SUCCESSION PLANNING AS

PLANNED BEHAVIOR: SOME

EMPIRICAL RESULTS

FAMILY BUSINESS REVIEW
Authors Pramodita Sharma, James J. Chrisman and Jess H.
Chua
Definitions and Terms
Succession Planning is defined as a dynamic, on-
going process of systematically identifying, assessing,
and developing leadership talent; and assessing,
developing and recognizing key contributors to meet
future organizational strategic and operational needs
(Kimball, 2005).
Theory of Planned Behavior The theory of planned
behavior was adapted to explain entrepreneurial
behavior and to explain successors intentions to take
over a business. According to this theory, the
probability that a behavior will occur is dependent on
the intention of an individual to engage in that
behavior. Intention is, in turn, molded by the
individuals attitudes
Study Purpose
The purpose of this study is to investigate the
determinants of succession planning in family
firms, using the theory of planned behavior.
Problem statement
Management succession has been a subject of academic research
since the 1960s, beginning largely with case studies. Since then, it has
focused on the antecedents, events, and consequences of succession.
Although this subject occupies approximately one-third of the family
business literature there still is no general theory of succession or
succession planning in the family firm.
It is through the iterative process of proposing, testing, and revising
theories that researchers hope to improve our understanding of and
ability to predict family firm behavior. Consequently, research on
succession and succession planning should be theory driven. A good
place to start is to test the applicability of existing theories from related
disciplines to family business issues. This study attempts to contribute
to the understanding of succession planning in the family firm by
embedding succession planning in the theory of planned behavior -a
theory widely used in social psychology.
Need for the Study

In the context of family firms, succession planning refers to the
deliberate and formal process that facilitates the transfer of
management control from one family member to another. Scholars
and consultants alike stress the importance of such a process to
ensure continuity and prosperity of family businesses. Researchers
believe, however, that many family firms leave succession planning
to chance.
Because more than half of the family firms in North America expect
their CEOs to retire within the next 10 years, failure in succession
due to a lack of planning could negatively affect the larger economy.
Therefore, a better understanding of the succession planning
process is important both in practice and in theory. The purpose of
this article is to investigate the determinants of succession planning
in family firms. This paper studies the constituent components of
succession planning individually in an attempt to gain further
insights that would be unavailable if those components were
combined.
Literature Review
To summarize, the literature suggests that the succession-planning process consists
of discrete components, which form the dependent variables for this study.



Includes



It is commonly believed that succession is largely under the control of the incumbent
leader of the family firm.
The literature suggests that firms possessing the characteristics listed above would
have desirability, conformance with social norms, and feasibility that, together, should
lead to the intention to pursue succession.
Activities
1. Sequence
2. Timing
3. Technique
4. communication



Components
1. Training and selecting a successor.
2. Developing a vision or strategic plan for
the company after succession.
3. Defining the role of the departing
incumbent.
4. Communicating the decision to key
stakeholders.


Conceptual Model
Figure 1. Planned Behavior Model of How Family Firm Characteristics Influence
Engagement in Succession-Planning Activities
--------------------------------------------------------------------------------------------------------------------
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Intentions to Pursue Succession Succession
Planning Activities
DESIRABILITY
CINFORMITY WITH SOCIAL
NORMS
FEASIBILITY
SUCCESSOR SELECTION
AND TRAINING
POST-SUCCESSION BUSINESS
STRATEGY
POST-SUCCESSION ROLE OF
INCUMBENT
COMMUNICATION OF DECISION
TO KEY STAKEHOLDERS
Hypotheses on the Factors Influencing
Succession Planning
1. Incumbents Desire to Keep the Business in the Family.
Hypothesis 1a: There is a positive relationship between the
desire of an incumbent to keep the business within the family
and the extent of successor selection and training undertaken
by the firm.
Hypothesis 1b: There is a positive relationship between the
desire of an incumbent to keep the business within the family
and the extent to which the post-succession business
strategy is developed.
Hypothesis 1c: There is a positive relationship between the
desire of an incumbent to keep the business within the family
and the extent to which the post-succession role of an
incumbent is defined.
Hypothesis 1d: There is a positive relationship between the
desire of an incumbent to keep the business within the family
and communication of the decision to key stakeholders.
Hypotheses on the Factors Influencing
Succession Planning
2. Familys Commitment to the Business.
Hypothesis 2a: There is a positive relationship between the
familys commitment to the business and the extent of
successor selection and training undertaken by the firm.
Hypothesis 2b: There is a positive relationship between the
familys commitment to the business and the extent to which
the post-succession business strategy is developed.
Hypothesis 2c: There is a positive relationship between the
familys commitment to the business and the extent to which
the post-succession role of the incumbent is defined.
Hypothesis 2d: There is a positive relationship between the
familys commitment to the business and communication of
the decision to key stakeholders.
Hypotheses on the Factors Influencing
Succession Planning
3. Propensity of a Trusted Successor to Take
Over.
Hypothesis 3a: There is a positive relationship between
the propensity of a trusted successor to take over and
the extent of successor selection and training
undertaken by the firm.
Hypothesis 3b: There is a positive relationship between
the propensity of a trusted successor to take over and
the extent to which the post-succession business
strategy is developed.
Hypothesis 3c: There is a positive relationship between
the propensity of a trusted successor to take over and
the extent to which the post-succession role of the
incumbent is defined.
Hypothesis 3d: There is a positive relationship between
the propensity of a trusted successor to take over and
communication of the decision to key stakeholders.

