An examination of succession planning approaches in family owned businesses : a case study of two businesses in East London, South Africa

Family businesses constitute a large number of businesses worldwide contributing significantly to the global economy. Succession planning is a key issue influencing the sustainability of these family businesses. According to research, approximately 30% of businesses fail due to matters related to succession planning (Grote, 2003). Further research indicated that approximately 50% of family businesses do not have adequate succession plans in place. Hence, family businesses are exposed to significant risk in sustainability due to insufficient succession planning. An effective approach to succession planning in a family business increases the chance of success of a family business in both the short and long term. The purpose of this study was to develop a better understanding of approaches to succession planning in two family businesses in East London, South Africa. This purpose was to improve the commercial viability of family businesses and improve the body of knowledge from an academic perspective. To this end, a detailed literature study was conducted on family businesses and succession planning. A qualitative case study research paradigm was implemented to ascertain the nature of the approaches adopted by the two businesses. An interview process was conducted with the incumbent founders (fathers) and successors (sons) of the family business. This process suggested that each business requires a unique approach to succession plan which may include aspects of formal and informal processes. It is necessary to understand the nature of the family business, its interrelated relationships and context to adequately determine the success of a succession approach. It is for this reason that families aspiring long term sustainability should invest in effective succession planning approaches that integrate the nuances of the individual family busines