1. Final Year Project
SUCCESSION PLANNING IN FAMILY OWNED
BUSINESSES
MEHREEN YOUSUF
BB-03-06-3479
SUPERVISED BY:
MR. COL.RAZA KAMAL
SUBMITTED ON:
MAY 07, 2010
In the Partial fulfillment of the requirement for the Degree of Bachelors of
Business Administration (BBA)
Department of Management Science
PAKISTAN AIR FORCE
KARACHI INSTITUTE OF ECONOMICS AND TECHNOLOGY
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2. LETTER OF APPROVAL
Thesis Title: SUCCESSION PLANNING IN FAMILY OWNED
BUSINESSES
By: MEHREEN YOUSUF
BB-03-06-3479
Thesis Supervisor: Mr. COL RAZA KAMAL
Academic Year: 2010
The Board of Advanced Studies at PAF KIET has approved this Thesis, submitted in
partial fulfillment of the requirements for the degree of Master of Business
Administration.
Approval Committee:
Mr. COL. RAZA KAMAL
(Supervisor) (Director Academics)
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3. LETTER OF TRANSMITTAL
April 7, 2010
Mr. COL RAZA KAMAL
Project Supervisor
PAF KIET
Dear Sir,
I am submitting the final project report on “Succession Planning in Family owned
businesses”. The report includes brief literature survey, methodology, data analysis
and conclusion.
I am grateful for your guidance and supervision without which this assignment
could have not been completed. I have tried my utmost to do justice to the topic.
However any suggestion or query relating to the topic is always welcome. If any
matter pertaining further clarification, I would be glad to help.
Yours Sincerely,
_____________
MEHREEN YOUSUF
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4. LETTER OF AUTHORIZATION
APRIL 7, 2010
MEHREEN YOUSUF
BB-03-06-3479
Please refer to your initial proposal for undertaking the study on “Succession
Planning in Family owned businesses”. In the view of subsequent meetings,
discussions, chances of availability of data, and scope and interest of this study, the
initial proposal was finalized. Kindly initiate the study on the finalized Terms of
Reference. (TOR)
Mr. COL RAZA KAMAL
Supervisor
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5. ACKNOWLEDEMENT
First of all I would like to thank Almighty Allah who has guided me the
way for a bright future. I would like to acknowledge the help provided
by my supervisor to make this project a success.
My supervisor Mr. COL RAZA KAMAL has helped in the preparation of a
project. He was always full of energy and willing to teach the concepts
about human resource with his working and practical experiences.
I am also thankful to my parents who accommodated me during those
long hours of work in my project development and all the friends who
equally encouraged me.
I would like to appreciate the co-operation I got from my class mates at
PAF KIET, which boosted my moral and encouraged me to strive for
better results.
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6. ABSTRACT
The aim of this study is to explore and gain an insight into succession
planning in family firms in impacting business performance. There were
main two variables that include 1) Succession planning and 2) Family
business. There were five sub variables for each main variable. A set of
questionnaire was pilot-tested and personally distributed to 30
executives. There were some limitation in the study the main limitation
was shortage of time and the main population were business man who
do not have time to fill the questionnaire. There were two sources of
data. One is primary data that is through questionnaire and other was
secondary data that is from books, articles, news papers. The literature
review was made which help me make my hypothesis. There were two
main hypotheses in the study
1. Ho 1: there is no relationship between family ownership and
successful succession planning.
Ha -1: there is a strong relationship between family ownership
and successful succession planning.
2. Ha 2: there will be eventual smooth transition in family
businesses if the successor is relevantly educated.
Ho 2: there will not be an eventual smooth transition in family
businesses if the successor is relevantly educated.
The method which I have is a new method for statistical test which is
lisrel. It is software that determines the relationship. This equation was
selected since the sub variable of independent and dependent variables
vary in intensity therefore the other test were weak for the data.
After analyzing the literature review and research methodology it was
concluded that my first hypothesis was accepted because business man
believe that there is a very strong relationship between family
ownership and successful succession planning and my second
hypothesis was rejected because in Pakistan people believe that
experience is more important than education.
