Succession process among africa owned business kenya

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Succession process among africa owned business kenya

  1. 1. is International et al.: Business Journal Tatoglu Small Succession Planning in Turkey Copyright © 2008 SAGE Publications b (Los Angeles, London, New Delhi and Singapore) j http://isb.sagepub.com [DOI:10.1177/0266242607086572] Vol 26(2): 155–180Succession Planning in Family-ownedBusinessesEvidence from TurkeyE K R E M TATO G L UBahcesehir University,TurkeyVEYSEL KULAAfyon Kocatepe University,TurkeyK E I T H W. G L A I S T E RUniversity of Sheffield, UKA key issue for many family-owned businesses (FOBs) is intergenerationalmanagement succession. This article investigates the dynamics of the successionprocess for FOBs that have already taken the succession decision and have selectedtheir successors. The primary goal of the study is to delineate the factors behindthe succession process by investigating selection, training and entry mode ofsuccessors as well as the involvement of family members and stakeholders in thesuccession process. Data from the predecessors of 408 FOBs in Turkey reveals anumber of insightful findings regarding major characteristics of the FOB successionprocess including the views of predecessors on the succession process, successorselection criteria and the post-succession period. This is the first systematic studyto deal with the succession process in Turkish FOBs, which previously has beeninformed only by anecdotal evidence.KEYWORDS: family-owned business; predecessor; succession planning;successor; TurkeyIntroductionThe family-owned business (FOB) literature is dominated by discussions of problemsand pitfalls, such as access to capital and managerial talent, and effective governance.One problem that forms the core of the family business literature is intergenerationalmanagement succession. Succession planning in the family-owned business is definedas ‘the explicit process by which the management control is transferred from one 155 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  2. 2. International Small Business Journal 26(2)family member to another’ (Sharma et al., 2000: 233). Succession planning appearsto be where most family business failures occur (Handler and Kram, 1988). Successful succession can provide a family-owned business with a competitiveedge over a non-family-owned business by enabling the continued use of accumu-lated idiosyncratic knowledge of family members (Bjuggren and Sund, 2001). Theinside knowledge possessed by family members, coupled with their loyalty and trust,endows them with specific competencies and know-how required to run the busi-ness effectively and helps them to create the resources and capabilities required togenerate a competitive advantage (Ram and Jones, 2002). In professionally managedfirms, boards of directors often make succession decisions by utilizing a professionalrecruitment consultancy service. In such firms, the successor is selected from a poolof candidates on the basis of perceived competency. In contrast, in FOBs there willbe few people in either the business or the family with any experience of when andhow succession should be dealt with, as this issue is a rare event for the family firmoccurring only once for each generation (Fox et al., 1996). Consequently, one of themost pressing problems for the FOB is planning to pass control of the business tothe next generation (Kuratko et al., 1993), with succession a problematic and neg-lected issue in many family businesses (Bachkaniwala et al., 2001). Moreover, as thenumber of potential successors is limited largely to the number of family members,succession in FOBs carries a greater risk of failure. It is generally accepted that only 3 out of 10 firms survive to the second generation,with only 15% persisting to the third generation (Davis and Harveston, 1998; Ketsde Vries, 1993; Ward, 1987). This raises interesting research questions related to thedynamics of successful successions. Evidently it may be difficult for owners torelinquish the prestige and power associated with being the head of the FOB.Nonetheless, owners should be prepared to adopt a proactive approach towardssuccession. This is in order to transfer managerial and technical knowledge, tosustain the confidence of stakeholders in the business and to remove the powerconflicts within the family. In their study on FOBs in Lebanon, Fahed-Sreih and Djoundourian (2006) re-ported that in less than 40% of cases a successor has been chosen. Similarly, in hisstudy on FOBs in the UK, Westhead (2003) found that only 41% of the incumbentowner-managers have a successor in mind. The findings of the study indicated asignificant positive association between the incumbent owner-managers having asuccessor in mind and companies with long-serving CEOs. According to Westhead(2003), this evidence suggests that CEOs in family firms are not universally rigid, norreluctant to contemplate retirement, which infers that CEOs in many family firmsare aware of their personal life cycle dynamics, and to protect the store of personaland family wealth, actively seek ways to ensure smooth successions. Succession planning, as Francis (1993: 49) asserts, is a dynamic process requiringthe current ownership to plan the company’s future and then to implement the re-sulting plan. It is also a complex process involving the interaction of several factorsoperating at the personal, relational and organizational levels. These factors includethe personal and career development of the successor, succession planning andcontrol activities. Drawing on a relatively large dataset of FOBs in Turkey, this article investigates thedynamics of the succession process for FOBs that have already taken the succession156 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  3. 3. Tatoglu et al.: Succession Planning in Turkeydecision and have selected their successors. The dominant non-governmentalbusiness structure in Turkey is the family-owned firm (Gunduz and Tatoglu, 2003).Even the large holding companies are family owned, in which important positionsare occupied by family members. This is confirmed by a recent survey on the owner-ship data of companies traded on the Istanbul Stock Exchange, which reveals thatfamily groups directly or indirectly own more than 75% of all companies andmaintain the majority control (Yurtoglu, 2000). Managers in a traditional Turkish business are perceived essentially as exten-sions of the founder owner and they emphasize an autocratic style of leadership(Marcoulides et al., 1998). The typical organizational structure is noted for its highdegree of centralization. The hierarchy serves the main mechanism of control andcoordination in most Turkish companies, with less emphasis, however, being placedon the various lateral and informal means of coordination (Kozan and Ilter, 1994).Traditional Turkish business firms are governed almost totally by a patriarch, whois virtually free to exercise his intentions concerning succession to key managerialpositions within the firm. The traditional Turkish style of management also influencesthe management succession process in Turkish FOBs. There are seldom formal rulesand procedures documented for the purpose of succession planning. Bearing these characteristics of Turkish FOBs in mind, the key concerns of thisstudy are to examine the major characteristics of the FOB succession process in-cluding the views of predecessors on the succession process, successor selectioncriteria and the post-succession period. The study sheds new light on the succes-sion process in place in Turkish FOBs, drawing on the perceptions of predecessorsfrom a large dataset. This article presents the first systematic study to deal with thesuccession process in Turkish FOBs, which previously has been informed only byanecdotal evidence. The remainder of the article is set out in the following way. The backgroundliterature on successor selection, successor relationships with predecessor, familymembers and other stakeholders is reviewed in the next section. In this section,emphasis will be given to exploring which member of the family is usually selectedas the successor, his/her entry mode and the prevalence of outside experience ofthe successor. The literature review will also consider the method of successorselection together with the most influential successor criterion in the selection. Thepredecessor’s level of involvement after the succession decision and perception ofthe various attributes of the post-succession process are also examined in the review.The research methods are set out in the third section. The research was conductedas a survey study relying on the views of predecessors that had already selectedtheir successors in a sample of Turkish FOBs. To this end, a survey instrument wasdesigned based upon the review of the extant literature. The fourth section presentsfindings. Discussion and conclusions are in the last section.Literature ReviewAs noted earlier, the primary goal of this study is to delineate the factors behind thesuccession process for a sample of family-owned Turkish companies. As Motwaniet al. (2006) assert, within family-owned organizations, unique sets of issues arise.This is because the presence of the ‘family’ dimension in addition to the ‘business’ 157 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  4. 