Impact of Generational Change on Change Management Strategy in Family Businesses

Impact of Generational Change on Change Management Strategy in Family Businesses

Introduction

This essay examines the issue of organisational change and its management, with specific regard to succession and generational change in family businesses. This short essay attempts to analyse the bringing about of organisational change in family businesses, with specific regard to the impact of succession and generational change upon organisational change management strategies. The essay discusses the rationale for organisational change, describes relevant change management models and furthermore takes up the limitations and challenges of succeeding generations to respond to changing environments and manage change. Use is made of various change management models and succession theories for the evaluation of this study.

Overview

There is little doubt that family firms constitute the predominant form of businesses in economies around the world, and especially so in the developing and emerging nations. Whilst countries like the United States and Japan witnessed a huge expansion in the formation of joint stock corporations in the early years of the 20th century, many other European countries like France, Italy, Portugal and Spain witnessed the persistent continuance of family businesses (Bigliardi & Dormio, 2009). The United States and Japan accordingly witnessed the growth of huge corporations like General Motors and Toyota, where management was separated from ownership, even as countries like France and Italy continue to have an abundance of small, medium and even large family owned and controlled business firms (Bigliardi & Dormio, 2009).

Whilst the continuance of this form of business activity is accepted by academics and experts, the majority of business and management experts tend to compare the strategies, managerial and operational efficiencies of family firms unfavourably with their counterparts, which are managed by paid managers and where ownership is distinctly separate from strategic and management decision making (Cabrera-Suárez, et al, 2001). Such tendencies appear to be confirmed by the results of several research studies, which reveal that only 30% of family owned firms continue into the second generation and approximately 10% of such firms last into the third generation (Cabrera-Suárez, et al, 2001).

Change management is widely accepted to be one of the most important areas of business activity and is felt to be the litmus test of organisational managements. Successful organisations are very likely to be those who have displayed their adeptness at bringing about efficient and successful change management (Randall, 2004). With the overwhelming majority of business organisations functioning in dynamic and changing environments, all of them need to respond effectively to the challenges of political, economic, social, technological and environmental changes that are constantly occurring around them (Randall, 2004).

The failure to do so can result in obsolescence, the development of inefficiencies, unpreparedness in the face of market emergencies, lack of competitive advantage and decline in organisational growth, profitability and well being, as repeatedly displayed by the unfortunate debacles of organisations like Remington, Kodak and Xerox in the face of aggressive, efficient and skilled competitors. Management academics like Peter Drucker and CKS Prahalad have constantly emphasised on the need for managements to be effective agents of constructive change in case they really wanted their organisations to prosper (Randall, 2004).

Whilst professionally managed companies constantly work towards developing environmental response through the inculcation of a change oriented culture and seamless transition of management from one CEO to the other, family businesses experience very substantial organisational change during succession and the changeover from one generation to the other (Paton & McCalman, 2000). Successors in family businesses are by and large groomed for succession by their seniors, but such changeovers do bring about significant alterations in management relationships, communication and coordination between the successors and older managers and various other issues, all of which have significant bearing on organisational strategies towards change (Paton & McCalman, 2000).

Discussion and Analysis

Rationale for Change

The ability to manage change has always set apart successful businesses from the also-rans. Whilst change management was always considered to be important for organisational flexibility and effectiveness, recent years, have seen the progressive occurrence of numerous changes that have greatly impacted the performance of business organisations, providing them with enormous opportunities and great challenges at the same time (Cameron & Green, 2004).

The rapid occurrence of events like the collapse of the Soviet Union, the reunification of Germany, the formation of the European Union, astonishing technological advances, the emergence and growth of China and India as fast growing and huge economic powers and the development and spread of the Internet and IC technology have created huge challenges for business organisations, providing them with numerous market opportunities and avenues for increasing production at very low costs, as well as various types of business challenges (Paton & McCalman, 2000). The success of modern day businesses depends significantly on their ability to manage change. Recent decades have accordingly witnessed the debacle and even demise of many organisations that could not effectively manage change, as well as others that could forecast opportunities, respond to the environment, and achieve enormous business success (Paton & McCalman, 2000).

Important Change Management Models

Whilst there is little doubt of the need for organisational change, many research studies have repeatedly revealed that the majority of change management initiatives by business firms are unable to achieve all or some of their original change management initiatives. The majority of the failures of such change initiatives occur because of employee and organisational resistance to change. It has repeatedly been seen that organisational employees tend to resist change initiatives, both individually and collectively, because of apprehensions about the impact of the change management initiative upon their professional and personal lives, by way of location of work, nature of assignment to be handled, additional responsibilities, need for training, advancement opportunities, and finally security of employment.

Management experts state that such resistance is best managed through careful, planned and coordinated communication with all employees by the senior management, either directly or through appointed organisational change champions. Change management experts like Lewin and Kotter have also advocated the bringing about of change in a phased and carefully planned manner. Lewin advocates the use of a three stage model, namely unfreeze, change and freeze, implying that the organisation should first be readied carefully for change (Lewin, 2005). The change should then be brought in carefully, following which systems and processes should be established for institutionalising such change (Lewin, 2005).

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