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7. INTRODUCTION
Family businesses are growing and turning into complex business
groups,
Transforming from family controlled and managed to family owned and
professionally managed public listed businesses. Hence, successful
succession of a business and development of future successors are
becoming the key success factors for family businesses. The question
here arise is that what is successful succession for that we need to
understand what is succession planning is a process whereby an
organization ensures that employees are recruited and developed to fill
each key role within the company. Through your succession planning
process, you recruit superior employees, develop their knowledge,
skills, and abilities, and prepare them for advancement or promotion
into ever more challenging roles. If succession plan work properly than
the firm will reach towards successful succession which could reach to
success.
In western the owner of the family owned business transfer the
ownership according to the managerial skill through proper use of
succession planning whereas, in developing countries like Pakistan the
ownership is transfer to the next generation. . Family-owned businesses
face a unique obstacle: continuation of the business through
intergenerational transfer. Most family-owned businesses cease when
the next generation does not enter the business. This is the reason that
succession planning is important in family owned businesses.
Family business is the key to region’s economic growth and therefore,
their sustainability and success are critical to the region especially the
developing country like Pakistan. But in Pakistan there are many family
businesses that fail and the main reason for their failure is poor or no
succession planning.
The family succession plan must recognize and accommodate the needs,
goals and objectives of each family member. "The family's goals and
objectives then become the basic building blocks for the development of
the succession plan for the family's business," Many family businesses
also have trouble determining guidelines and qualifications for family
members hoping to participate in the business. Some companies try to
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8. limit the participation of people with certain relationships to the family,
such as in-laws, in order to minimize the potential for conflicts. Family
businesses often face pressure to hire relatives or close friends who
may lack the talent or skill to make a useful contribution to the business.
Once hired, such people can be difficult to fire, even if they cost the
company money or reduce the motivation of other employees by
exhibiting a poor attitude. A strict policy of only hiring people with
legitimate qualifications to fill existing openings can help a company
avoid such problems, but only if the policy is applied without exception.
AIM OF THE STUDY
Several objectives were set for this exploratory research.
The first was to compare the successor development activities
and succession dynamics of locally managed family businesses,
grounded in local cultural and religious environment.
The second objective was to investigate successor development
And succession dynamics of the family businesses in Pakistan,
since the majority of them are facing succession challenges from
founder generation to second and third generation of successors.
LIMITATION OF THE STUDY:
There is always a limitation that comes in our way while we conduct a
research. My research limitation include
As my research was questionnaire based and the population who
fill the questionnaire was business man and as we know that all
business man don’t have time to fill the questionnaire.
I had sent the questionnaire through email so many business men
didn’t reply to my mail.
I used incorrect numeric in questionnaire where 1 was high and 5
was low which I reversed data collating stage.
THE RESEARCH INCLUDES:
Literature review
Methodology
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9. Findings/Analysis
Conclusion
PRELIMINARY DETAILS:
Source of data: there are two source of my data: primary data i.e.
observation from questionnaire and secondary data from books,
journals and news papers.
1. LITERATURE REVIEW:
DEFINING THE TERMS.
There are many researches that define family businesses. Early
researcher Wendy Handler, (1989) identifies that family business is
ownership, management, control structures and intergenerational
transfer. Recently research has shifted Jess Chua, James Chrisman and
Pramodia Sharma, (1999) to focus intention and vision of a particular
firm as mean of determining whether it can be defined as family
business. In other article Nazir Afghan, (2007) cited the definition of
family businesses as business owned, control and managed by families.
Ivan Lansberg (1999) defines Succession as the transfer of management
and the control of a business. He also describe that there are two types
on which the succession focuses.
First is ownership succession and other is management
succession. Ownership succession focuses on who will own the
business, when and how will that happen.
On the other hand the management succession focuses on who
will run the business, what changes will occur, when will they be
accountable for results and how will results be realized.
If these two are coordinated well then succession will be successful.