4. International Small Business Journal 26(2)dimension of the enterprise means that additional factors must be taken into ac-count to understand organizational planning processes. The following subsectionsprovide a review of the main issues that are pertinent to the succession process inFOBs, with particular emphasis on the family-business dilemma.Successor SelectionUsing a psychological approach to the understanding of succession among owner-managed firms by borrowing Jung’s original concepts of extraversion and intro-version, Stavrou (2003) proposed that FOBs demonstrate an extraverted attitudeduring succession. In other words, Stavrou claims that when it comes to leadershipsuccession, the business (the subject) places primary importance on the values andbeliefs of an outside source, namely the family (the object) over its own needs.Therefore, in FOBs the difficulty of succession decisions is compounded by thecomplexities of family dynamics that are not present in non-family-owned busi-nesses (Kuratko et al., 1993). The problem of finding a successor is not limited tothe person with the most suitable track record and abilities, for example, but hasthe added complications of family membership and expectations (Brown andCoverley, 1999). The literature on succession typically presumes that the eldest sons of ownerswill be their successors, although attention has been given recently to daughters (Foxet al., 1996). The normal practice in western societies can be described as male primo-geniture, i.e. the eldest male heir is chosen for succession. Kuratko et al. (1993) intheir study of US and Korean small business owners found that the overwhelmingmajority wanted a son to take over the firm. This was the case for both the US andKorean firms. Martin (2001) from a sample of small and medium-size firms foundthat male offspring were described and treated as ‘heirs apparent’. This was the casewhether or not they were currently employed by the firm. In contrast, Bachkaniwalaet al. (2001) from case studies of South Asian FOBs found that the founder chosehis eldest son as his successor in only one case. In most cases intelligence, hard work,good leadership skills and effective training under his guidance were identified asfactors influencing the founder’s choice of the successor. Many FOBs fail to engage in the planning process to determine a successor.Huang’s (1999) study of Taiwanese FOBs revealed that among the reasons for failingto adopt a succession plan were the lack of a succession-planning department orpersonnel charged with the task, concern about potentially negative side effects,too small organizational scale, top management not recognizing the importance ofplanning and unfamiliarity with plan contents and procedures. A survey of Canadianfamily firms showed that FOBs pay the least attention to identifying the candidatesand developing criteria for selecting the successor. Furthermore, the family firmstrained the successors and communicated the succession decision although theydid not define the post-succession role for the incumbent (Sharma et al., 2000). How-ever, Martin (2001) found some succession plans to be carefully devised followingmeetings with accountants, solicitors and banks, while others were informal in thatthey were not committed to writing but were the results of repeated discussions atfamily and/or management meetings. Beckhard and Dyer (1983: 9) state that family-158 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  5. 5. Tatoglu et al.: Succession Planning in Turkeycontrolled enterprises use the following scenarios to manage the continuity: (1) thefounder controls the process entirely, (2) the founder consults with selected familymembers, (3) the founder works with professional advisors, and (4) the founderworks with family involvement. The succession plan should not only identify the potential candidate, but also thereasons why the candidate is preferable to other possible nominees (Borwick, 1993).The two conditions, which are crucial for the succession to proceed as intended, arethe successor’s willingness to demonstrate a long-term commitment to the businessand his or her ability to gain the necessary knowledge, skills, and competenciesrequired to manage within the finite time-span leading up to the retirement of theincumbent (Fox et al., 1996). The successor’s time commitment and mode of entryto the family business must be planned. Barach et al. (1988) indicate that most suc-cessors join the family firm immediately after completing their education. One viablestrategy is to use summer employment and low-level jobs as methods of entry. Barachet al. (1988) contend that the rarer course of external employment post-schoolingand prior to working for the family firm has some value. This is for several reasons:non-family-owned firms might provide more opportunity and objective evaluationof a young person’s achievement. Gaining experience in other companies can alsoprovide the potential successor with a broader perspective on managerial issuesand help him/her develop the capacity to adapt to far-reaching environmentalchange. Furthermore, achievement outside the family business can win the entrantcredibility and respect when joining the family firm. A low-level job entry strategy in the FOB facilitates the establishment of strongrelationships with key stakeholders. However, a major disadvantage associatedwith this entry strategy is that mistakes may be too readily viewed as a sign of in-competence on the part of the successor. While the delayed entry route allows thesuccessor to build self-confidence and credibility, the main drawback of this strategyis that specific expertise and/or an understanding of the culture of the family busi-ness may be lacking once the successor joins the FOB (Fox et al., 1996). In theirstudy of 102 family firms, Morris et al. (1996) found that most successors were welleducated with relatively few years of experience outside the family business, anda large majority joined the company either as an entry-level employee or a lower-level manager. In terms of succession planning, they found that the criteria used toselect heirs were usually not formalized. Brown and Coverley (1999) from a sample of East Anglian family firms, foundthat a list of requirements for prospective successor candidates showed experiencein the business as essential, experience in a similar business elsewhere as desirable,and a good business education as optional. Handler (1991) argues that the followingfactors influence the effectiveness of succession criteria: degree of training, degreeof responsibility, and experience outside the organization, communication con-cerning succession and planning around succession. In their study on FOBs in theUSA, Motwani et al. (2006) found that in terms of skill requirements, respondentsrated decision-making ability of successor, the successors’ commitment to the busi-ness, and interpersonal skills as the top three successor attributes. Bachkaniwalaet al. (2001) reported that most founders educated their offspring in order to enhance 159 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  6. 6. International Small Business Journal 26(2)their labour market prospects and not just for succession purposes. However,founders were also involved in succession planning by guiding their heir to under-take relevant education.Successor–predecessor RelationshipsThe progressive weakening of the association between the predecessor and thebusiness is the essence of managing succession although it is the most difficultstep as a mutually dependent relationship between the owner and the firm is likelyto have been built over a long period of time. For most FOBs, predecessors donot wish to contemplate succession because they fear the loss of power and status(Fox et al., 1996). Handler (1990) asserts that the succession process involves amutual role adjustment between predecessor and successor. Within this process,the predecessor adopts sequentially the roles of sole operator, monarch, delegatorand finally consultant. On the other hand, the successor moves from a no role posi-tion to the positions of helper, manager and finally leader/chief decision-maker.Handler (1990) argues that the last two stages of this role transition appear to bethe most critical to effective successions. It is during these pivotal phases that thepreparation of the next generation becomes most apparent. It is often not untilthe predecessor has progressed into the role of delegator that the level of challenge,responsibility, and task complexity for the successor can increase. This is seeminglya very sensitive transition, which depends on the owner’s capacity to trust, shareand delegate. In their study of South African FOBs, Venter et al. (2005) noted that satisfactionwith the succession process is strongly influenced by a willingness to take over thebusiness and the positive relationship between the owner and successor. Based oncase studies of six Kenyan firms, Janjuha-Jivraj and Woods (2002) found that formost of the sample firms, with the transition from second to third generation, firmsbegan to work on a formalized succession plan involving both generations. Whilethe first generation owners that developed the business experienced difficulties inrelinquishing control, the third generation successors, often educated in foreigncountries, allowed the increased employment of non-family staff in their companies,institutionalizing the notion of separating ownership and management. Succession planning should include a clarification of the role, responsibilities,and ownership stake of the predecessor after succession (Sharma et al., 2000). Intheir study of a sample of Canadian firms, Sharma et al. (2000) found statisticallysignificant positive relationships between the predecessor’s perceptions about theextent of succession planning and the variables of the predecessor’s willingness tostep aside and the presence of a competent successor.Successor and Family Member/Stakeholder RelationshipsRelations between family members may be crucial in maintaining business harmonyas well as achieving successful transition (Bachkaniwala, 2001). They may even playa greater role than skills or education in determining the make-up of management(Francis, 1993). As noted by Martin (2001: 223), the need to ‘keep the business in thefamily’ has been identified as a key motivator for family-run firms globally.160 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  7. 