Family CEO mentoring: the effects on the successor’s leadership readiness and performance

Abstract

Whether it is generations that want to retain their wealth or countries that want to ensure employability and prosperity for the majority, family-owned businesses (FOBs) are crucial. Most people worldwide work for FOBs, thus ensuring succession is not only the family’s concern but also the government’s. One of the most important elements the FOBs should get right is preparing the next leader to ensure successful succession. Leadership readiness is therefore crucial, and one fundamental way to achieve this is when the current chief executive officer (CEO), the predecessor, mentors the new CEO, the successor, towards leadership readiness, thereby facilitating a successful succession. A qualitative, narrative inquiry strategy approach was used to understand how CEO mentoring occurs within the transition period in an FOB. What exact practices and interactions happened in these sessions? Firstly, the study aimed to understand how these CEOs interacted to identify practices that other businesses seeking to transition can utilise. Secondly, it aimed to understand which knowledge, skills, or support most successors deemed valuable. Lastly, it aimed to understand how mentoring between the predecessor and successor fostered the successor's readiness to lead. These findings were obtained through 13 semi-structured interviews, in which both the predecessor and successor were asked in-depth questions. These individuals were interviewed separately, except for one FOB, who was interviewed with another individual and their answers to each question were also provided via email. This study found that the ideal approach to communication between the predecessor and successor is through daily interactions and long, uninterrupted conversations at the beginning of the transition. Another effective approach was for the predecessor to place the successor in challenging situations, effectively “throwing them into the deep end,” to encourage learning through experience. People skills, emotional intelligence (EQ), and entrepreneurial skills emerged as the most prevalent skills that should be passed down from one generation to the next. It was also confirmed that the primary reason CEO mentorship succeeds is the friendship between the two CEOs. Another key finding was that succession planning could be helpful, but what is more important is the manner in which the succession takes place. The succession should align with the values of the FOB. It is also clear from the study that CEO mentoring leads to the successor’s leadership readiness, although mentorship is rarely formal and defined as such when it occurs. The most prevalent recommendations this study aims to make include: • Expose the potential successors to entrepreneurial activity as early as possible, even while they are still in school. • Expose the potential successors to the entire FOB. • The predecessor should ensure that numerous formal and informal interactions occur; these informal interactions should include long conversations where the predecessor explains the entire business and its history. • The predecessor should allow the successor to decide if they want to be the successor, as this internal decision is critical. The predecessor should also be open if the successor is someone they least expected. • The proximity between the two CEOs is essential, where open and honest conversations are unavoidable. Therefore, the successor should undergo training in communication and conflict management, which includes developing people skills. • First, the successor should learn through observation. Then, the predecessor should throw the successor into the deep end to learn by doing, while allowing the successor to do it their way without intervening. • Train the successor on contracting and financial management. • Publicly endorse the successor and remain in the shadows to provide support when needed.