Barbara Murray, (2003) cited that for the concept of relationship a
business enjoys with itself takes form of different business journey. If
the journey undertaken is one of the balance between the forces for
change and forces of resistance to change so that the issue can be easily
solved and leads to success that can be done if the psychology of
incumbent is ready to control the process. Nazir afghan et al, cited that
there are three stages for development Stavrou’s (1998) pre-entry,
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10. entry and succession phase for focus of change. The research has
several new areas, such as succession processes in kinship culture and
successor development practices within the local cultural and social
context.
SUCCESSFUL SUCCESSION
Caspar, Ana Karina Dias, and Heinz-Peter Elstrodt (2010), elaborate that
for successful succession a family business must meet two intertwined
challenges:
Achieving strong business performance
Keeping the family committed to and capable of carrying on as
the owner.
They further assert that the five dimensions of activity must work well
and in synchrony: harmonious relation within the family and an
understanding of how it should be involved with the business, an
ownership structure that provides sufficient capital for the growth
while allowing the family a to control key parts of the business, strong
governance of the company and a dynamic business portfolio,
professional management of the family’s wealth, and charitable
foundation to promote family values across generation. Nazir Afghan,
(2007) cited that successful succession is the most important factor for
survival and growth of family businesses. He further says that scholars
are searching for answers within family businesses. Lums is carrying
out a study in this respect. (Afghan. 2007). Successful succession is
subsequent positive performance of the business and ultimate viability
of the business. (Miller, 2004). Jeffery Barach, Joseph Gantisky, James
Carson, and Benjamin Doochin, (1998) cited that successors need time
and the opportunity to gain the credibility to be considered as an
effective successor.
IMPORTANCES OF STRONG RELATIONSHIP BETWEEN FAMILY
MEMERBERS
Fox, Nilakant, and Hamilton, (1996) stresses the significance of the
relationship between the business itself and the principal individuals
involved. They offer six point which talks about the relationship with
the individual and business itself that involves
The business itself and its stakeholders.
The incumbent and the business itself.
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11. The successor and the business itself.
The successor and the incumbent.
The successor and key stakeholders.
The incumbent and the key stakeholders.
These could affect the whole business as family business encounters
with relationship more than other types of business. Nazir Afghan et al
also pointed out that satisfaction of the stakeholder with the succession
process (Cabrea-Suarez et al, 2001; dyer, 1986, handler, 1990) in the
family is important to consider for successful succession.
TRUSTAMONG THE MEMBERS AND BUILD HEALTHY
COMMUNICATION
Marshall Paisner, (1999) encourages a healthy practice of
communication and dialogue within the family business should be
prime task of anyone involved with succession planning because it is a
way to maintain strong relationship between individual. Shaheena
Janjuha-Jivraj and Adrian Woods, (2002) cited that open honest
dialogue, where respect for others is maintained, can help foster a
rational focus on what are the most important consideration for
achieving a smooth succession. In another Nazir et al. cited that
according to the one of the CEO, kinship culture provides a trusted
network which helps in making decision about succession without any
help from outside. According to another CEO, the kinship culture helped
the family during the succession phase in housing complex and enjoys
family dinners and gatherings. Another family business CEO said that
due to an atmosphere of high level trust it is easier to settle the different
matters. Benjamin Becker and Fred A Tillman, (1987) assert that a trust
enables the family business owner to view his plans in operation and
make desirable changes.
SOCIAL NETWORK AMONG MEMBERS
Nazir Afghan et al, cited that a collectivist (kinship) culture is one
where there is a preference for a tightly knit social framework (norms)
in which individuals can expect their relatives, clan, or other in group to
look after them in exchange for unquestioning loyalty’( Hofstede, 1984).
11

12. Sue Birley, Dennis Ng, and Andrew Godfrey, (1999) describe that there
are three types of groups
Family in group, where family is intended to be involved
Family out group where the family member are not virtually
besides principal which is influenced by culture
And family jugglers group which falls somewhere between then
other two groups.
