Leadership

A Family Affair

With more than 60% of publicly listed companies in Southeast Asia being family run, succession can be fraught with tension.

Successful Succession in Family-Run Businesses

The firm was in its third generation of family leaders. At a recent board meeting, the patriarch—a 73-year-old CEO—turned to his daughter and asked, half-jokingly, “So, are you ready to take over?”

Her brothers—one older, one younger—looked shocked. The eldest balked, asking why he hadn’t been chosen. The other board members looked down at their hands. Was the CEO really deciding now who would take the reins?

So much for a family affair. While all companies must grapple with finding the best leader to lead the firm in the next era, the tensions that come with doing so in a family-run practice are much higher. “Succession planning in family businesses is uniquely complex due to a mix of cultural, emotional, and business dynamics,” says Daniel Soh, sector leader for Asian conglomerates at Korn Ferry. “It’s a far more personal and nuanced process.”

In many Asian countries, there’s the added pressure of blending Eastern and Western values. This can create strain between traditional founders, who value loyalty, caution, and control, and next-generation leaders, who may be more focused on modernization and globalization. What’s more, hierarchy and filial piety may discourage family members from dissenting, which can result in personal or emotional logic, rather than strategy or data, driving decisions.

To navigate these complexities, Korn Ferry’s Singapore office recently gathered CEOs of family-run businesses to share insights into how to succeed at succession in family conglomerates. Here’s what we learned.

Recognize Leadership Roles Aren’t a Birthright.

Conventional wisdom assumes that nepotism reigns supreme. But experts say it’s important for family heirs to start in the lower ranks, such as business development or associate roles, because it allows them to understand the business, develop their own perspectives on operations, and find niche interests within the firm. “You have to earn your stripes,” said Vishal Vijay, CEO of Agrocorp International. “I don’t think this is a birthright, because I know I have to deliver.” In some cases, it’s best for heirs not to report to family members at first so they can have the opportunity to learn from professional managers.

Appreciate Generational Wisdom

One of the most important aspects of any succession is ensuring that a thorough knowledge transfer occurs. But because of the family dynamic, predecessors may not share the full extent of their knowledge; they may believe the next generation won’t listen. Conversely, the next generation may not pay attention as closely when it’s Mom who’s doling out advice as opposed to, say, a boss who isn’t in the family.

Timing is also critical. At 65, with a good decade left in the business, Vijay’s father asked him to be CEO so that he could mentor him. “Succession is more of a progression,” said Graham Poston, regional practice leader in the CEO and Board Practice in APAC. “If you start too late, there isn’t enough time to develop people. But if you start too early, it’s never-ending.”

Beware of Sibling Rivalry

There’s a reason shows like Succession are big hits: Sibling rivalries, particularly when millions are at stake, aren’t something to take lightly. There can be misalignment about the direction of the business, jealousy over who will lead, and sensitive dynamics involving shareholders. “Sibling rivalry in succession planning is one of the most sensitive and potentially explosive challenges in a family business,” Soh said. “It often emerges due to birth-order tensions, perceived favoritism from founders, unequal roles, or a lack of clarity or fairness in succession criteria.”

Experts say the best way to handle these rivalries is to acknowledge the innate competition up front and try to find pivotal roles, through merit-based leadership criteria, that play to siblings’ strengths. It’s also critical to hold structured family meetings to talk about the future, under the guidance of a neutral, non-family-member facilitator.

Don’t Shut Out External Options

In some cases, family members may not be ready or suitable to lead the company—or would rather pursue a different professional path. Instead of trying to jam an heir into the top seat, boards can act as a bridge between the family and external candidates by finding people who have business discipline and can lead successfully without disrupting family unity. “Succession planning isn’t about one person,” Poston said. “It’s a team sport.”