When planning the ground rules for the succession from generation to generation, the relationship between incumbent and successor is obviously of the utmost importance. High levels of trust allow for a bidirectional exchange between them, as they learn alongside each other. Contrarily, if the incumbent and the successor are not on good terms, then there may be restrictions on howmuch they communicate, and howmuch knowledge is passed on. Much depends on those family relationships, how they interact and how they plan the process. Establishing knowledge management systems to integrate the knowledge of new employees with retiring and retired ones can affect the transfer of knowledge across generations, between the owner, the management team and the workforce. More participative leadership styles encourage more open knowledge sharing, especially in small family businesses. For example, having successors attend family meetings can help translate tacit into explicit knowledge, and give access to private knowledge of other family members and specific information about business operations that are fundamental for continuity. Successors need to manage structural, social intellectual and human capital, to maintain or build a competitive advantage. This can be dependent upon social interactions in the family business, motivation and commitment, as well as education and experiences inside and outside the organisation. When plans are put in place, grooming the successor is the most crucial phase of the succession process, where knowledge is shared, transferred, acquired and created. It is important that family members lined up as successors value commitment and psychological ownership towards the business, appreciate family relationships, and engage in training courses and gaining experience outside the business or from non-family members. Successors will come into the business at different stages. You have those who have been involved since they were children, who have seen the business grow, and – by and large – they would know what to expect. In bigger businesses, when the next generation comes in, they might have worked in one part of the business – the part they like to work in – but they won’t necessarily have worked with all the senior executives, and these are people who, by default, will know a lot more about the business as a whole. This could make the successor less legitimate in some eyes to take over, and it can be difficult to build those relationships between successors and senior executives. Leveraging knowledge from external sources – such as counselling, publications or training – makes family firms thrive over time, and is especially critical in the final phase of succession, when the baton is passed. This knowledge supports small family firms especially in sustaining performance through innovation of products, processes and organisation. PLAN AHEAD There are opportunities as well as hurdles for businesses when it comes to the transfer of knowledge. Businesses should reflect on their practices, consider their stage in the succession process, and take into account the stakeholders involved. Understanding how knowledge flows, who has it, and how it might be made explicit can all help through the succession process. Businesses need to have an action plan, one that works for them. There will be boxes to tick, but not the same boxes for every business. If they tick the right boxes, then they can ensure that knowledge is passed on and success can be continued. Dr Bingbing Ge is a Teaching Fellow in the Department of Entrepreneurship and Strategy. The paper Knowledge Management in Family Business Succession: Current trends and future directions, by Dr Bingbing Ge and Dr Giovanna Campopiano, of Lancaster University Management School, is published in the Journal of Knowledge Management. b.ge1@lancaster.ac.uk FIFTY FOUR DEGREES | 41 When a new leader takes over any business, there are lots of things they need to know to make sure they – and the company – succeed. In a family firm, the importance of a successful knowledge transfer during the succession takes on even greater importance. Knowledge brings superior performance and competitive advantage, is the foundation of innovation and entrepreneurialism, and the backbone of many businesses. It is considered the key asset, the vital resource, for any family business, andmost of the knowledge that distinguishes a firm fromother companies will be in the hands (or, more specifically, the head) of its current leader. When new people come in, it is really important for them to understand who is there, what is there; they need that prior exposure to the business, and then they can talk about how to develop. New leaders cannot just be dropped in without having the opportunity to gain this knowledge; they need to knowmore than can be written down on a piece of paper, they require the tacit as well as the explicit knowledge of what makes the company tick and succeed. Part of the knowledge will be explicit – the products, the contents of the company manual – but it is harder to transfer that tacit knowledge between the incumbent and the successor. Whereas explicit knowledge can be easily articulated and codified, tacit knowledge needs careful management and is hard to pass on, or even be aware of. It could be relational, it could be networks, there are all sorts of experience and tacit knowledge that need to be shared. It differs between all companies – they each have their own characteristics and strong points that drive their success. It is a more complicated transfer for family businesses, because we are not talking purely about business relationships. Family firms also have a unique intertwining of family and business systems. They need general business knowledge, such as that about the industry, business/trade-related education and business processes, but also knowledge of family values, goals and family history, of connections to important networks. Interactions between the incumbent and the successor, and among stakeholders within and outside the family, are crucial for the knowledge transfer process. Business leaders need to pass the knowledge to the next generation through mentorship, and social interactions between all the parties can affect the way individuals learn about family business continuity, thanks to the sharing of skills, norms and values. THE THREE STAGES OF SUCCESSION Succession does not always start when businesses might think. Through informal participation in the family sphere, potential successors become involved in the family business long before they formally join or are identified as the next leader. There is no universal best practice. Businesses need to think constructively about their culture and the best way to transfer this knowledge from one generation to the next. Through our research, we have identified challenges in the succession process in there stages: setting the rules for transferring the knowledge; grooming the successor; and, finally, passing the baton. 40 | There is no universal best practice. Businesses need to think constructively about their culture and the best way to transfer knowledge from one generation to the next. ‘‘ ’’
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