Nazir Afghan et al, further describe that the benefit of kinship include
Sources of capital
Pooled resources lower employee turnover,
Cohesion
Social support (Peredo, 2003)
The kinship based family businesses are those kinships where members
of kinship predominate the family business. The strong social network
will leads to good relationship pattern. Danny Miller, Lloyd Steier, and
Isabelle Le Breton-Miller, (2003) define that relationship pattern is
usually business tendencies for taking any action, it consist of three
patterns that is
Conservative pattern is rooted which is how the things happened
previously.
Rebellious is against prevailing status
And wavering which is wavering which is between both past and
present.
In another Nazir Afghan cited that to enhance the family bonding, the
practice of inter-family marriages is encouraged. It was also observed
that in kinship based family businesses when a partner expires or sells
his shares, the next kin, or relationship wise closer members get the
first preference in the purchase share, at a mutually agreed price. Jim
Grote, (2003) discusses the possibility that fundamental psychological
processes are at the heart of the conflict between individuals, especially
the incumbent and successor, during the succession process. Without an
understanding of how human nature compels individual to behave in
certain ways an advisor may experience difficulty discerning how to
resolve matters. Ercilia Garcia-Alvarez, Jordi Lopez-Sintas, and Pilar
Saldana Gonzalvo, (2002) cited that there are two broad categories of
family business socialization.
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13. The first is the founder homo-social reproduction model. Here
successors are brought in to the firm early, experience it
practically from ground up, and thus usually share the business
perspectives of the incumbent to a large degree.
The second is the new leader development model which suggests
that successor are encouraged to purse education as well as
external business and life experience and consequently they may
largely hold differing business perspectives from those of the
incumbent.
LEADERSHIP ROLE
Roger Allred and Russell Allred, (1997) describe that there are many
ways successors can gain appropriate skills and experience needed to
assume the leadership role. The first for them to work in the business
from an early age and gain direct experience of the business. Further
explain that successor to acquire experience through working in
another business and this is seen as a useful means of broadening of a
successor’s abilities and skills. Isabelle Le Breton-Miller, Danny Miller,
and Lloyd Steiner, (2004) assets that nurturing and development of
potential successors through training, education and work experience
should be undertaken with monitoring the process of succession.
SUCCESSOR’S CAN CHANGE BUSINESS ORIENTATION:
Januha-Jivraj and Woods, (2002) cited that regardless of the many other
factors involved, generational difference mean that incumbent and
successors will automatically bring divergent attitudes, experience , and
expectations to the succession process. Lansberg, (1999), emphasizes
the need to inculcate a sense of responsibility towards business and its
continuity, within family members if the business is to prosper across
generation. This requires adequate time and preparation as well as the
capacity to foster and promote a family business culture which
accommodates these concerns. Both the generation should create
combined vision for business which adequate time and preparedness
through this the business can move towards success, as well as promote
a family business culture which accommodates the concerns. Rob
Goffee, (1996) define culture that an appropriate successor value but is
also open and sensitive to future needs of successor and business id
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14. desirable. Lansberg et al, elaborate that culture is also indicated by the
way status is determined, through the systems and procedures
employed in the business and the overall organizational structure. Gita
Piramal, (1987) highlighted that if the young successor prove
themselves and energetic, and able to continue to manage growth, then
their family business continues to flourish through the high-tech 21st
century.
TRAINING PROVIDED
The firm should be provided appropriate training programs and family
member’s position that will give them the required skill and experience
to assume future roles in firm. In training sessions the family
requirement should be identified that could groom the next generation,
tend to experience better succession outcomes. Afghans asserts that
there is a strong emphasis on grooming the successor during
incubations. Youngsters are invited in summers internship, CE0 dinners
and family discussions. There is a strong emphasis on schooling and
university education.
