Navigating leadership succession in a changing world

The answer is “yes and no.” 
Across Southeast Asia, findings from a joint SMU-Deloitte study found 77 per cent of first generation family business leaders believe it’s important for the Next Gen to succeed them. At the same time, Asia’s level of consumption – and the rise of the internet economy – is happening at break-neck speed.
As a result, the family businesses we work with are a complex tapestry of continuity and change. 
The continuity comes from retaining the values and the ingredients that have made the business successful over decades. 
On the other side of the coin, business strategies are changing because of changing dynamics in Southeast Asia including a rapidly growing middle class. 
Technology is also promising to offer a new way of life and better experiences for consumers in the region. In a report by Google-Temasek, they estimate in 2017, 330 million Asean inhabitants were internet users – but that number is expected to soar to 480 million by 2020.
The opportunities in reaching an emerging and increasingly online consumer are numerous and ripe for the taking but the challenge is to be quick, bold and flexible to change.
In response we are seeing business clients move “from less bricks to more clicks” and seek out sales talent that can drive online sales. Wrapped up into an increasing digital strategy, is a shift in the company brand. 
At the operational back-end, we are seeing clients move toward cloud accounting, RFID in the supply chain to track the movement of goods, and shifting the supply of materials away from China to lower-cost economies like Vietnam.
Some of the decisions are a break from decades of traditions but are the right ones to take in order to meet the challenges of the future. The problem is these decisions need to be made at a time when a leadership transition is taking place. 
Here lies a potential generational divide within a family business which could be fraught with danger. 
Businesses have become successful following tested templates, but innovation is how they will remain successful in the future. For the current generation of leaders, letting go whilst observing immediate change by the successor can trigger a lot of emotions on top of what is already an emotional time. 
This can actually become a source of conflict if not addressed because it’s not unreasonable for founders to want to stay involved in the business in some shape or form. Having invested so much emotionally and physically into building a business, it would take an extraordinary individual to not have their nose slightly out of joint if the next generation wants to change what they built over many decades. 
So while experience, knowledge of the business and industry, leadership traits and education are rightly the main factors for leadership selection, the ability and willingness of the successor to manage inter-generational collaboration cannot be dismissed. 
A lot of this can be avoided by having clear communication and a clear and collaborated plan.
Some things to consider in mapping out a leadership transition include identifying the successor and the active/none active members of the family, work out a collective business vision for the company in future, establish governance process for involving family members in decision-making, and document the plan in writing. The plan should also have flexibility in it because succession planning is never a permanent thing or a ‘straight line’ activity – it changes and evolves. 
The first generation may have built the business but the ‘Next Gen’ carry the weight of sustaining it. Being true to family values, through open communication, and structured planning can help ensure the generational divide become a generational accelerator. 

Contributed by PHILIP KUNZ, Head of Private Banking, Southeast Asia, HSBC Private Banking