Tax, legal, and process-related factors take center stage
Why do so many business succession plans in Germany still fail? Although the problem is well known, recent surveys by the DIHK and KfW show no signs of a positive turnaround. Our foundation, “In guter Gesellschaft,” which advocates for modern entrepreneurship, therefore sheds light on the topic of business succession from a different perspective with its recently published digital publication, “Together Instead of One After Another—How We Can Redesign Business Succession.” While business succession has traditionally been addressed in the professional literature primarily from financial, legal, and tax perspectives—that is, in rather “technical” terms—we focus on the question of how sociopsychological factors can cause business transfers to fail and how this can be prevented.
Emotions influence decisions—including in business transfers
We therefore asked ourselves: What emotional hurdles exist, both on the part of those handing over the business and on the part of those taking it over? What patterns of behavior lead to success? What constructive hypotheses and approaches can we formulate to shape succession processes in a way that is positive for all parties?
Based on a comprehensive literature review, we sought answers and compiled key statistics and scientific findings—such as those regarding the (not-so-surprising) gender dynamics in succession. Models such as the “role clash” in family businesses or the “magic triangle” of love, money, and power help us better understand and contextualize many controversies within family businesses.
We’ve been looking at new problems through the lens of old ways of thinking
All too often, the topic of business succession is approached through outdated frameworks, such as an unwavering focus on handing the business over exclusively within the family. Yet, as expert Prof. Dr. Birgit Felden explains in an interview, a family name alone does not make an entrepreneur. Perceptions are dominated by clichés: the old patriarch who can’t let go; the son as a talentless successor who, out of defiance, wants to do everything differently; or the daughter who, as a woman, doesn’t have “what it takes” to be a full-fledged entrepreneur anyway.
The perspective of daughters as potential successors to a family business has generally not yet been given intensive consideration in the literature we reviewed. The image of the patriarch and the “strong man” at the helm of a company remains firmly entrenched in people’s minds.
The emotional significance of one’s own business is often underestimated. For example, entrepreneurs often refer to their company as “my baby.” While this is usually meant symbolically, a study by Aalto University in Helsinki shows that men’s love for their business bears a striking resemblance to paternal affection. These emotional factors naturally have consequences for business succession. However, we still know far too little about these aspects beyond the idea of “not being able to let go”—and, above all, about possible solutions.
What approaches to a solution are there?
Change can only happen if we take a fresh look at the topic of succession with an open mindset. For example, by focusing on the people involved—their fears and motivations—rather than merely approaching the issue from a process-optimization perspective. Entrepreneurs should be viewed more as emotionally driven actors than as purely rational ones. This socio-psychological perspective also needs to be further explored scientifically.
To do this, we need, among other things, different language and different frames: The term “SUCCESSION,” for example, implies that one person succeeds another. There is no provision here for collaboration. The terms “SENIOR” and “JUNIOR” categorize people into age silos. What is needed here is a shift in thinking—away from generational change occurring every few decades toward continuous change.
Last but not least, we also need to redouble our efforts to make female succession more commonplace—from redefining the roles of women as entrepreneurs, to providing more female role models, to placing a greater focus on the opportunities for succession, especially for women.
How to Move from Thought to Action
Business succession rarely fails due to technical issues; rather, it usually fails because of emotions, relationships, and conflicts. Like an iceberg, only a small part of the motives for action is visible—the far larger portion lies “below the water,” that is, in the preconscious and unconscious realms.
Sustainable solutions therefore require not only technical expertise but also an eye for personal concerns, values, and beliefs. After all, whether handing over or taking over a business, people make decisions that significantly shape the rest of their lives.
So it’s about starting with ourselves. As is almost always the case, however, putting this into practice often sounds easier than it is in everyday life. What helps here is, ideally, an open and trusting exchange with other entrepreneurs, engaging with questions that prompt personal reflection, as well as tools and methods from coaching and personal development.
We have compiled additional practical tips, expert interviews, and recommended reading in this publication. As a nonprofit foundation, we aim to encourage a completely new way of thinking about business succession—moving away from old patterns toward more contemporary and flexible models. It is available free of charge as an e-paper at www.ingutergesellschaft.org/publikation.