Ha 2 :there is strong relationship between good education
of family successor and eventual smooth transaction
EXPERIENCE AND SKILLS OF SUCCESSOR
Janjua, Jivraj and wood (2002) elaborates that the history of a family
business provides valuable insights for sequencing the process of
succession planning. However he asserts that the succession will be
smoother if the successor has managerial skills for the said business
although the idiosyncrasies can cause problems for succession. In case
the successor lacks these abilities the owners usually find it difficult to
pass on succession to non family members. In another study carried out
by Nazir et al cited that it is expected from the young/new generation of
successor will join the family business or establish their own businesses
once they reached adulthood. Young successors get good exposure to
different role models in biradari and family businesses. Nazir suggests
that there are four phases for implementation of succession planning.
Firstly establishing the performances criteria of individual, second are
possible career paths, thirdly plans for succession in ownership, and
fourthly power needed to be handed over to the next generation. This
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15. approach will provide smooth succession. Transaction problem are
being handled in a number of ways by successful family concerns in
Asia. Honda and Samsung have introduced a (regency period during
which heirs will be guided by qualified elders in India shop floor
experience and western management education is encouraged. (lin.j
1987)In kinship culture and succession development practices within
the local cultural and social context, grounding theory approach through
case study adopted. (Afghan’s. 2007)Nazir afghan highlighted that
company’s reputation, turnover and succession process Friedman
(1984, 1984) as being relevant depend upon past or history of the
business. Caspar, Ana Karina and Heinz-Peter Elstrodt, (2010) assert
that as the number of family shareholders increases exponentially
generation by generation, with few actually working in the business, the
commitment to carry on as owners cannot be taken for granted.
TRANFER OF OWERNERSHIP
Beckar and Tillman, (1987) assert that the business owner should
choose a transfer of ownership option that will minimize conflict and
cost. They also cited that the ownership transfer during owner’s lifetime
might reduce the overall death tax burden on his estate and help
provide liquidity to pay death costs. Furthermore, the family business
owner can test the plan while he is alive. Caspar, Karina Dias and
Elstrodt (2010) cited that maintaining family control or influence while
raising fresh capital for the business and satisfying the family’s cash
needs is an equation that must be addressed, since it’s a major source of
potential conflict, particularly in the transition of power from one
generation to the next. Becker and Tillman et al, highlighted that the
transfer of ownership should be planned they asserted that a carefully
planned recapitalization of the family business could be designed
whereby ownership is transferred, but security is retained for the family
business and his family. They highlighted stock option to key employees
that most family businesses depend upon certain key employees for
continuity of management. Generally, most family businesses cannot
afford many such key persons, however; and the loss of a key
employee’s services could involve a considerable loss in sales,
production etc. the cost is extremely difficult to measure but it is
decidedly substantial. In another Caspar, Karina Dias and Elstrodt et al,
cited that financial policies often aim to keep the family in control. Many
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16. family businesses pay relatively low dividends because reinvesting
profits is a good way to expand without diluting ownership by issuing
new stock or assuming big debts. They also cited that family
shareholders who want to sell must offer their siblings and then their
cousins the right of first refusal. Allred and Allred, (1997) cited that the
financial arrangements for the survival is necessary in family business
for the events of a major family upheaval such as divorce or sudden
death. An obvious step here is to make appropriate arrangements for
the orderly transition of financial control and ownership to the next
generation in a manner suitable to all concerned. Where external
shareholders are involved there is a range of other necessary
consideration. Maintaining adequate dividends, regular share value
determinations and good financial reporting are crucial components in
ensuring a business runs well and is ready for succession.
Ha-1: there is a strong relationship between family
ownership and successful succession planning.
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17. 2. METHODOLOGY OF THE STUDY
2.1. HYPOTHESIS:
1. Ho-1: there is no relationship between family ownership and
successful succession planning.
2. Ha-1: there is a strong relationship between family ownership and
successful succession planning.
Ha-2: there will be eventual smooth transition in family
businesses if the successor is relevantly educated.
Ho-2: there will not be an eventual smooth transition in family
businesses if the successor is relevantly educated.
