Understanding the factors that influence the management succession process in black familyowned businesses

Abstract

A significant number of businesses operating in South Africa can be categorised as familyowned businesses and contribute substantially to employment creation, poverty eradication and wealth creation. Nonetheless, their longevity through generations remains a major cause for concern for all stakeholders. South African economy is characterised by a history of apartheid, where prior to 1994, the black majority only owned less than 5 percent of the businesses active in the economy. Since then, black majority participation in the economy has increased driven by the Black Economic Empowerment (BEE) legislation. Therefore, the aim of this study is to understand the influence of the incumbent, the successor, the family and the business, on management succession within black family-owned businesses in South Africa. The study followed an exploratory qualitative approach, using semi-structured interviews. Thirteen black family-owned business incumbents were interviewed with a view to answer the research questions. From the literature, 17 of the most widespread factors that influence management succession in family businesses were derived and formed the basis of the constructs or themes adopted during data analysis. All the interviews were recorded and then transcribed into text. A directed content analysis using ATLAS-ti was used to analyse the data, while constant comparative analysis using a meta-matrix was used to establish common themes to specific groups of respondents. The key findings showed that incumbent of black family-owned business regard the successor and incumbent-related factors as the predominant drivers of management succession. Commitment and interest of the successor towards the business and the quality of the relationship between the incumbent and the successor have a strong influence on decisions and criteria design across all the stages of the management succession process. From the family perspective, natural succession based on birth order and gender was considered to be the key determinant of the succession pool composition. Support of the successor by the family members through acceptance of the choice and not passing judgement when mistakes are made emerged as the critical family dimension that will influence the overall management succession process. In terms of the business itself, the size and nature of the business and change in market conditions were established to have a major influence on the succession process.