7. Tatoglu et al.: Succession Planning in Turkey Janjuha-Jivraj and Woods (2002) found that family members who were notactive in the business had considerable influence during succession, in particularthe mother of the successor who acted as a ‘silent buffer’ between the generations.Janjuha-Jivraj and Woods (2002) also found that greater communication acrossthe generations resulted in goal congruence between the predecessor and the suc-cessor and a commitment to the long-term strategy by the successor. Handler (1991) found that a key factor to succession was the level of mutual respectand understanding between current and next-generation family members. Thiswas defined as the degree to which these individuals had a good working relation-ship that included trust, support, communication, feedback and mutual learning.Handler maintained that the development of mutual respect and understandingwas an evolutionary process, which began in the home prior to the next-generationfamily member’s involvement in the family business. Mutual respect between thenext-generation family member and the founder or owner can build over time asthe working relationship progresses. An essential characteristic of this relationshipis that the respect should be mutual. For this to happen, the next-generation familymembers must have sufficient confidence in themselves, which enables others togain trust in their ability. To earn respect, the next-generation family members areexpected to prove themselves to other family members, particularly those that arethe founders or owners. In support of Handler’s (1991) views, Morris et al. (1996)from a study of 102 family firms that had completed the succession process, foundthat during the process relationships among family members were generally positive,and tended to be based on trust, openness, respect, cooperation and closeness. The succession process is only complete when the successor has gained legitimacyand is widely accepted by the stakeholders. Completion of the process is contingenton the successor’s ability to exercise appropriate leadership in the business (Foxet al., 1996). The progressive delegation of authority to the successor is essential ifthe successor is to assume full control. The lack of delegation not only frustratesthe learning process of the successor but, perhaps more importantly, it serves toreduce their credibility in the eyes of employees and other key stakeholders (Foxet al., 1996). Although there is a dearth of research investigating Turkish managementpractices, commentators and researchers tend to agree on certain characteristicsof management practices in Turkey (Lauter, 1970; Ramazanoglu, 1985; Skinner,1964). Among the frequently mentioned characteristics of Turkish managerialpractices are a highly centralized organizational structure (Lauter, 1969, 1970; Pasaet al., 2001; Skinner, 1964; Terril, 1965), reliance on short-term planning (Iseri andDemirbag, 1999; Lauter, 1970), less clear organizational strategies (Sozen and Shaw,2002; Terril, 1965), reactive rather than proactive strategies and long-term verticalrelationships (Iseri and Demirbag, 1999; Skinner, 1964). The nature of decision-making in Turkish business organizations has been described as top-down and lessparticipative (Lauter, 1969; Sozen and Shaw, 2002) and hierarchical relations arereported to be formal and status rigid (Pasa et al., 2001). Turkish business organ-izations, probably due to overstaffing and top-down communication, have beenfound to have high administrative intensity (Iseri and Demirbag, 1999; Sozen andShaw, 2002). In their work on understanding cultural diversity among 38 nations, 161 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  8. 8. International Small Business Journal 26(2)Trompenaars and Hampden-Turner (1998) noted Turkey to have the steepesthierarchy in its organizations and to resemble more the ‘family type’ category. Sozenand Shaw (2002) argue that submissive and paternalistic tendencies, and the avoidanceof initiation and innovation are derived from a patriarchal, benevolent and close-knit family system and authoritarian and rote learning-based education system.Such an administrative value appears to create action avoidance in terms of decision-making and strategic planning. As a close-knit society, business organizations in Turkey are dominated by privateholding companies run by family members and professional managers (Gunduz andTatoglu, 2003). As Pasa et al. (2001: 568) highlight ‘family members still hold per-manent positions in organizations and continue to be responsible for relationshipswith state officials’. The state, in Turkey, from the early years of the republic, has beena major player in business life (Bugra, 1994; Ramazanoglu, 1985) and often inter-venes by frequent and predictable policy changes (Bugra, 1994; Pasa et al., 2001). The traditional Turkish management style has been criticized for a lack of sophis-tication. The family stands at the heart of Turkish society with people having hugetrust in their family members, leading them to exhibit substantial loyalty to familyvalues. Family and other in-group relationships have significant influence on thelives of Turkish people, which in turn influence the pattern of conducting businessin Turkey (Kabasakal and Bodur, 2002).Derivation of HypothesesThe review suggests that an idiosyncratic feature of Turkish management styleincludes the intertwined structure of family and business entities. Before selectingsuccessors from within the family-wide candidate pool, predecessors may have achance to observe business performances of several family members in their routinefamily interactions in general, and where they work in the FOB, in the work envir-onment in particular. This provides predecessors with crucial knowledge about thecompetencies of candidates as well as their interest in business. This invigilation,especially of the work experience of several family members within the FOB, mayserve as a platform to provide ample opportunities to evaluate the comparativepotential of each candidate. Hence, the following hypothesis is proposed: H1: Business-related successor selection criteria will be more important than family- related successor selection criteria for those selected to succeed after starting to work in FOBs, as compared to those selected before starting to work in FOBs. Another feature of Turkish management style is an excessive focus of power inthe hands of owner-managers. Where this leads to the adoption of an autocratic style,this may pose serious threats to the healthy interplay among predecessors, successorsand other agents in the succession process. We expect predecessors to be reluctantto delegate authority to successors unless they are satisfied with their expectationsregarding the post-succession period, and they develop a high level of reliance onsuccession process and successors. Given the detailed analysis of this managerialaspect in the literature review, the following two hypotheses are derived: H2: The extent of the delegation of authority to the successor will vary with respect to the predecessor’s perception of the post-succession era.162 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  9. 9. Tatoglu et al.: Succession Planning in Turkey H3: The extent of the delegation of authority to the successor will vary with respect to the predecessor’s perception of the succession process and the successor’s attributes.Research MethodsSurvey InstrumentIn order to address the research questions a survey questionnaire was developeddrawing on the extant literature and discussions based on semi-structured inter-views with representative managers of FOBs. The questionnaire was in three parts.The first part was designed to obtain background data on the FOB ranging fromits legal status to geographical location, and to obtain data on which generation wasin control of the company, the relationship of successor to predecessor, educationlevel of successor, the first working position of successor in the family firm, and thesuccessor selection process. In the second part of the questionnaire the respondents were asked to assessthe influence of a set of successor attitudes on the predecessor’s selection of succes-sor on a five-point scale from 1 = ‘least influential’ to 5 = ‘most influential’. In the third part of the questionnaire the respondents were asked to indicatetheir level of agreement with a set of statements concerned with the successor–pre-decessor relationship and the succession process, using five-point scales from1 = ‘strongly agree’ to 5 = ‘strongly disagree’. The respondents were also asked toexpress their perceptions regarding post-succession business developments using five-point scales from 1 = ‘not true’ to 5 = ‘completely true’.Data CollectionThe survey was conducted on a sample of family-owned businesses in Turkey. Forthe purposes of the survey, FOBs are defined as firms where the majority of thevoting shares are owned by members of a single family. The focus was on thoseFOBs where a younger family member would assume control of the business froman elder. Only manufacturing companies were included in the sampling frame inorder to minimize differences across industry sectors. The completion of a self-administered questionnaire was requested from the incumbent predecessors ofsurveyed companies. The sampling frame was drawn from the website of TOBB (The Union ofChambers of Commerce, Industry, Maritime Trade and Commodity Exchangesof Turkey; http://www.tobb.org.tr), which provides an Industrial Database thatcontains approximately 40,000 firms that are registered to any of 10 Chambers ofIndustry, 19 Chambers of Trade and 64 Chambers of Industry and Trade in Turkey.The names and addresses of these companies are available from the websites ofthese chambers, which are linked to the website of TOBB. Neither the IndustrialDatabase of TOBB, nor any other database, provides a comprehensive list of familyunquoted companies in Turkey. Therefore, we were left with the option of taking apragmatic approach to the construction of the sample. Three copies of the questionnaire were distributed to each of 146 students ofthe Department of Management at Afyon Kocatepe University who wereinstructed to contact and visit 3 stock ownership companies they chose from the 163 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  10. 