Table 1: hypothesis testing
Independent Dependent
variable Variable
Ho 1 Main variable Succession planning Family
Ownership
Education Partnership
Sub variable Early entry Financial
Stability of family structure stability
Merger External
ownership/management environment
Family cohesion Internal
Interpersonal style environment
expansion of
business
Independent Dependent Moderating
variable variable variable
Main Smooth Succession Family business
variable transition Education
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18. Sub variables Succession of Partnership Relevant
Ho 2 policies Financial interest
Stability of business stability Education
No diversification External experience
environment
Internal
environment
The above table is for hypothesis that represents all the variables and
shows which variable is independent and which variable is independent
and also introduces the main variable and their sub variables.
2.2. SAMPLING:
TYPE OF BUSINESS SECTORS LIFE SPAN
14% 1% 2%
8% 1%
11% M 3A
Sole S 3B
Partner 64% CnG 89% 3C
21%
89% CoG 3D
SUCESSION EDUCATION
6% PLANNING 7%
UG
YES 39%
G
54%
NO M
94%
Analysis:
In Type of business 89% of the population have business type in
partnership the reason for this is because as in family business usually
follow kinship culture. Their partnership is usually within the family
like two brother’s sons owned the business as partners. The life span
pie chart shows that most of the population life span is 5 years the
reason is poor or lack of succession planning as the succession planning
pie chart also shows that there is only 9% of the population who make
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19. use succession planning. The educational level pie chart shows that
more than half population is under-graduate. The reason is many like
uncertain death of owner, lack of interest in studies etc.
2.3. METHOD OF SURVEY:
The method used for the research is questionnaire.
JUSTIFICATION OF QUESTIONAIRE:
Data were collected either from CEO of an organization or from the
partners of the particular organization. There were basically two main
variables that are family business and succession planning. These two
variables are main variable because these two are the pillars of my
research. These variables have sub-variables as shown on the above
chart. All variable help and support my research a lot. In family business
the sub variable includes partnership, financial stability, internal and
external environment, expansion of business. All these individual sub
variables highlighted the impact of partnership, expansion, environment
and financial stability on family business. The other main variable is
succession planning and it includes education, early entry, stability of
family structure, family cohesion as sub variables. These help my
research to anchor the real position of organization.
2.4. STATISTICAL TESTING
LISREL structural equation modeling method was used to test the
relationship between SP and FB. The advantage of this model is that it
allows the testing of several variables simultaneously which is not
possible within regression analysis. Several statistics are used to assess
the model fit. The evaluation of the model fit derives from a variety of
sources and is based on several criterions assessing the model fit.
(Byrne 1998).Each statistic must fall within a minimum range to qualify
for a reasonable good fit.
1. Statistical testing determines the goodness of fit between a
hypothesized model and the sample data. It is sometime unlikely that
there will be a perfect fit of the model to the data. This differential is
called RESIDUAL. Mean Square Residual (RMSR) and Root mean
Square Error of Approximation (RMSEA). It incorporates no penalty
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20. for model complexity and tends to favor models with many
parameters. Values less than 0.05 indicate good fit while values
ranging from 0.08 to 0.10 indicate mediocre fit.
2. Goodness of Fit (GFI) is analogous to the squared correlation and it
indicates the proportion of the observed co-variances. Adjusted
Goodness of Fit (AGFI) differs from the GFI only in the fact that it
adjusts for the number of degrees of freedom in the specified model
(Byrne, 1998). Both indices range from zero to 1.00, with value close
to 1.00 being indicative of good fit.
3. The Chi-square is the likelihood ratio test that has been the
traditional measure used to test the closeness of fit between the
unrestricted sample covariance matrix S, and the restricted
covariance matrix Σ(θ) (Byme, 1998). The ratio of chi-square to the
degrees of freedom provides information on the relative efficiency of
alternative models in accounting for the data. Researchers have
recommended using ratios lower than 5.0 to suggest a reasonable fit.
20

21. 3. FINDINGS OF THE STUDY
The table below shows the averages of all the independent and
dependent variables which is the result obtained from questionnaire
which was filled by family business owners or partners. The respondent
pointed out that stability of family structure and degree of family
cohesion plays a major role in succession planning which actually gives
more importance to family structure rather than education of the
successor. Education has been given least importance in the family
succession. Similarly financial stability and partnership are more
prominent sub variables in the prosperity of family business.
