Democratic Management Succession in Balkan Family Businesses: Appointment of Family and nonfamily Members in Leadership Roles
Authors: Evangelos Markopoulos, Denis Ukperaj, Hannu Vanharanta
Abstract: Family businesses are considered to be the backbone of the free-enterprise system in the Balkans. They account for the overwhelming majority of small and medium-sized enterprises and contribute significantly to the economic welfare of the region. However, the lack of succession planning, among other factors, has put the future prospects of local family businesses at risk. Accordingly, family-owned enterprises that do not have a succession plan in place could not only endanger the ongoing prosperity of their future generations but also the company’s very existence. Given that the nomination of family and nonfamily members to top senior positions may set personal interests against corporate ones, this may lead to serious problems in the firm’s strategic direction when the two are not compatible. Consequently, potential successors should be assessed across different domains to determine who is the best fit for a leadership role. Accordingly, this paper introduces the Democratic Employee Connect Model (DECM), a step-gated framework which can provide a potential solution for family businesses when planning for management succession. It is composed of six steps, which will guide family-owned enterprises during this crucial process. The six steps of the model are aligned with the six levels of the Company democracy Model to democratically identify the most suitable candidate in this succession process which is often driven by personal and family interests. Two essential components of the DECM are its scoring system and change management model applied in a democratic context. The former would help family-owned enterprises decide whether a family or nonfamily member should be the next leader of the company, whereas the latter would increase the organisational commitment and level of cohesion between family and nonfamily members. Although this framework is specific only for the Balkan region, it may also be applicable in other regions and economies of similar size with some minor adjustments. The research conducted is based on secondary data that integrates selected elements from the main family business theories in the proposed model such as the family business system theory, agency and stewardship theories, social exchange and social identity theories, and others. In addition, primary research has been collected from survey responses of 63 family businesses, interviews with five industry experts and observations of two family-owned enterprises to better understand the factors that Balkan family businesses take into account for the appointment of family and nonfamily successors.In this context, the primary and secondary research findings suggested that relational and contextual factors are more important than individual factors for the nomination of a nonfamily successor in these organisations and the opposite is true for a family successor. This provides evidence that most family-owned enterprises in the region have a strong desire to appoint family members in leadership roles as opposed to nonfamily members, whose contributions are presumably secondary to the founding family. These insights are incorporated in the Democratic Employee Connect Model (DECM) for a more accurate representation of family businesses in the region. The paper also presents research limitations that can be considered for future research.
Keywords: Family Business, Succession, Entrepreneurship, People, Economy, Society, Governance, Management, Leadership, Balkan, Company Democracy, Culture.
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