10. International Small Business Journal 26(2)TOBB Industrial Database list. The participation-invoking nature of personalcommunications and cost constraints led to this method rather than mailing thequestionnaire. The method of data collection via students was deemed appro-priate in this study, because it was necessary to select companies with predecessorswho had already identified their successors. The involvement of a large number ofstudents enabled a convenient access to those firms with the required condition.In contrast, a mail survey method would have required several iterations until thetargeted companies were identified. The methodology of the study is similar to theconvenient sampling used by Venter et al. (2005). Due to the impossibility of secur-ing a mailing list of respondents in small and medium-sized FOBs in South Africa,Venter and his colleagues employed research associates in the different regionsof the country to contact small and medium-sized businesses in general, with theobjective of identifying family businesses in particular. It may also be noted thatthe involvement of students in data collection through questionnaires is utilizedin management research (e.g. Kula, 2005; Palmer, 2000). No restriction was applied to the students in choosing the companies, but oncea student chose a company it was eliminated from the sampling frame so thatother students would not choose the same company. This avoided the possibility ofmore than one questionnaire being completed by the same company. The studentspresented an incumbent predecessor of each business with a letter of invitation toparticipate in the study. If the invitation was accepted, the students delivered thequestionnaire and then retrieved it upon completion. Students were asked to returnthe completed questionnaires bearing an official company stamp and the signatureof the respondent. Where a firm declined to participate, another company was drawnfrom the sampling frame. A great deal of time and energy was spent by the studentsin the search for companies with the specified requirements. Nearly all of the accessedfirms meeting the specified requirements agreed to participate in the research.Less than two dozen companies declined to participate in the research on thegrounds of having no interest in such academic studies and long-term unavailabilityof incumbent owner-managers due to frequent business travels abroad. A total of438 questionnaires were returned, of which 30 were eliminated due to missing data,resulting in a total of 408 usable questionnaires. While the sample is a convenientone, there is no reason to believe it is not representative of the population, forexample, the majority of the sample firms (72%) are located in the Marmara andAegean regions, with both regions accounting for the great majority of the nationalindustrial output. The responding companies were also compared across the main characteristicsof the sample such as industry type and geographical location and showed no sys-tematic differences (p > 0.1). The characteristics of the sample firms are shownin Table 1.Data AnalysisIn this study, frequency analyses, chi-square test, t-test and Anova tests were used.Given the relatively large sample size and the reasonable assumption that thesample is from a normal distribution, it was appropriate to use parametric tests. Com-parison of the successors selected to succeed after or before starting work in the164 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  11. 11. Tatoglu et al.: Succession Planning in TurkeyTable 1. Characteristics of Sample No. Percentage (%)Legal Status Joint-stock 95 23.3 Limited 229 56.1 Sole proprietorship 84 20.6Geographic Location Marmara 171 42 Aegean 122 30 Central Anatolia 97 24 Other 18 4Sector Machinery and equipment 53 13.0 Food 108 26.5 Textile and garments 57 14.0 Chemical products 15 3.7 Marble 47 11.5 Construction 44 10.8 Forestry products 51 12.5 Other 33 8.1Total 408 100FOB was conducted by implementing two-tailed t-tests. In a similar vein, mean dif-ferences in views on post-succession era and on succession process with respectto the extent of delegation of authority to successor were examined by means ofAnova tests. The non-parametric equivalents of the tests (Mann-Whitney U andthe Kruskal-Wallis Test) were also conducted to remove any doubts that may stemfrom the nature of the data. The non-parametric tests (not reported here) confirmthe findings of the parametric tests.FindingsSuccession StructureThe findings of the succession-related issues are reported in Table 2. The majorityof incumbent predecessors were of the founding generation (60.3%), followed bysecond generation (30.1%) and third generation (7.8%). In terms of the identityof the successor, 59.6% of the sample selected their sons, 15.9% their brothers andonly 4.2% their daughters. In general, the successors were either working at thefamily firm (47.5%) or were still at school (39.2%). In terms of education level, nearly58% of the successors had a university degree with about 27% having a high schooldiploma. The successors mainly started in their family firms as low-level managers(41.9%). Only 20% of the successors had prior work experience in other firms. 165 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  12. 12. International Small Business Journal 26(2) The respondents were also asked to indicate the method of successor selection.In about two-thirds of the sample firms, successors were selected on the basis of thepredecessors’ sole decision. Among the other successor selection methods used bythe predecessors were consultations with all family members (18.9%) and consult-ations with some family members (4.2%). The least used methods of successorselection were asking the family-member candidates to nominate themselves(2.9%) and consultation with friends (1.5%).Successor Selection CriteriaFor the purpose of discovering the most favoured succession criteria, the respond-ents were asked first to select ‘the most influential single criterion’ from a pre-determined list. Subsequently, the respondents were asked, in a different question,to evaluate the level of influence of each criterion on the list separately. For the whole sample, Table 3 shows the rank order of the criteria in terms ofthe degree of influence on successor selection. By far the most influential selectioncriteria was competency. Other influential selection criteria were interest in thebusiness, and education. Less influential factors were family harmony, lack of analternative and level of respect. In order to compare the factors influential to successor selection for those suc-cessors selected before starting to work in the family business with those selectedafter starting work in the family business, the incumbent predecessors were askedthe following two questions: ‘For how many years has the successor has been workingin your family business?’ and ‘How many years ago did you select the successor?’The mean value of the responses to the first question was 5.79 years and the meanvalue of the responses to the second question was 3.40 years. Comparison of theanswers to these two questions showed that for the whole sample the proportionof the successors selected after starting to work in the family business (Group A)was 53.9%, while the proportion of the successors selected before starting to workin the family business (Group B) was 31.9%, with the remainder not respondingto these questions. For the purpose of making a comparison between the successor groups selectedto succeed at different periods, we excluded the answers with missing information,and thereby were left with 116, 60 and 55 responses for ‘competency’, ‘interest inbusiness’ and ‘education’, respectively. Of the total of 116 predecessors who rated‘competency’ as the most influential single succession criterion, 79 (68.1%)respondents were from the group with the successors selected to succeed afterstarting to work in the FOB, while 37 (31.9%) respondents were from the groupwith the successors selected to succeed before starting to work in the FOB. Simi-larly, the overwhelming majority of the predecessors (49 respondents, 81.6%)who indicated that ‘interest in the business’ as the most influential single criterionselected their successors after they started to work in the FOB, while the remain-ing 11 predecessors (18.4%) made their selection before the successors started towork in the FOB. The converse tendency applies to the third most favoured criter-ion of ‘education’. In this case, the majority of the predecessors (33 respondents,166 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  13. 