Table 2: findings of the study
INDEPENDENT EDUACTION STABILITY FAMILY MERGER/OWNERSHIP INTERPERNAL
VARAIBLES OF FAMILY COHESION MANAGEMENT STYLE
STRUCTURE
AVERAGE 3.74 4.06 3.96 3.90 3.68
DEPENDENT PARTNERSHIP FINANCIAL EXTERNAL INTERNAL BUSINESS
VARIABLES STABILITY ENVIRONMENT ENVIRONMENT EXPANSION
AVERAGE 3.66 3.60 3.58 3.52 3.54
3.1. STATISTICAL TESTING:
As pointed out that lisrel education was used for statistical testing. This
equation was selected since the sub variable of independent and
dependent variables vary in intensity therefore the other test were
weak for the data. Although this equation was not fully applied due to
hiccups of understanding and application, however two test result were
projected by the said software which are reproduced as under
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22. Table 3: lisrel testing
My findings DECISION
Name of the Indices Recommended Value
Test
0.00 GOOD FIT
Root Mean RMSR Maximum 0.10
Square
Residual
Goodness of GFI Minimum 0.90 for good
Fit fit
Adjusted AGFI Minimum 0.90 for good
Goodness of fit
Fit
Minimum 0.90 for good 0.81
T Chi square CFI GOOD FIT
fit
The result shows a moderately high good fit between succession
training and growth of family owned business. The traditional approach
of merging management and ownership cannot be challenged due to
other constraints like control, trust and business confidentiality.
However, the importance of good succession training cannot be
lowered.
CONCLUSION:
The family enterprise continues to be an important element of the
world economy and a location for understanding conflict in family
relationships internationally. Managing conflict effectively in the
process of succession is crucial to preserving the impact family
enterprise has on our economy and families themselves. After analyzing
the literature review and the methodology of hypothesis. It may be
concluded that in developing countries like Pakistan there is a need of
succession which is missing in most of the family businesses in Pakistan.
In my study the hypothesis 1 was that there is strong relationship
between family ownership and successful succession planning. This
hypothesis was accepted because business succession planning seeks to
22

23. manage the issues, setting up a smooth transition between you and the
future owners of your business. With family businesses, succession
planning can be especially complicated because of the relationships and
emotions involved - and because most people are not that comfortable
discussing topics such as aging, death, and their financial affairs.
The second hypothesis were rejected which was there will be eventual
smooth transition in family businesses if the successor is relevantly
educated. In Pakistan the family business is prove to be an
intergenerational business so they believe that their experience is
enough to teach their children as owner of their business. Most of the
population answered that the upcoming owner of their business are
under-graduate. This concludes that experience is more important than
education.
RECOMMENDATION:
Succession planning is an important part for family owned business
especially in the developing country like Pakistan because family
business is the key to region’s economic growth and therefore, their
sustainability and success are critical to the region. As my second
hypothesis was rejected which I believe that there is strong need of
education in family businesses because education can help
Increase the understanding between the owner and the
successor through mutual trust and interest in the similar
business.
Through proper education the successor can understand
the meaning and need of succession in family owned
business which can remove conflict and help in
improvement in internal business environment.
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24. APPENDIX A
BIBLIOGRAPHY:
1. Ana karina Dias and Heinz-peter Elstrodt. (2010):’ The five attributes of
enduring family business’ Christen Caspar: organization practice.
2. Alred, Roger C, Russel S. Allred. (1997) the family Business: power Tools for
Survival, Success, and Succession. Berkley Trade Paperback Edition. New
York: Berkley Books.
3. Bahadur, Desmet and Bommel “Smart IT spending combines IT management
with a tight focus on using IT to help improve business performance”
McKinsey Quarterly Jan 2006.
4. Fox, Nilakant, and Hamilton, (1996) ‘Managing succession in family-owned
businesses.’ International Small Business Journal Vol. 15, No. 1, p. 15.
