Governance

The rise of sticky baton syndrome

The next generation of family business leaders are growing increasingly frustrated with parents that refuse to let go of businesses, despite the fact that many of them say they have “retired”.

This frustration has been highlighted in a study by the business services group PwC, which talks about the “sticky baton syndrome”. According to PwC, this is when the older generation hands over management of the firm in theory, but in practice remains in control of the key decisions.

“As the generational gap widens, the period between each transition gets longer,” says Alfred Peguero of PwC. “This means potential successors often are excluded from hands-on involvement and lack the experience needed to run a company.”

In most cases there is considerable awareness of the importance of pursuing a coherent succession at family businesses. Nevertheless, when it comes to actually allowing the next generation to take full control many family businesses fail.

Even when next generations get appointed to senior positions at their family business the previous generation leaders are staying on as chairman and/or advisers. They are still influencing the business from behind the scenes.

“I won’t really have power until my father dies,” says a next generation leader of a family business who wanted to remain anonymous. Although this represents an extreme view, it is a common sentiment of many next generation family business leaders, say analysts.

Sir Michael Bibby, who is now chief executive of the UK family business Bibby Group, told the BBC recently that he wasn’t going to work in his family business with his father  “He would be the boss and I would argue with him and he would always win. So I actually came into the business the day he retired.”

The situation is likely to be worse for the children of first generation entrepreneurs. In this case the business hasn’t been through a succession so there is no first-hand experience to act as guidance. “Also, the entrepreneur is likely to be a determined and dominant individual who will find it difficult to relinquish control,” says a family business expert.

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