13. Tatoglu et al.: Succession Planning in TurkeyTable 2. Main Succession-related Issues No. Percentage (%)Status of existing generation First generation 246 60.3 Second generation 123 30.1 Third generation 32 7.8 Fourth generation 5 1.2 No answer 2 0.5Successor Son 243 59.6 Daughter 17 4.2 Brother 65 15.9 Son-in-law, cousin 81 19.9 No answer 2 0.5Present status of successor Working at the family firm 194 47.5 Working at another firm 14 3.4 Still in school 160 39.2 Other 38 9.8 No answer 2 1Education level of successor Primary school 18 4.4 Secondary school 28 6.9 High school 109 26.7 University 236 57.8 No answer 17 4.2The entry mode of successor Worker 68 16.7 Low-level manager 171 41.9 High-level manager 115 28.2 No answer 54 13.2Prior work experience of successor in another firm Yes 82 20.0 No 303 74.3 No answer 23 5.7Method of successor selection Predecessor’s sole decision entirely 277 67.9 All family members 77 18.9 Some of family members 17 4.2 Self-nomination 12 2.9 Predecessor’s friends 6 1.5 No answer 19 4.7 Total 408 10060%) who rated ‘education’ as the most influential single criterion were from thegroup who selected the successors before working in the FOB, whereas 22 predeces-sors (40%) made their selection after the successors began working in the FOB. 167 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  14. 14. International Small Business Journal 26(2)Table 3. The Most Influential Successor Selection CriterionCriteria Whole Sample (A) (B) (A+B)X No. % No. %X %Y No. %X %Y No.Competency 133 32.6 79 43.4 68.1 37 34.9 31.9 116Interest in the business 68 16.7 49 26.9 81.6 11 10.4 18.4 60Education 66 16.2 22 12.1 40.0 33 31.1 60.0 55Family harmony 36 8.8 19 10.4 67.8 9 8.5 32.2 28Lack of any other 28 6.9 10 5.5 40.0 15 14.2 60.0 25alternativeLevel of respect 4 1.0 3 1.7 75.0 1 0.9 25.0 4No answer 73 17.9Total 408 100.0 182 100.0 106 100.0Notes: (A) Successors selected to succeed after starting to work in the family business; (B)Successors selected to succeed before starting to work in the family business; X For most of thecriteria, (A+B) is less than the numbers in the second column due to missing data; %X shows thepercentage of column totals; %Y shows the percentage of (A+B) for each row. The inter-group analysis of the criteria reveals different rankings for each group.Table 3 shows that by far the most influential factor on the selection of successorsselected after starting work in the family business is ‘competency’ followed by‘interest in the business’. For the successors selected before starting work in thefamily business, ‘competency’ and ‘education level’ constituted the most influentialcriteria on successor selection, with each having about the same level of influence.As the family-related criteria of ‘family harmony’ and ‘level of respect’ were notranked highly for both groups, no support has been found for H1. Our findings indi-cate that selection of the successors after starting to work in the FOB does not leadto business-related criteria being replaced by family-related criteria. The respondents were also asked to assess the influence of each of the successorselection criteria per se on successor selection on a scale from 1 = ‘least influential’to 5 = ‘most influential’. As shown in Table 4, with the exception of the criterion‘lack of any other alternative’, all the other five criteria have mean values greaterthan four indicating a high level of influence placed on each criterion for bothgroups of successors (i.e. those selected before starting work in the family businessand those selected after starting work in the family business). For the set of six suc-cessor selection criteria, there exist statistically significant differences betweenboth groups of successors with respect to the following three criteria: ‘competency’,‘education’ and ‘interest in the business’. Of these selection criteria, ‘competency’and ‘interest in the business’ were found to be significantly more influential (atp < 0.01 level) for the successors selected after starting work in the family businessthan for those selected before starting work in the family business. In contrast, theselection criterion of ‘education’ was significantly more influential (at p < 0.1 level)in the selection of successors selected before starting work in the family business.These findings constitute further evidence that leads to the rejection of H1. Thesummary of these findings is illustrated in Figure 1.168 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  15. 15. Tatoglu et al.: Succession Planning in TurkeyTable 4. Successor Selection Criteria: Comparison of the Successors Selected to SucceedAfter Starting Work and Before Starting Work in the FOBCriteria No. Mean SD t-value (A) 216 4.52 0.77Competency 2.608** (B) 127 4.26 1.06 (A) 215 4.19 1.10Family harmony –1.189 (B) 128 4.33 1.01 (A) 215 4.18 1.10Education –1.755* (B) 124 4.39 0.99 (A) 218 4.72 0.63Interest in the business 5.081** (B) 124 4.25 1.06 (A) 216 4.46 0.91Level of respect 0.517 (B) 125 4.41 1.00 (A) 199 2.10 1.46Lack of any other alternative –0.703 (B) 119 2.22 1.59Notes: The mean is the average on a scale of 1 (= ‘least influential’) to 5 (= ‘most influential’);(A) Successors selected to succeed after starting to work in the family business; (B) Successorsselected to succeed before starting to work in the family business; *p<0.1, ** p<0.01Figure 1. Findings Regarding the Favoured Succession Criteria by Different SuccessorGroupsViews on Post-successionIn order to assess the extent of decision-making authority delegated to the succes-sors, the predecessors were asked to indicate the degree of their own decision-makingauthority relative to that of their successors. For the full sample, the predecessorswere found to have the largest share of decision-making authority with a meanvalue of nearly 70% resting with the predecessor. In over one-fifth of the samplefirms, the decision-making authority was delegated mainly to the successor, with thepredecessor’s share being less than 50%. For the purposes of this study, this groupof firms was labelled as ‘the firms with strong delegation of authority’ (Group A).In about 64% of the sample firms, the extent of decision-making authority of thepredecessor ranged between 51% and 99%. This group of firms was labelled as 169 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  16. 16. International Small Business Journal 26(2)‘the firms with weak delegation of authority’ (Group B). For about 16% of thesample firms, decision-making authority was solely in the hands of the predecessor.This group of firms was labelled ‘no delegation of authority’ (Group C). The attitudes of predecessors towards four predetermined statements con-cerning post-succession issues are shown in Table 5. In general, respondents envisagethat their companies will be successful in their absence with the mean value of 2.23on a five-point scale from 1 = ‘strongly agree’ to 5 = ‘strongly disagree’. There is,however, a statistically significant difference (at p < 0.01 level) in the mean valuesof the responses provided to this statement by each group of sample firms charac-terized as varying levels of authority delegation. The group of firms with a strongdelegation of authority (Group A) were relatively more favourably disposed to theview that their company would be more successful post-succession compared tothe other two groups of firms (Group B and Group C) with weak or no delegationof authority. The respondents were relatively sure about the business strategy of their com-panies in the post-succession era, with a mean value of 3.9 on a five point scale from1 = ‘not true’ to 5 = ‘completely true’. Again, there is some significant variation (atp < 0.1 level) in the responses of predecessors towards this statement between thethree groups of firms. The firms belonging to the Group A, where the managerialauthority predominantly rests with the successor, were more certain about thebusiness strategy in the post-succession era compared to the other two groups offirms. Thus, H2 is partially supported as there were significant variations betweenthe extent of authority delegated to successors and predecessors’ perception ofpost-succession era with respect to the following two statements: ‘I am sure ourcompany will be successful in my absence’ (at p < 0.05 level) and ‘I am clear aboutthe business strategy after me’ (at p < 0.1 level). The predecessors were also of the opinion that the key employees of their com-panies would support the successor, with a mean 3.6 on a five point scale from1 = ‘not true’ to 5 = ‘completely true’. There were no significant statistical differ-ences between the three groups of sample firms on the basis of their responses tothis statement. The predecessors were somewhat ambiguous about their post-succession rolesin their companies, as the mean value of 3.14 (on a five point scale from 1 = ‘nottrue’ to 5 = ‘completely true’) is only slightly above the mid-rank value of 3. Therewere no significant statistical differences between the three groups of sample firmson the basis of their responses provided to this statement.Views on Succession ProcessThe predecessors were asked to provide their views on a number of statementsregarding the succession process using a five-point scale from 1 = ‘strongly agree’ to5 = ‘strongly disagree’. Table 6 lists the statements in rank order based on the extentof agreement by the predecessors. The respondents were largely in agreement withthe statements on succession process with most of the mean values of the responseswell below the mid-rank value of three. Ranking by mean scores, with the highestranked statements those with the lowest mean values, six statements had means ofless than 2, as follows: ‘It is important for me for the succession process to go in a170 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  17. 