Succession Planning in Family-Owned Businesses - Case Study Example

Case Study Analysis- Right Boss Student’s name Code & Course Professor’s name University City Date Case study Analysis- Right Boss Although Betty Kesmer was always a smart individual, the case of Fancy Footwear presents a unique set of complex problems that cannot be addressed simply by having a strong plan for leadership backed by theory as Betty had. Betty went to work at Fancy Footwear, her uncle’s company, after school, and was singled out as one of the most impressive employees. So impressed was the company that it agreed to pay for her MBAs, which she completed, performing excellently. She always related many of the things she had been taught to her work at Fancy Footwear, and when she came back and received a leadership position, she was ready, or so she thought. She thought she understood the pitfalls of managing a company, and actively sought to avoid them. However, in doing so, she ended up creating a whole new set of problems for herself and the company. Betty Kesmer’s case highlights a variety of management problems. The first issue that comes to mind is that of succession in family owned businesses. Despite the fact that she had always been brilliant in school, there is no getting away from the fact that Betty’s rise to the top can be attributed to her relationship with the owner of the company, her uncle. The fact that her uncle took her through her MBAs might be a contributing factor to this conclusion. Secondly, Betty and the Fancy Footwear case highlights the issue of organizational culture and norms, and how changing them affects the organization. An important dynamic to consider is the effect of including all the stakeholders in the change decision-making and design process. Betty’s failures at Fancy Footwear also highlight the issue of management styles and how they affect perception and performance in the organization. This paper offers an in depth analysis of the problem and provides possible intervention plans for getting the company back on the right track. Problem analysis Succession planning in family owned businesses: Mentorship and transition Succession planning is an important aspect of business that must not be ignored especially in small and medium family owned businesses. Family owned organizations have been found to have gaps in governance, succession planning and board operations (Deloitte, 2013). According to the family business institute, as family businesses transition from one generation to the next, the rates of survival reduce. Only 30 percent survive transitions from one generation to the next, with a further 12 percent surviving the third generation, and only 3 percent surviving the fourth generation (Family Business Institute, 2015). With this in mind, it is important to consider several aspects of succession planning in family owned businesses that are important to this business case. In situations where it is obvious that one family member will be taking over from the other as was in the case of Betty, it is important to have as much mentorship as possible. Mentors imparts knowledge they have garnered over time while running the business during their generation, and in doing so, ensures that part of their legacy continues in the business. Mentorship has been associated with improved job performance, satisfaction rates, higher salary, upward mobility and higher salary (Kumar & Blake-Beard, 2012). While there was considerable preparation by Betty and her uncle to have her take over a management position in the company, she did not have a formal or informal mentorship with regards to taking a management position. While it is not possible in many instances to have the transition process happen slowly, allowing the transition process to happen over time has been found to have favorable results. It gives the members of the first generation adequate time to step down from their role, while at the same time having company employees getting used to the leadership role (Giamarco, 2012). Transition allows for preparation of every individual, but more importantly, allows time for knowledge transfer to the person taking over. Knowledge transfer is important as it helps fill the gaps in knowledge that cannot be filled by formal education. While formal training is important, it is the understanding of firm specific knowledge that will determine the success rates of the second generation. In the case of Betty and Fancy Footwear, she was given the gift of formal education, what with her always being smart in class. She was a good employee, and the organization paid for her MBAs, but she did not get the chance to have knowledge transferred to her, knowledge that would have been imparted if there had been a structured transition process from her predecessor to her, moderated by her uncle. Organizational change Change initiatives in organizations are time consuming and often costly. However, in most organizations, change is inevitable. In the Fancy Footwear case, change was inevitable, regardless of whether the transition would happen within the family or not, as Max Worthy decided to take adan6tage of the early retirement plan. However, an alarming statistic shows that nearly half or organizational change processes result in failure. This makes the planning of organizational change processes very important (Cabrey & Haughey, 2014). According to research, there are two important characteristics that make organizations effective at change. The organizations should have a culture that embraces change, and must manage employees adequately throughout the change process (Cabrey & Haughey, 2014). The culture of the organization was clearly not prepared for change. When the management relations committee resigned, they stated the fact that they did not want to become supervisors in their last years as they headed towards retirement. When Betty asked employees what was going on, the answer she received was that they liked her, but given the choice they would have loved to go back to how things were. There are several reasons why change management fails, all of which are important to the case of Fancy Footwear. The first point of failure comes from the transformation of leadership. Many leaders are of the idea that their job involves a social influence process, where one individual or group exerts social influence over another group. While there are different leadership theories that are themselves effective in their own right, there is no single best way to approach leadership, especially in change situations. There are two important factors that determine the leadership style appropriate; the characteristics of the team being led, and the prevailing scenario. The traits of the leader are important, but it is important for them to harness the skills and capabilities of other people in order to adapt to the different situations (Song, 2009). Betty’s case had her choosing participative management, which she did not pull off properly. She created groups and channels from which to get feedback and help, but when they did not go as fast as she wanted, she ended up taking them over and pushing them in the direction most appropriate to her. Organizational change also results from a failure to appreciate and incorporate elements of culture into the change process (Song, 2009). Culture has the ability to significantly change the intended outcome of any well thought-out change process. It is