A good succession plan in family-managed businesses should leave everyone happy when it’s time for the older generation to give way. PHOTO | FILE
What you need to know:
A good leader must put in place mechanisms that ensure a smooth transition.
King David said, “Call Zadok the priest, Nathan the prophet, and Benaiah son of Jehoiada. And they came before the king. The king told them, Take the servants of your lord and cause Solomon my son to ride on my own mule and bring him down to Gihon (in the Kidron Valley). And let Zadok the priest and Nathan the prophet anoint him their king over Israel. Then blow the trumpet and say, Long live King Solomon!” 1 Kings 1:32-34 AMP
Shin Kyuk-ho founded Lotte in 1948 in Tokyo and later expanded into his home country of South Korea in 1967 from which dual locations the company grew into its present size of $77.5 billion and 180,000 employees worldwide.
His sons, born from his marriage to Hatsuko Shigemitsu, a Japanese citizen, both believe that they are the legitimate heirs to the fifth largest company in Korea.
According to the Korea Herald, trouble for Lotte Japan and Korea began in 2011 following a dispute between the founder’s sons Shin Dong-bin and Shin Dong-joo about who was to take over from their father.
Each oversaw their domains in Japan and Korea respectively with their father acting as the general-chairman.
On 27 July 2015, Shin Kyuk-ho and his older son, Shin Dong-joo, visited the Lotte Holdings and fired six directors, among them was his younger son Shin Dong-bin.
The next day, the younger son called an emergency board meeting to reinstate the board members previously fired and to oust his father.
This messy battle culminated in the removal of the elder son Shin Don-joo from all boards in the Lotte Holdings, a position that was confirmed by Lotte Holdings shareholders who rejected all his proposals and confirmed Shin Dong-bin’s leadership of the company.
So immense was the crisis and intense the nationalist sentiments (since the company has both Korean and Japanese identities) that the new chairman was called in for a parliamentary audit on 17th September 2015.
It was at this meeting that Shin Dong-bin reiterated that Lotte belonged to Korea and not Japan, (albeit in a heavy Japanese accent) and declared on Korean television that “the war of the princes is over. It is not going to happen again.”
These sentiments appear to be wishful thinking on his part; according to the same article, his aggrieved sibling dismissed Shin Dong-bin’s statement as “madness” even as he initiated a fresh contest to his brother’s leadership.
Given his shareholding advantage in the company, his remarks cannot be taken lightly. A commentator watching from the sidelines prophetically stated that “Lotte has no future if the two keep fighting.”
Every leader of family business must see to it that they organise an orderly succession from them to the next generation of leaders.
Under no circumstances should scions be left to fight it out among themselves to determine fitness for the position of leadership. Nor should the leader allow any among their children to unilaterally anoint themselves to be heir.
It is the leader’s role and responsibility to identify who among the next generation is most suitable to lead, to publicly proclaim their choice without fear or trepidation and to visibly demonstrate the passing on of the leadership mantle from them to their successor.
Leadership succession within a family business that intends to transcend generations should not be reduced to a bitter contest among the children or a case of survival for the fittest.
Allowing such a spectacle to play out, even in the privacy of one’s home or office, is detrimental to the business and even more to the family relationships.
Even though conventional wisdom advises upcoming leaders to “get up and grab it (leadership)” rather than wait to be anointed, self-appointed heirs can be the undoing of family businesses especially when they achieve their positions through the strategy of divide and conquer.
Whether they succeed or not, they inadvertently create fissures in the venture that eventually develop into insurmountable chasms.
An orderly, public and symbolic succession process is a boon to the founder, the heir and the family business in general.
It cements the founders authority over the household (and places a premium on all the core values the leaders holds dear), firmly establishes the incoming leader in their new role and, by involving as wide a group of stakeholders as possible, creates a sense of ownership of both the business and the leadership transition process.
Mutua is a Humphrey Fellow, leadership development consultant. [email protected]
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