Understanding the influence of culture on succession planning in South African Muslim-owned family businesses

Abstract

The significance of the family firm in the South African economic environment is growing each year. This increasing relevance is owing to growth experienced by family businesses in South Africa. Family businesses are found to provide jobs to a large unskilled population in South Africa, and in turn contribute to the stability and growth in the communities in which they operate. However, family firms experience a 70% failure rate in their second generation of operation and an 88% failure rate in their third (Downes, 2011). It is found that one of the major issues in the failure rates of subsequent generations of family businesses is due to the inability of family businesses to manage the dynamics that influence the succession planning process. The aim of this study is to provide insight into the family business’s characteristics, dynamics and practices, primarily those characteristics that govern cross-generational ownership. According to Adendorff and Boshoff (2011), Gupta and Levenburg (2010), Papalexandris and Panayotopoulou (2004) and Taruwinga (2011), the organisational culture is amongst the most important dynamics that influence succession planning. This study therefore focuses on understanding the influence of culture on the succession planning process of family businesses. Eight South African Muslim-owned family businesses have been selected as the sample for the current study and therefore provide a unique insight into the influence of culture on succession planning in family businesses of religious commonality. A Rapid Ethnographic research methodology was adopted to provide insight into the cultural elements of the businesses. Cultural elements were found to influence the planning for the handover, the selection process of the successor, the training and development of the successor, the handover process and the management stage of the businesses. The study found that certain cultural aspects were influenced by religious practices and sentiments stemming from the Islamic belief system. These cultural aspects were found to be the most influential cultural elements in the succession planning process of South African Muslim-owned family businesses. This study therefore implicitly provides insight into the strong influence that religion has on organisational culture and ultimately on succession planning of family businesses.