important to emphasize the role of organizational culture in the change process. Taking into consideration the culture leaves the management with four options; ignore the culture, manage around it, try to change elements of the culture to fit in with the strategy or change the strategy to fit in with the culture, by perhaps reducing the expectations (Song, 2009). The organizational culture at the company was clearly not ready, facilitative or supportive of any change process. They liked the way the department was run under the previous manager, and chose to resign in the face of change initiatives by the new manager. After being in one place for so long, the last thing that the employees wanted was to learn a new way of doing things. The third common reason for failures in organizational change initiatives is the failure to recognize the significance of people issues in the adaptation process (Song, 2009). Theoretically, many managers know the importance of people management in the success of the organization. However, on the ground, many of the people who lead the change management process. Betty clearly did not take into consideration the people issues of Fancy Footwear in planning her change process. She only sought their feedback when failure was imminent, with the management relations committee resigning at the start of the fourth meeting. Intervention process Uncertainty and communication Change is inevitable in any fast moving organization, and middle level managers like Betty are important to the management process. Organizational change processes result in uncertainty; the ambiguity about the intended results of various actions, especially in situations where situation is unpredictable or where there is little information (Herzig & Jimmieson, 2006). The management of organizational change requires focused leadership and clear communication (Hackett & Liu, 2015). There are four features of communication networks that might be effective in correcting the current situation at Fancy Footwear (Hayes, 2014). Directionality: in many instances, change management happens as a top down process. In the case of Fancy Footwear, it started from the top with Betty, trickling down to the management committee and to the low level employees. This is the typical process in many organizations, with those at the top informing those below them of what is going to change and what is required of them during the change process. However, effective communication during the change management process should involve a steady stream of upward communication. This provides the change managers with the information they need in order to clarify the need for change, and develop a clear change program. The nature of the communication might be affected by roles and positions in the organization. For instance, in the Fancy Footwear case, the fact that the communication was going to people who were veterans in the organization and much older than the new manager Betty might have been a major factor in the communication failures. The development of an inter-role relationship is important in establishing effective communication channels during change management processes. The content of the communication is another important factor. Change managers must pay attention to all manner of information, even the kind that at first does not seem to have any significance. One particular aspects of communication content that is relevant to the Fancy Footwear case is the importance of integrating external information to that which is routinely available to the organizational members. Betty learned a lot about leadership while studying for her MBAs, and always related what she studied with the company. However, when she got into her management position, she did not incorporate internal information with her external knowledge. Any intervention process must involve the collection of internal information and integrating it with external knowledge. The last important aspect of communication during the intervention process is the choice of an appropriate channel of communication. Structure To achieve greater success with the ambitious and potentially effective organizational change plan, Betty must incorporate elements of change management into the structure of the organization. Traditional corporate structures, while effective in their own right, sometimes get in the way of innovation and creativity (Girard, 2014). While the traditional top down structure should not be discarded, it must be complemented with a dual operating system (Kotter, 2014). Kotter, one of the household names in organizational change management, suggests an eight step process for leading organizational change (Auguste, 2013). The eight step process is as follows; 1. Communicate or create a sense of urgency 2. Build a guiding team or coalition 3. Form a strategic vision 4. Enlist the help of volunteers 5. Enable action through the removal of barriers 6. Create short term win scenarios to facilitate momentum 7. Sustain the acceleration and momentum 8. Institute the change into the organizational culture (Kotter, 2007) Conclusion Change management describes all the activities that manage far reaching changes in an organization. The main objective is to create an organizational context that is friendly and facilitates the change process. It is a mandatory building block for the establishment of both short and long term management activities (Reiss, 2012). Reference list Auguste, J., 2013. Applying Kotter’s 8-Step Process for Leading Change to the Digital Transformation of an Orthopedic Surgical Practice Group in Toronto, Canada. International Journal of Medical Informatics, 4(3), pp. 1-4. Cabrey, T. S. & Haughey, A., 2014. Enabling Orgaizational Change Through Strategic Initiatives, Newtown Square, PA : Project Management Institute. Deloitte, 2013. Perspectives on family-owned businesses: Governance and succession planning, Deloitte. Family Business Institute, 2015. Succession Planning. [Online] Available at: http://www.familybusinessinstitute.com/index.php/succession-planning/ Giamarco, J., 2012. The three levels of family business succession planning. Journal of Financial Service Professionals, 56(2), pp. 59- 69. Girard, K., 2014. John Kotter’s Plan to Accelerate Your Business. [Online] Available at: http://hbswk.hbs.edu/item/john-kotters-plan-to-accelerate-your-business [Accessed 29 September 2015]. Hackett, A. & Liu, D., 2015. How Do You Effectively Engage Employees During Times of Change and Uncertainty?, Cornell University. Hayes, J., 2014. The Theory and Practice of Change Management. 4 ed. New York: Palgrave Macmillan. Herzig, S. E. & Jimmieson, N. L., 2006. Middle managers’ uncertainty management during organizational change. Leadership & Organization Development Journal, 27(6), pp. 628-645. Kotter, J. P., 2007. Leading Change: Why Transformation Efforts Fail. Harvard Business Review, pp. 1-10. Kotter, J. P., 2014. Accelerate: Building Strategic Agility for a Faster-Moving World. 1 ed. Harvard Business Review Press. Kumar, P. & Blake-Beard, S., 2012. What Good Is Bad Mentorship? Protégé's Perception of Negative Mentoring Experiences. Indian Journal of Industrial Relations, 48(1), pp. 79-93. Reiss, M., 2012. Change Management: A Balanced and Blended Approach. 1 ed. Norderstedt: Books on Demand. Song, X., 2009. Why Do Change Management Strategies Fail? Illustrations with case studies. Journal of Cambridge Studies , 4(1), pp. 6-15. Read More