TM5 Flashcards
(12 cards)
Succession vs. Inheritance
What’s the difference?
Succession: Transfer of leadership/management (active roles).
Inheritance: Transfer of ownership/assets (passive rights).
Key Point: Succession requires preparation; inheritance is legal entitlement.
Outline the 3-phase succession process.
- Pre-Succession: Planning, training successors, incumbent retirement prep.
- Transition: Gradual role transfer (e.g., shadowing, co-leadership).
- Post-Succession: Monitoring, feedback, incumbent’s new role
How does pruning reduce complexity?
By limiting ownership to committed branches (e.g., buying out disinterested cousins).
Avoids:
Decision-making gridlock.
Conflicts over divergent visions.
Describe the 4 retirement styles based on financial/mental readiness.
Let Go Financially + mentally ready = Plans exit smoothly.
Emotional Stay Financially ready, mentally not = Clings to power (e.g., “I’m irreplaceable”).
Financial Stay Mentally ready, financially not = Delays exit for money.
Imperative Stay Neither ready = Forces next-gen to oust them.
The 4 Exit Styles of Incumbents
Monarch: Refuses to leave (until death/crisis).
Ambassador: Steps back but stays as figurehead.
Governor: Announces retirement date and prepares.
Entrepreneur: Exits to start a new venture.
Successor Commitment Types
What drives successors to join the business?
Affective: Passion for the business (“I want to”).
Normative: Family duty (“I ought to”).
Calculative: Cost-benefit analysis (“I have to”).
Imperative: No alternatives (“I need to”).
Name 5 categories of barriers to Intra-Family Succession
- Individual: Incumbent’s attachment or successor’s lack of skills.
- Relational: Sibling rivalry or non-family resistance.
- Financial: Tax burdens or liquidity issues.
- Contextual: Industry decline or stakeholder distrust.
- Process: Poor planning or unclear criteria.
Succession Policy vs. Plan
How do they differ?
Policy: General guidelines (e.g., “Next-gen must have a MBA”).
Plan: Specific steps (e.g., “CEO transition over 3 years with mentorship”).
What are key grooming successors strategies?
Autonomy: Let them make decisions early.
Competence: Assign stretch projects + honest feedback.
Relatedness: Foster team support (avoid isolation).
Explain the “Freeze-Thaw-Refreeze” Transition
Freeze: Incumbent retains control (stability).
Thaw: Gradual handover (e.g., joint decisions).
Refreeze: Successor fully takes over.
Example: 5-year transition with shared CEO title in Year 3.
Why are in-laws a common conflict source?
They may:
- Push spouses for leadership roles.
- Divert wealth to non-bloodline heirs.
- Lack emotional ties to the business legacy.
Name 3 critical steps for Succesfull Sucession
- Start early (10+ years before exit).
- Involve outsiders (e.g., independent board evaluation).
- Document everything (charters, timelines, feedback).