17. Tatoglu et al.: Succession Planning in TurkeyTable 5. Views on Post-succession EraStatements Group No. Mean. SD F-valueI am sure our company will be (A) 85 1.84 1.07 5.864**successful in my absence (§) (B) 258 2.31 1.26 (C) 64 2.45 1.37 Total 407 2.23 1.26I am clear about our business (A) 85 4.09 1.22 2.371*strategy after me (B) 259 3.91 1.26 (C) 64 3.64 1.29 Total 408 3.90 1.26I am sure the successor will be (A) 83 3.54 1.67 0.265supported by the key employees (B) 251 3.65 1.54of our company (C) 63 3.51 1.64 Total 397 3.60 1.58My post-succession role in the (A) 85 3.24 1.65 1.650company is well defined. (B) 258 3.19 1.63 (C) 64 2.80 1.64 Total 407 3.14 1.64Notes: The mean is the average on a scale of 1 (= ‘not true’) to 5 (= ‘completely true’), exceptfor the statement with the sign (§) for which the mean is the average on a scale of 1 (= ‘stronglyagree’) to 5 (= ‘strongly disagree’); (A) is the group of companies with strong delegation ofauthority to successor; (B) is the group of companies with weak delegation of authority tosuccessor; (C) is the group of companies with no delegation of authority to successor;*p<0.1, **p<0.05planned way’, ‘I exert great effort in getting the successor to know the companywell’, ‘I exert great effort in training the successor’, ‘All family members supportthe successor’, ‘The successor has an education suitable to our company’ and ‘Thesuccessor is competent enough’. Two statements had mean values of more than 2but less than 3, namely ‘The successor has high degree of responsibility’ and ‘Thesuccessor’s background is suitable to the company’. This leaves one statement witha mean value over 3: ‘The successor can earn more in another company’. Some support has been found for H3, in that for five of the nine statements stat-istically significant differences were found between the three groups of samplefirms characterized by the varying degree of delegation of managerial authority interms of the level of agreement indicated by the predecessors. The extent of dele-gation of managerial authority to the successor by the predecessor increases, asthe implementation of the succession in a planned way becomes more important(p < 0.10), the relevance of successor’s education increases (p < 0.05), the compe-tency of the successor is regarded satisfactory (p < 0.05), the responsibility of thesuccessor increases (p < 0.05) and the background of the successor is regarded moresuitable to the company (p < 0.01). Figure 2 summarizes the relationship betweenthe extent of authority delegated and the perception of predecessors regardingpost-succession era and succession process. 171 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  18. 18. International Small Business Journal 26(2)Table 6. Views on Succession ProcessStatements Group No. Mean SD F-valueIt is important for me for the succession (A) 85 1.39 0.64 2.712*process to go in a planned way (B) 259 1.64 1.01 (C) 64 1.70 1.02 Total 408 1.60 0.95I exert great effort in getting the (A) 83 1.70 1.00 0.551successor to know the company well (B) 249 1.71 1.04 (C) 59 1.86 1.21 Total 391 1.73 1.06I exert great effort in training the (A) 83 1.78 1.10 0.144successor (B) 251 1.72 1.04 (C) 60 1.77 1.11 Total 394 1.74 1.07All family members support the successor (A) 83 1.87 1.12 0.133 (B) 257 1.88 1.08 (C) 64 1.80 1.14 Total 404 1.86 1.09The successor has an education suitable (A) 85 1.72 0.89 5.206**to our company (B) 258 1.85 1.02 (C) 62 2.24 1.13 Total 405 1.88 1.02The successor is competent enough (A) 83 1.70 1.04 6.251** (B) 251 1.86 1.05 (C) 58 2.33 1.21 Total 392 1.90 1.09The successor has high degree of (A) 80 1.61 0.99 27.479**responsibility (B) 248 1.93 1.11 (C) 59 3.02 1.54 Total 387 2.03 1.24The successor’s background is suitable to (A) 84 1.83 0.93 26.321***our company (B) 251 2.10 1.08 (C) 61 3.07 1.17 Total 396 2.19 1.13The successor can earn more in another (A) 84 3.07 1.38 1.732company (B) 255 3.27 1.22 (C) 64 3.45 1.19 Total 403 3.26 1.25Notes: The mean is the average on a scale of 1 (= ‘strongly agree’) to 5 (= ‘strongly disagree’);(A) is the group of companies with strong delegation of authority to successor; (B) is the groupof companies with weak delegation of authority to successor; (C) is the group of companies withno delegation of authority to successor; *p<0.1, **p<0.05, ***p<0.01172 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  19. 19. Tatoglu et al.: Succession Planning in TurkeyFigure 2. The Relationship between the Extent of Authority Delegated and thePerception of Predecessors Regarding Post-succession Era and Succession ProcessDiscussion and ConclusionsThis study has delineated the factors behind the succession process of family ownedbusinesses by investigating selection, training and entry-mode of successors as wellas the involvement of family members and stakeholders in the succession process.Data from the predecessors of 408 FOBs in Turkey reveals a number of insightfulfindings on the succession process of FOBs. First, the decision of the predecessor dominates the method of successor selec-tion. As noted in earlier studies of FOBs undertaken in developed countries (e.g.Kuratko et al., 1993), the sons are at the forefront of the candidate lists to takeover control of the firm. This result confirms in the Turkish context the finding byMartin (2001) that male offspring were described and treated as ‘heirs apparent’. Thedominant entities are the predecessors themselves in taking the successor selectiondecisions. In that decision, family members have little influence as suggested byJanjuha-Jivraj and Woods (2002); they act only as agents of secondary importance. Another finding emerging from the study is that while most of the successors donot have previous work experience in another company, the predecessors in gen-eral are somewhat opposed to the successors joining the family business as high-level managers. Thus, the successors in Turkish FOBs follow a similar pattern tothat indicated by Barach et al. (1988). For successors, working at another firm islargely a disregarded option and the position of low-level manager is the first placeof entry to the family business following or during their education. This finding 173 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  20. 20. International Small Business Journal 26(2)suggests that the predecessors attach little value to the experience gained in othercompanies. It appears that the predecessors prefer to emphasize the maintenanceof relationships with key stakeholders and an understanding of the culture of thefamily business. The commonly observed phenomenon of keeping the crucial bodyof managerial knowledge away from the non-family members in Turkey may bea factor in rendering other-firm experience not so advantageous. The choice of alow-level managerial position rather than a higher level position points to theresistance of predecessors to giving up their authority in FOBs. The predeces-sors seem to bring the managerial pattern of their successors in line with themuntil the successors are promoted to higher ranking positions. The findings of the study provide no support for H1. When asked to indicate themost influential single criterion, business-related criteria, namely ‘competency’,‘interest in the business’ and ‘education’, are ranked the highest. The majority ofpredecessors who rated ‘competency’ or ‘interest’ as the most influential singlecriterion are those predecessors who selected successors following the latter’swork experience in the FOB. In contrast, the majority of predecessors indicating‘education’ as the most influential single criterion are from the group that selectedsuccessors before they worked in the FOB. On the other hand, within group com-parisons show that while competency and interest in business are the most influ-ential ‘single criterion’ for successors selected to succeed after starting to work inFOB, competency and education are the most favoured ‘single criterion’ for thosesuccessors selected before they started working in the FOB. Compared to business-related criteria, family harmony and successor’s level of respect to predecessor aregiven only scant prominence as the single criterion. As a further step in the analysis, the respondents were also asked to evaluate theimportance of both business and family-related criteria individually, rather thannominating the most influential single criterion. This part of the analysis also yieldsthe same results. In selecting successors, predecessors seem to attach importanceto all criteria related both to family concerns and business concerns, which is sup-ported by high scores of all criteria except ‘the lack of alternative candidate’.However, when working in the family business, the successors tend to impress thepredecessors more when making the selection decision, by portraying their com-petencies and their involvement in the business. In successor selection decisions,the successor’s education, irrespective of the relevance to the particular field ofhis/her business acts as a substitute for competence and interest in the business.This substitution effect is especially valid for the candidates who were selected tolead before starting to work in the business. In the light of these findings it can beargued that education in Turkish FOBs is not a complementary option to the essen-tial feature of gaining experience in business, as suggested by Brown and Coverley(1999). Rather, especially when selecting the potential successor well before ob-serving him in the business, the emphasis shifts from interest in the business andcompetency to education. The university degrees and high school diplomas of thesuccessors may strengthen the egos and support the pride of the predecessors aswell as being an objective signal of potential competency. In sum, the interplay of thecriteria with regard to the existence of work experience is not between family-related174 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  21. 