Hope for the Best, Prepare for the Worst – The Difficulties of Succession

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Succession is an issue that is notoriously hard for families to resolve because there are so many unpredictable factors that affect whether the next generation member will be successful. Even a family that has meticulously planned out the succession process cannot foresee whether the second generation will be a fit leader while there have been a number of pleasant surprises where a relatively unprepared member has exceeded expectations.

The Royal Example

We see many examples of such unpredictability in royal successions. In 1936, Edward VIII the Prince of Wales was crowned the King of England after his father passed away. Even from his teen years, he was meticulously groomed to take the role of future king. Upon taking the throne, however, he made clear his distaste of royal protocol and caused political concern by his apparent disregard for established constitutional conventions. Only months into his reign as king, he shocked the nation when he proposed to an American named Wallis Simpson, a woman in the midst of a second divorce. Faced with intense political and internal pressure, he abdicated his throne, becoming one of the shortest-reigning monarchs in British history. He was hastily succeeded by his younger brother Albert, who took the name George VI in his reign. The stammering young monarch’s struggles were popularized in the film The King’s Speech, and was even rumored to be suffering from kleptomania, forcing Scotland Yard to get involved a number of times. King George managed as best as he could until his daughter Elisabeth took the thrown to this day, closing out a tumultuous time for the royal family.

The succession story played out a bit differently across the Atlantic in the USA, with the iconic Kennedy family. The eldest son Joseph, who the family groomed for greatness and ultimately the president of the United States, prematurely died during the war. After recovering from the shock, Joe Kennedy Sr. then turned his attention to his second son, Jack (later known as John), for a run for the presidency. John F. Kennedy went on to be known as one of the most fondly remembered Presidents in U.S. history, which begs the question of how the better prepared Joseph would have fared in his attempt at the job.

Succession in Business

In recent years, the massive Indian family business Tata Group faced a similar challenge. It was no secret that the Chairman J.R.D. Tata planned for his brother-in-law Colonel Sawhney to succeed him, as Tata had no children of his own. But Colonel Sawhney suddenly passed away, leaving behind a vacuum as the successor of the largest conglomerate in India. After some intense soul-searching, J.R.D. Tata identified his nephew Ratan Tata as his successor. When Ratan took over, he surprised all his detractors by taking the Tata Group to new heights. Who could have foreseen such an outcome from the offset?

There are times when the best laid out plans go awry in the world of family business. Which is why it may be good to always have a fallback plan, especially in succession. In this aspect, family businesses may have something to learn from professionally managed companies.

An example of this was seen in Kelkar Group, one of the largest family-run companies in India. When the third generation member Kedar Vaze came into the perfume manufacturing group in 1996, he took the role of CTO and COO, an unusual move for Indian successors who often automatically take CEO. Kedar realized that at the time, he was not the right person to lead the company and deferred himself to a non-family CEO. Although he had every right and power to take the top role, his priorities were first and foremost the performance of the company and the interests of the shareholders, allowing him to make such a radical decision. Kedar ultimately took on the role of Group CEO in 2014 after many years learning and growing in his previous roles.

Simply put, the success of the next generation is never guaranteed. For business families, the best that they can do is hope for the best and prepare for the worst.