession phase were not often adopted. Succession planning and documented procedures for developing and grooming successor were less observed in all four cases.
It was also observed that there was strong emphasis on grooming the successor during the pre-entry, entry, and succession phases. There was a sound exposure of family business environment during childhood via summer internships, CEO dinners, family discussions etc. Also there was strong emphasis on good schooling and university education. During the succession phase, the division of business assets among family members was observed.
Regarding the kinship culture it was found that most kinship based family businesses strongly favour following the biradari values and norms. Business founders help their brothers and family members in setting up a new business or in expanding a business. Regardless of the experience, educational background and even business inclinations, family members were included in the business. There was strong preference towards respecting the elders or bhai. In these cases, the family elder decided the division of the family businesses as well as all the future investment in the businesses. The biradari was highly respected and the family head decided to divide the business among son(s) and brother(s) to keep conflicts at bay.
To enhance family bonding, the practice of inter-family marriages was encouraged. It was also observed that in kinship-based family businesses when a partner expires or sells his shares, the next of the kin, or relationship-wise closer members get the first preference in the purchase the shares, at a mutually agreed price. In inheritance cases, daughters or other women in the family are not transferred any shares but are paid off their entitlement value, either in cash or kind (equivalent valued property) by male shareholders purchasing the shares. This is done in order to keep interference of women and brothers-in-law or sons-in-law away from the day-to-day running of the business.
It was further observed that in kinship-based family businesses, the family provides opportunity to every new generation, since division of business or share in the businesses is important to keep the family united. Kinship based businesses provide an excellent opportunity for grooming and developing future business leaders. Young successors get good exposure to different role models in Biradari and family. They also get early experience of managing the business independently. Biradari and kinship based family businesses keep a well-developed and profitable business which provides learning ground for future successors. Such family businesses have access to financial and business capital which essentially help in cyclic business performance. Due to the adherence of kinship norms, a high level of trust or bharosa exists between the biradari members which create further solidarity among members.
According to one of the CEO, the kinship culture helped the family during the succession phase. During succession one is not worried if you give or take a few millions rupees. He further said that we still live in the same housing complex and enjoy family dinners and getherings. According to another CEO, kinship culture provides a trusted network wihich helps in making decision about succession without any help from out side. Another family business CEO said that due an atmosphere of high level trust. It is far easier to settle different matters. This trust also helped them during the issue of succssion.. The prilimenry conclusions are that kinship culture based family businesses promote harmony among family members after/during the succession from one generation to the next. Moreover, such family businesses continue to exist (ultimate viability of the businesses) as business after the succession from one generation to the next.