21. Tatoglu et al.: Succession Planning in Turkeycriteria and business-related criteria, but rather within business-related criteria. Thisresult may also explain lack of support for H1. As suggested by H2, the predecessors delegate more decision-making authorityto their successors if they are more certain of the future direction of their business.These predecessors are also of the opinion that the successors are competent; havea high degree of responsibility, and relevant education and work experience. Thesuccessors are expected to be successful by these predecessors. The findings alsoestablish important links between the transfer of control and attitudes towardsthe succession process. The results tend to support the arguments of Handler (1990)in that as the extent of delegation expands, the preparation, the level of challengeand responsibility of successors increase. In line with the findings of Sharma et al.(2000) in their study on Canadian firms, a statistically significant positive relation-ship was found between the predecessors’ perceptions about the extent of successionplanning and the predecessors’ desire to relinquish power in the Turkish context. The assertion by Fox et al. (1996) who link the completion of the succession pro-cess to the successors’ ability to exercise appropriate leadership in the businesswas also confirmed in the present study. Relevance of education and backgroundof successors to the business, and high levels of competency and responsibilityare among the indispensable inputs to good leadership. Our findings suggest thatthe control of the firm was shifted to the successors only if they were perceivedby the predecessors as endowed with these attributes. This statistically significantrelationship tends to support H3. Overall, the results of the study confirm the assertion by Bhalla et al. (2006) thatfew strategic decisions in family businesses are made on purely economic grounds;rather, the values and aspirations of the owners play an important role. Some ofthe observed behaviours in the study were close to what is called the ‘systemicapproach’. The systemic approach, as Bhalla et al. (2006) put forward, indicatesthat wider social roles and political constraints prevent deliberative managerialstrategies developing, or anything like profit-maximization from occurring. In fact,the selection of a successor from the family circle and the exclusive determiningpower of the predecessor in this decision appear to be reflections, at the outset, ofthe systemic approach. However, the succession behaviour observed in the studydoes not entail harmful implications for business interests. It is true, as Stavrou(2003) emphasizes that preferences in the successor-selection process amongfamily members such as status, gender and birth order are not necessarily in thebest interests of the firm, and given the emphasis on family needs, criteria such ascompetence are frequently ignored during the succession process in many owner-managed businesses. However, Stavrou (2003) asserts that where business andfamily needs coincide, this attitude does not pose a threat to the well-being of thebusiness. That is, family-related criteria may be considered during the process ofselecting a successor but the most important criteria should be those ensuringwhat is best for the business. The findings of this study regarding the successioncriteria employed largely conform to these assertions. The reliance on the business-related criteria such as competency, interest in business, education at the expenseof family harmony, and level of respect by successor for predecessor, implies that 175 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  22. 22. International Small Business Journal 26(2)business concerns are not sacrificed to family concerns. Rather, Turkish FOBs adopta compromising attitude in successor selection. The findings of the study have several implications for family-owned businesses.Most of the sample companies are in the hands of the founding or second gener-ations. In future as control passes to the incoming generations, the incumbent ownerswill be expected to be more exposed to innovations and to be more in favour ofpromoting a professional type of management. This in fact corroborates the findingreported by Janjuha-Jivraj and Woods (2002) who noted that with the transitionof control to the next generation, the successors endorsed the increased employ-ment of non-family staff in their companies, institutionalizing the notion of separ-ating ownership and management. In that regard, from successor selection to successor adaptation to the familybusiness, more professional counselling will be required in every stage of the suc-cession. Furthermore, with the growing awareness that the family business is anentirely separate entity from the family, family councils with clearly defined rolesand responsibilities should be established in order to provide an interface betweenthe family and the business. The new generation is perceived to be successful onlywhen delegated with full authority. The predecessors should, therefore, ensure thecreation of a suitable business environment for authority delegation. There are a number of areas for future research. This study has focused on theperceptions of the predecessors; a promising area of future research would be anevaluation of the perceptions of the successors, family members and other stake-holders in the succession process. Drawing on a relatively large dataset, this studyhas enabled generalization of the key findings on the succession process in TurkishFOBs. However, to gain a richer understanding of the underlying dynamics of thesuccession process a case study approach would be useful. Finally, succession is asubject closely intertwined with good governance. Future studies could approachthe subject of succession by emphasizing the perspective of corporate govern-ance with a view to revealing the differences in succession practices between well-governed and poorly governed FOBs. This would also serve to enhance theimportance of succession issues in the governance framework.AcknowledgementsThe authors would like to thank the journal’s two anonymous referees whose suggestionsand comments substantially contributed to the article.ReferencesBachkaniwala, D., Wright, M. and Ram, M. (2001) ‘Succession in South Asian Family Businesses in the UK’, International Small Business Journal 19(4): 15–27.Barach, J. A., Gantisky, J., Carson, J. A. and Doochin, B. A. (1988) ‘Entry of the Next Generation: Strategic Challenge for Family Business’, Journal of Small Business Management 26(2): 49–56.Beckhard, R. and Dyer, W. G. (1983) ‘Managing Continuity in the Family-owned Business’, Organizational Dynamics 12(1): 5–12.Bhalla, A., Henderson, S. and Watkins, D. (2006) ‘A Multiparadigmatic Perspective of Strategy’, International Small Business Journal 24(5): 515–37.176 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  23. 23. Tatoglu et al.: Succession Planning in TurkeyBjuggren, P. and Sund, L. (2001) ‘Strategic Decision Making in Intergenerational Succession of Small- and Medium Size Family-owned Businesses’, Family Business Review 14(1): 11–23.Borwick, C. (1993) ‘Eight Ways to Assess Succession Plans’, HRMagazine (May): 109–14.Brown, R. B. and Coverley, R. (1999) ‘Succession Planning in Family Businesses: A Study from East Anglia, UK’, Journal of Small Business Management 37(1): 93–7.Bugra, A. (1994) State and Business in Modern Turkey: A Comparative Study. New York: State University of New York University Press.Davis, P. S. and Harveston, P. D. (1998) ‘The Influence of Family on the Family Business Succession Process: A Multi-Generational Perspective’, Entrepreneurship Theory and Perspective 22(3): 31–49.Fahed-Sreih, J. and Djoundourian, S. (2006) ‘Determinants of Longevity and Success in Lebanese Businesses: An Exploratory Study’, Family Business Review 19(3): 225–34.Fox, M., Nilakant, V. and Hamilton, R. T. (1996) ‘Managing Succession in Family-owned Businesses’, International Small Business Journal 15(1): 15–25.Francis, B. C. (1993) ‘Family Business Succession Planning’, Journal of Accountancy 176(2): 49–51.Gunduz, L. and Tatoglu, E. (2003) ‘A Comparison of the Financial Characteristics of Group Affiliated and Independent Firms in Turkey’, European Business Review 15(1): 48–54.Handler, W. C. (1990) ‘Succession in Family Firms: A Mutual Role Adjustment between Entrepreneur and Next-generation Family Members’, Entrepreneurship Theory and Practice 15(1): 37–51.Handler, W.C. (1991) ‘Key Interpersonal Relationships of Next-generation Family Members in Family Firms’, Journal of Small Business Management 29(3): 21–32.Handler, W. C. and Kram, K. E. (1988) ‘Succession in Family Firms: The Problem of Resistance’, Family Business Review 1(4): 361–81.Huang, TungChun (1999) ‘Who Shall Follow?: Factors Affecting the Adoption of Succession Plans in Taiwan’, Long Range Planning 32(6): 609–15.Iseri, A. and Demirbag, M. (1999) ‘Overcoming Stereotyping: Beyond Cultural Approach’, Middle East Business Review 3(1): 1–21.Janjuha-Jivrav, S. and Woods, A. (2002) ‘Successional Issues within Asian Family Firms’, International Small Business Journal 20(1): 77–92.Kabasakal, H. and Bodur, M. (2002) ‘Arabic Cluster: A Bridge between East and West’, Journal of World Business 37(1): 40–54.Kets de Vries, M. F. R. (1993) ‘The Dynamics of Family Controlled Firms: The Good News and the Bad News’, Organizational Dynamics 21(3): 59–71.Kozan, M. K. and Ilter, S. S. (1994) ‘Third Party Roles Played by Turkish Managers in Subordinates’ Conflicts’, Journal of Organizational Behavior 15(5): 453–66.Kula, V. (2005) ‘The Impact of the Roles, Structure and Process of Boards on Firm Perform- ance: Evidence from Turkey’, Corporate Governance: An International Review 13(2): 265–77.Kuratko, D. F., Hornsby, J. S. and Montagno, R. V. (1993) ‘Family Business Succession in Korean and US Firms’, Journal of Small Business Management 31(2): 132–6.Lauter, G. P. (1969) ‘Sociological-Cultural and Legal Factors Impeding Decentralization of Authority in Developing Countries’, Academy of Management Journal 12(3): 367–78.Lauter, G. P. (1970) ‘Advanced Management Process in Developing Countries: Planning in Turkey’, California Management Review 12(3): 7–12.Marcoulides, G. A., Yavas, B. F., Bilgin, Z. and Gibson, C. B. (1998) ‘Reconciling Culturalist and Rationalist Approaches: Leadership in the United States and Turkey’, Thunderbird International Business Review 40(6): 563–83. 