Methodology

Data Collection. Data on the components of
succession planning and the factors affecting
succession planning were collected using a
mailed questionnaire-based research instrument
administered to the incumbent presidents in
member firms of the Canadian Association of
Family Enterprises (CAFE).
509 firms were chosen. Usable responses were
received from 118 incumbent presidents, a 23.2%
response rate.
Methodology
A total of 12 indicators were used to measure
the four variables representing succession-
planning activities and nine indicators to
measure the three family firm characteristics.
Using a five-point Likert scale, ranging from
not at all accurate to completely accurate,.
Control Variables:
1. Firm Size
2. Age
Findings
Successor Training and Selection
The family businesses in our sample did not
engage in extensive planning with regard to
succession selection and training.
Planning for successor selection and training
appears to have a statistically significant
relationship only with the propensity of a trusted
successor to take over. None of the other
dependent or control variables appears to make
any difference in the extent to which family firms
engage in successor selection or training.
Apparently, feasibility drives the selection and
training of the successor.

Findings
Developing a Post-Succession Business
Strategy.
Family businesses appear to pay slightly more
attention to post-succession strategy.
Once again, the results suggest that feasibility,
in the form of the propensity of a trusted
successor to take over, drives the
development of a post-succession business
strategy.

Findings
Defining the Post-Succession Role of the
Departing Incumbent.
The Canadian family businesses in our
sample did not plan for the post-succession role
of the incumbent.
Consistent with the findings above, only H3c,
representing the relationship between
feasibility of succession (propensity of a
trusted successor to take over) and defining
the post succession role of incumbent, was
supported.

Findings
Communicating the Succession Decision.
Of all of the aspects of succession planning,
communicating the succession decision appears to be
the one most practiced.
Also consistent with our previous analyses, the
feasibility of succession, as measured by the
propensity of a trusted successor to take over, was
significantly related to communication, lending support
for the third hypothesis (H3d).
The second hypothesis (H2d) was also supported,
which states that conformance with social norms
affects the extent to which a family firm engages in
succession-planning activities.

Limitations
The sample was limited to Canadian family
businesses, which is not representative,
therefore, cant be generalized to other
countries, especially that this study uses the
theory of planned behavior which discuss the
social norms which differs from one country to
another.
Other factors that affect succession planning
should be studied.
Recommendations
First, after refining some of the scales in this study that indicated lower reliability, it is important to
conduct follow-up studies using different samples to ensure that the findings here are
generalizable to the broad population of family businesses in the world. For example, does
feasibility of succession drive the planning process in other countries and other cultures?
Second, it would be useful to determine which factors lead to more effective succession planning
processes. This paper suggests that the desire of the incumbent is vitally important for effective
succession planning, but more research is necessary to determine whether this statement is
valid.
Third, research is needed on the relative importance of the various components of the
succession-planning process to succession satisfaction and effectiveness. For example, few
studies have informed us how much succession sequencing, timing, technique, and
communication matter to succession success .
Fourth, it would be important to understand the effect of relative power between incumbents and
successors in family firms and the influence of these dynamics on the departure style of the
parting leader.
Fifth, research focused on investigating the part that other family-related variables such as
traditions and norms play on the succession planning in family firms would enhance our
understanding of this process.
Finally, whatever direction future research takes us, to accumulate a more consistent body of
knowledge it is important that scholars in the field either build their research programs on theories
of behavior or theories of the firm. Although there are many possibilities, we suggest that the
theory of planned behavior is a good fit for studying many of the critical issues, such as
succession and professionalization, facing family businesses in the new millennium.