Whilst this may seem like a relatively simple task to orchestrate, it is actually a difficult task considering that most SMEs are family owned businesses (Bowman-Upton 1991).
Lassini (2005) found that family businesses are unlikely to survive after the third generation with only 30% of these businesses successfully handing over leadership to the second generation and 12% handing over to the third generation. Lassini (2005) also found that nearly 2-3% of family businesses progress to permanent development, compared with approximately 97% that either close down or are sold. There are a variety of reasons for these statistics, some of which include the fact that some of these businesses are started by immigrant populations. As their children get older, they can lose interest in the family business and develop a preference for integrating with other members of society by attending university, or moving into mainstream employment. Some of the businesses may not be owned by immigrant populations but the younger generation are constantly under pressure to take on employment offers in the more seemingly attractive areas of technology, media and other more glamorous occupations which offer bigger pay packets and benefits.
This demonstrates the importance of manageme...
These organisations tend to have personalised management which results in the identification of the business with the owner/founder; they have a small market share which means they cannot dictate the price and have to rely on the numbers of goods sold; they occupy a niche market with heavy reliance on customer loyalty; and they also find it difficult to raise the finance to grow (Bartol and Martin 1998). Whilst SMEs have favourable characteristics which include having a dependable culture and strong commitment, their nature leaves them vulnerable to succession issues and dilemmas, and is often the main reason why they find it difficult to survive throughout generations. For example, the Hilton hotel chain was founded during the Great Depression in the US and it is currently in its second generation; however, the succession into the third generation does not seem clear as there is no apparent heir to the hotel chain.
Traditional management succession models cannot be easily applied to SMEs because they are more relevant to larger corporations. For instance, traditional methods include employee motivation and rewards through promotions, higher salaries and incentives (Mullins 1999). However this can only work in an organisation a tall hierarchy and more layers of management which are lacking in SMEs. This paper shall analyse the issue of succession in a SME and consider future options for the business.
The Business Case Study
Stop N' Shop Supermarket has been chosen as the SME for analysis for this paper. This business has been selected based on the definition of an SME which stipulates that it has at least one employee and no more than 50 employees in order for it to be included in this paper.
This business is family owned