177 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  24. 24. International Small Business Journal 26(2)Martin, L. (2001) ‘More Jobs for the Boys?: Succession Planning in SMEs’, Women in Man- agement Review 16(5): 222–31.Morris, M. H., Williams, R. W. and Nel, D. (1996) ‘Factors Influencing Family Business Succession’, International Journal of Entrepreneurial Behaviour & Research 2(3): 68–81.Motwani, J., Levenburg, N. M., Schwarz, T. V. and Blankson, C. (2006) ‘Succession Planning in SMEs’, International Small Business Journal 24(5): 471–95.Palmer, J. J. (2000) ‘Internet Access in Bahrain: Business Patterns and Problems’, Techno- vation 20(8): 451–8.Pasa, S. F., Kabasakal, H. and Bodur, M. (2001) ‘Society, Organizations and Leadership in Turkey’, Applied Psychology 50(4): 559–89.Ram, M. and Jones, T. (2002) ‘Exploring the Connection: Ethnic Minority Businesses and the Family Enterprise’, in D. E. Fletcher (ed.) Understanding the Small Family Business, pp. 157–67. London: Routledge.Ramazanoglu, H. A. (1985) ‘A Political Analysis of Emergence of Turkish Capitalism, 1839–1950’, in H. A. Ramazanoglu (ed.) Turkey in World Capitalist System, pp. 222–48. Gower: Aldershot.Sharma, P., Chua, J. H. and Chrisman, J. J. (2000) ‘Perceptions About the Extent of Succes- sion Planning in Canadian Family Firms’, Canadian Journal of Administrative Sciences 17(3): 233–44.Skinner, G.W. (1964) ‘A Test Case in Turkey’, California Management Review 6(3): 53–66.Sozen, S. and Shaw, I. (2002) ‘The International Applicability of “New” Public Management: Lessons from Turkey’, International Journal of Public Sector Management 15(6): 475–86.Stavrou, E. T. (2003) ‘Leadership Succession in Owner-managed Firms through the Lens of Extraversion’, International Small Business Journal 21(3): 331–47.Terril, W. A. (1965) ‘Management Organizations and Methods in Turkey’, Human Organ- ization 24(2): 96–104.Trompenaars, F. and Hampden-Turner, C. (1998) Riding the Waves of Culture: Understanding Cultural Diversity in Global Business, 2nd edn. New York: McGraw-Hill.Venter, E., Boshoff, C. and Maas, G. (2005) ‘The Influence of Successor-Related factors on the Succession Process in Small and Medium-Sized Businesses’, Family Business Review 18(4): 283–303.Yurtoglu, B. (2000) ‘Ownership Structure of Turkish Listed Firms’, The ISE Finance Award Series 1: 55–76.Ward, J. L. (1987) Keeping the Family Business Healthy. San Francisco, CA: Jossey-Bass.Westhead, P. (2003) ‘Succession Decision-making Outcomes Reported by Private Family Companies’, International Small Business Journal 21(4): 369–401.EKREM TATOGLU is Associate Professor of International Strategic Management atBahcesehir University. Address: Faculty of Business Administration, Bahcesehir University,Besiktas, Istanbul, 34349, Turkey. [email: ekremt@bahcesehir.edu.tr]VEYSEL KULA is Associate Professor of Finance, Afyon Kocatepe University.Address: Faculty of Economics and Administrative Sciences, Afyon Kocatepe University,Afyonkarahisar, Turkey. [email: kula@aku.edu.tr]KEITH W. GLAISTER is Dean and Professor of International Strategic Management,Management School, University of Sheffield, UK. Address for correspondence:Management School, The University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK.[email: k.glaister@sheffield.ac.uk]178 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  25. 25. Tatoglu et al.: Succession Planning in TurkeyPlanification de la succession dans les entreprises familialesTémoignage de TurquieEkrem TatogluUniversité de Bahcesehir, TurquieVeysel KulaUniversité de Afyon Kocatepe, TurquieKeith W. GlaisterUniversité de Sheffield, R.-U.Pour un grand nombre d’entreprises familiales (EF) la succession intergénérationnelle est unequestion de réflexion déterminante. Le présent article examine la dynamique du processusde succession pour les EF qui ont déjà pris une décision en ce qui concerne la successionde l’entreprise et qui ont donc nommé leurs éventuels successeurs. En fait, le but que sepropose avant tout cette étude est de définir les facteurs sur lesquels s’appuie le processusde succession, en étudiant les modes de sélection, de formation et d’admission des éventuelssuccesseurs ainsi que le degré d’implication de divers membres de la famille et des différentesparties intéressées dans ledit processus de succession. Des informations recueillies en Turquieauprès des prédécesseurs de 408 entreprises familiales – au nombre desquelles les opinionsd’un certain nombre de prédécesseurs concernés par le processus de succession, les critèresde sélection desdits successeurs et la prise en compte de la période de post-succession - ontabouti à tout un ensemble de conclusions perspicaces sur les traits majeurs du processus desuccession des EF. Nous avons là la première étude systématique qui traite du processus desuccession dans les entreprises familiales turques, -processus qui jusqu’à présent n’avait étédocumenté que par des témoignages empiriques. Mots clés: Entreprises familiales – Prédécesseur – Planification de la succession – Successeur –TurquiePlanificación de la sucesión en las empresas familiaresTestimonio de TurquíaEkrem TatogluUniversidad de Bahcesehir, TurquíaVeysel KulaUniversidad de Afyon Kocatepe, TurquíaKeith W. GlaisterUniversidad de Sheffield, RULa sucesión intergeneracional para cargos de dirección es la cuestión clave para muchasempresas familiares. Este artículo investiga la dinámica del proceso de sucesión para lasempresas familiares que ya han decidido sobre la sucesión y elegido a sus sucesores. El objetivoprincipal de este estudio es definir los factores sobre los que se basa el proceso de sucesiónexaminando la selección, formación y modo de entrada de los sucesores, además del gradode participación de la familia y de las partes interesadas en el proceso de sucesión. Los datosde los predecesores de 408 empresas familiares en Turquía revelan una serie de conclusionesperspicaces respecto a las características principales del proceso de sucesión de las empresasfamiliares con inclusión de los pareceres de los predecesores sobre el proceso de sucesión, loscriterios para la selección de sucesores y el período postsucesión. Éste es el primer estudio 179 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010
  26. 26. International Small Business Journal 26(2)sistemático que trata del proceso de sucesión en las empresas familiares turcas, que anteshabía estado documentado solamente por relatos anecdóticos. Palabras clave: Empresa familiar; predecesor; planificación de la sucesión; sucesor;TurquíaNachfolge-Planung in FamilienunternehmenBelege aus der TürkeiEkrem TatogluBahcesehir Universität, TürkeiVeysel KulaAfyon Kocatepe Universität, TürkeiKeith W. GlaisterUniversität von Sheffield, GroßbritannienEin wichtiges Thema für viele Familienunternehmen ist die generationenbezogeneManagementnachfolge. Dieser Artikel untersucht die Dynamik der Nachfolge inFamilienunternehmen, die die Nachfolgefrage schon geklärt haben und eine Entscheidung überden Nachfolger getroffen haben. Das Hauptziel dieser Studie ist, die entscheidenden Faktorenhinter dem Nachfolgevorgang durch die nähere Untersuchung von Auswahl, Ausbildungund die Art, wie die Nachfolger in das Unternehmen gelangen, sowie die Einbeziehunganderer Familienmitglieder und Interessenvertreter innerhalb des Unternehmens in dieNachfolgeauswahl zu schildern. Daten von Vorgängern aus 408 Familienunternehmen inder Türkei zeigen einige aufschlussreiche Erkenntnisse über die Hauptcharakteristiken derNachfolge in Familienunternehmen auf, einschließlich der Ansichten von Vorgängern aufdie Nachfolgevorgang, Auswahlkriterien für Nachfolger und die Zeit nach der Nachfolge.Dies ist die erste systematische Studie, die sich mit dem Nachfolgevorgang in türkischenFamilienunternehmen befasst, nachdem Studien zuvor nur durch anekdotische Einzelberichtegestützt wurden. Schlüsselwörter: Familienunternehmen; Vorgänger; Nachfolgeplanung; Nachfolger; Türkei家族所有企业的继承规划——来自土耳其的证据Ekrem TatogluBahcesehir大学,土耳其Veysel KulaAfyon Kocatepe大学,土耳其Keith W. Glaister谢菲尔德大学,英国对于许多家族所有企业(FOB)来说,两代管理人员的接替是一项关键问题。本文调查了那些已经做出继承决定并选择了其继承人的FOB,研究其继承过程的各种情况。该研究的首要目的是通过调查对继承人的选择、培训和进入管理层模式,以及家庭成员和利益相关者对继承过程的参与进行研究,从而描绘继承过程背后蕴含的因素。来自土耳其408个FOB前任继承人的数据揭示了有关FOB继承过程主要特征的许多深入发现,包括前任对继承过程的观点、继承人选择标准以及继承后时期。这是对土耳其FOB继承过程的第一次系统性研究,而先前人们只能从一些传闻证据中了解。关键字:家族所有企业;前任继承人;继承计划;继承人;土耳其180 Downloaded from isb.sagepub.com at BTCA Univ de Barcelona on August 20, 2010

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