Giving charge: navigating leadership transitions in family businesses

• Successful leadership transitions require fully empowering the new leader with both authority and responsibility, rather than just a ceremonial transfer of power.
• The outgoing leader must provide mentorship and guidance while also allowing the new leader the freedom to make their own decisions and mistakes.
• Leadership transitions should be managed with a blend of respect for the outgoing leader and a commitment to continuity, ensuring that the business remains stable and prosperous during the change.

In the world of family businesses, the process of “giving charge” is often fraught with complexities. Elders may struggle with relinquishing power and responsibilities, while the younger generation may face challenges in stepping into leadership roles. A common refrain from the older generation is, “I’ve left everything, given up all my power and position. I’m no longer responsible for anything; I’m just another visitor or guest to the company.” Meanwhile, the younger members often wrestle with the legacy they’ve inherited and the constant direct or indirect interference from their predecessors.

Successfully giving charge requires more than just a symbolic handover; it involves a delicate balance of extending support when needed while fully empowering the new leader with the authority and responsibility required for the role. The younger generation often desires the freedom and power that comes with leadership but may shy away from the accompanying responsibilities. This can lead to a blame game, where each party struggles with their new role. It’s crucial for the leadership transition to be well-planned, with a clear overlap period and some level of mentorship or handholding as the new leader takes charge.

A planned and smooth transition

Leadership transitions are inevitable due to factors such as age, retirement, health issues, or even death. However, a planned and smooth transition can mitigate the potential turbulence associated with such changes. A real-life example illustrates this point vividly: A family chairperson was set to hand over her role to a younger male technocrat eager to take the reins. She had grown accustomed to certain privileges, such as a private room with an executive assistant, an attached washroom, a reserved parking space, and symbolic gestures of respect like a puja or office-wide standing ovation upon her arrival. In a ceremony when she came and not all stood up, she was hurt personally. When the new chairman came all stood up as was the custom. She, however, remained seated for a while. Her predecessor the old man immediately stood up. To the credit of the new chairman, he bowed down to her and the old man as was the custom in the family. Letting go is not easy yet there is no point in hanging on to a chair that no longer exists.

Despite the transition being well-documented in the family constitution, the outgoing chairperson struggled to let go. She continued to occupy her office and parking space, citing various reasons for the delay in moving out. She had a formal meeting and told him to ask whatever he wanted to know. She never gave him tips on red flags and how to handle them based on her experience. She wanted to make her presence felt in her absence on the chair. When the new chairman finally took over, he did so with grace, acknowledging her contributions and showing respect. However, the transition was not without its challenges. The new chairman initially overlooked some compliance issues, assuming they were trivial matters, only to face significant operational problems later. He was more focused on technology upgrades and chose to ignore a lot of paperwork which was necessary but he thought it was unnecessary bureaucracy. Here one of the old family loyalists swung into action and the situation was brought under control by paying a small late fee to the government body. 

The earlier chairman had swung back into action and took the initiative of guiding his onboarding. He shared with him all that he knew in clear language and told him he would be there. In the earlier transition, the old chairman had got the chairperson inducted into the role three months before his tenure ended. He put her on the chair and used to share his room and office with her. She could observe and ask questions very openly. He explained the do’s and don’ts from his perspective while allowing her to decide for herself. After she took the chair formally, he was available for the next three months daily in the office for any clarity needed. After that, he went on a long leave pushing all kinds of communication back to her. 

From his side, he had done his bit for the success of the succession.

Proactive and responsible 

This scenario underscores the importance of being proactive and responsible when taking charge. The outgoing leader’s struggle to let go and the new leader’s initial reluctance to take on certain responsibilities highlight the complexities of leadership transitions in family businesses. Some things come with the chair and must be complied with to be clearly understood. Having a list of such issues with the chairman’s office was put in place so that in the future there was timely compliance.

In any business, ensuring the success of a leadership change is key. Knowing when to hold on and when to let go is critical, as both are important in different contexts. Leadership transitions should be approached with a blend of grace, respect, and a keen understanding of the responsibilities that come with taking charge.

Naveen Khajanchi is chief executive of a leadership search firm, a division of NKH Foundation, and an executive coach. He is an alumnus of Insead.