Globally, we see successful examples of both models. Bechtel Corporation in the United States and Victorinox in Switzerland have family members as CEOs, while Walmart and L’Oreal retain family control but have non-family members as CEOs.
In Asia, Tata Trusts set up by the family still control Tata Group in India, but the current chairman and CEO is not a family member. Meanwhile, the Ayala family in the Philippines continues to control and manage the eponymous group, with Jaime Augusto Zobel de Ayala from the seventh generation as chairman, and until August 2022, his younger brother Fernando Zobel de Ayala as president and CEO. When Fernando resigned for health reasons, Ayala appointed Cezar P Consing, a long-time executive and a non-family member, to replace him, rather than accelerating the rise of the next-generation family members.
SUCCESSION RARELY GOES PERFECTLY
Succession planning is crucial for all companies but is especially critical – and often neglected – in family businesses. It requires careful consideration of unexpected events, as well as the availability, suitability and readiness of family members to assume senior leadership roles.
Even the best-laid succession plans can unravel. Whether transitioning to professional management or continuing with family management, things do not always go as planned.
A highly successful professional executive may not succeed in a family business due to differences in governance and management style.
In 2011, Tata Group broke away from tradition and appointed non-family member Cyrus Mistry as deputy chairman of Tata Sons after Ratan Tata endorsed him as his successor. Mistry assumed the chairmanship a year later, but differences soon cropped up and he was ousted in 2016 under very bitter circumstances and Ratan Tata returned as interim chairman. In 2017, Natarajan Chandrasekaran became the third non-Tata family member to be chairman of Tata Sons.
A lack of proper succession planning can also have catastrophic consequences. In South Korea, Hanjin Shipping – named Korea’s Best Company in 2016 – went bankrupt in 2017 after the death of the second-generation heir left the chairmanship to his unprepared spouse.
