Succession Planning in Ethnic Family-Owned Businesses:  Evidence from Jamaica

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Outline of Presentation. Background to ResearchContextual FrameworkObjectives of PaperMethodMain FindingsConclusions. Background to Research. A group of FBOs and WBOs wanted to know the landscape and scope of their respective sectorsSought and got sponsorsEngaged the university community. Co

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Succession Planning in Ethnic Family-Owned Businesses: Evidence from Jamaica

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1. Succession Planning in Ethnic Family-Owned Businesses: Evidence from Jamaica Lawrence A. Nicholson Densil Williams Maxine Garvey

2. Outline of Presentation Background to Research Contextual Framework Objectives of Paper Method Main Findings Conclusions

3. Background to Research A group of FBOs and WBOs wanted to know the landscape and scope of their respective sectors Sought and got sponsors Engaged the university community

5. Family-owned businesses are relatively common Problems they face…due to the interactions of the family and business entities are unique. Family-owned businesses combine love and work in a unique setting.

6. Perspective “…is there any institution more enduring or universal than a family business? (William O’Hara, 2004). …family business preceded important historical milestones such as the multinational corporation, the Industrial Revolution, the enlightenment of Greece and the empire of Rome. According to O’Hara, many of the oldest family businesses span countries such as Japan, France, Italy, Germany, United Kingdom, Chile, Netherlands and Mexico. Baskin (2001) characterises family business as the most common type of business form world-wide.

7. FOB Many argue that FOBs possess "distinguishing characteristics" that set them apart from other businesses (Cromie, Stephenson & Monteith 1995; Daily and Dollinger, 1991; Gersick et al., 1997;; Ward, 2004). Among the documented characteristics of FOBs are emotional and biological imperatives versus rational business-oriented imperatives, significant control by family members, strong overlap between family and business, importance of family/emotional relationships, entrepreneurial versus contentment, relatively poor governance

8. A Definition Defn.: an enterprise in which a family has significant ownership and control, which may or may not be majority ownership or control. The family includes nuclear family (spouse, offspring, adopted children), immediate relatives (grandparents, parents, siblings), and extended family members (aunts, uncles, cousins, nieces, nephews, and in-laws of both offspring and adopted children). FOBs include partnerships and limited liability companies that conduct a trade or business within the regulatory framework of the laws of the country in which they operate

9. The Three Circle Model1

10. Succession Planning One of the most challenging aspects of FB The ultimate test of a FB…affecting many components of the FB (Gersick, Davis, Hampton and Lansberg, 1997). The number one common predictable issue facing FB (Ward, 2004)…issues such as “letting go,” “choosing the right successor from among their children” and “financing the transition of business ownership to children.” Not to be confused with replacement planning (a means of risk or crisis management aimed at reducing the likelihood of total business failure due to the unplanned loss of key persons in the firm)…SP… a deliberate and systematic effort by the firm to put plans in place to ensure continuity in leadership, the retention and development of intellectual and knowledge capital for the sake of the future development of the firm…Rothwell (2001)

11. Factors Affecting SP Attitude of family members (Birley, 1986); Personal relations among relatives (Davis, 1986); Level of interest of members of junior generation (Ward, 1987; Handler, 1989); Gender and age of offspring (Ayres, 1990; Kaye, 1992, Ward, 2004); Trust of family members who are active in the business (Lansberg and Astrachan, 1994); Individual needs, goals, skills and abilities of potential successors (Stravrou, 1999). Cultural and traditional beliefs (Jivraj & Woods, 2002)

12. Objectives of Paper To examine JFOBs and the dynamics involved in succession planning To explore factors that affect succession planning in the JFOBs To examine and analyse ways in which ethnicity affects succession planning

13. Method Multi-dimensional approach to data collection (survey type with the use of a questionnaire): direct contact with employees and management staff of each business; personal knowledge of the investigating team which was familiar with the respective areas networking with persons knowledgeable about the respective business communities. Data were analysed using descriptive and multivariate statistical techniques. This method follows the general trend for analysing survey data in this stream of literature.

14. Method

15. Main Findings There are differences in approach to succession planning among the ethnic groups in Jamaica Families of African descent (Black and Brown Jamaicans) are more inclined to discourage their children to become part of the FBs Families of Indian and Chinese descent (Indian and Chinese Jamaicans) tend to regard it as a natural course of event for children to become part of the FBs The life of a number of FBs ends when children complete tertiary education Many view FBs and tertiary education as mutually exclusive

16. Main Findings Each of the ethnic groups was more inclined to choose men as successors About 60% of FBs with succession plans would choose a family member Many of the findings are consistent with findings in FBs in the USA

17. Main Findings

18. Main Factors Across Ethnic Groups Apprehension to non-family members Role clarity for family members Clear path to succession Role of non-family members Meritocracy Human resource issues Compensation for successors

19. Conclusion & Implications SP is critical for the survival of FOBs The trend in JFOBs not unlike that found in other regions There are differences among the main ethnic groups There are implications for… policy makers the large Diaspora in the UK & North America ….

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