5. Feigner, Brown, Prince and File (1996) ‘Passing on strategic vision.’ P.24
6. Goffee, Rob. (1996) ‘understanding family businesses: Issues for further
research’, International journal of Entrepreneurial Behavior and Research
Vol. 2, No. 1, pp.36-48
7. Gracia-Alvarez, Ercilia, Jrdi Lopez-Sintas, and Pilar Saldana Gonzalvo. (2002)
‘Socialization patterns of successors in first-to second-generation family
business’, Family Business Review Vol. 15, No. 3, pp. 189-203
8. Ivan Lansberg (1999) Succeeding generations: Realizing the Dream of
families in business: Boston: Harvard Business School Press
9. Isabelle Le Breton-Miller, Danny Miller, and Lloyd Steier, (2004) ’Toward an
Integrative Model of Effective FOB Succession,’Entrepreneurship Theory and
Practice Vol 28, No. 4, pp. 318-19.
10. Jim Grote, (2003) ‘Conflicting generations: A new theory of family business
rivalry, ‘Family Business Review Vol. 16, No 2, p. 113.
11. Janjuha-Jivraj and woods, (2002) ‘Successional issues within Asian family
firms, ‘p. 79.
12. Darshan bachkaniwala, Mike Wright, and Monder Ram, (2001)
13. Jess Chua, James Chrisman, and Pramodita Sharma, (1999) ‘Defining the
family business by behavior,’ Entrepreneur Theory and Practice Vol. 23, No.
4, p.1
14. Janjuha-Jivraj and Woods, (2002)’ Sucessional issues within Asian family
firms,’ p. 79.
15. Longenecker and Schoen, (1978)’ Management succession in family
business,’ p. 6.
24

25. 16. Marshall Paisner, (1999) Sustaining the family Business: An Insider’s Guide
to Managing across Generations. Reading, Mass: Perseus Books. p.28
17. Miller,danny, Lloyd Steier, and Isabelle Le Breton-Miller. (2003) ‘lost in time:
Intergenerational succession, change, and failure in family business’, Journal
of Business Venturing Vol. 18, no. 4,pp. 513-31.
18. Nazir Afghan. (2007) Managing succession in family business. Dawn news
paper. Pakistan.
19. Roger Allred and Russell Allred, (1997) the Family Business: Power Toolers
for Survival, Success, and Succession. New York: Berley Books, p. 17.
20. Sue Birley, Dennis Ng, and Andrew Godfrey, (1999) ‘The Family and the
Business’, Long Range Planning Vol 32, No 6, p.598.
21. Wendy Handler, (1989) ‘Methodological issues and considerations in
studying family businesses,’ Family Business Review Vol. 2, No. 3, p 260
22. Wendy Handler, (1989) ‘Methodological issues and considerations in
studying family businesses,’ Family Business Review Vol. 2, No. 3, p 260
25

26. APPENDIX B:
QUESTIONNAIRE
My name is Mehreen Yousuf a student of BBA at PAF-KIET doing my final year
project under Raza Kamal.This questionnaire is basically a way to expand
knowledge on succession planning in Pakistani owned businesses. I understand that
you operate a business enterprise; your responses to this questionnaire will be most
helpful.
My email contact is mehvi_math@hotmail.com
EXAMPLE
The rating scale used for this questionnaire is from 1-5 where
1) high
2) medium
3) Neutral
4) low
5) Very low
The respondent only has to write the number in front of the question
For example:
I enjoy while doing job.
4
QUESTIONNAIRE
Please type/encircle your choice
1) Sectors
o Manufacturing
o Services
o Consumer goods
o Commodity goods
o Others , please specify
2) The business you are in
o Sole proprietorship
o Partnership
3) Life span of your organization
o 5 years
o 7 years
o 10 years
o More than 10 years
4) How many successions have taken place in your organization
26

27. o Yes
o No
5) What is your specific level of education in your organization.
Under graduate
Graduate
Masters
Other
QUESTIONAIRE
1) How much impact does professional education have in your type of business.
2) For career development, furtherance of hand-on experience is more
important than
Education
3) How important it is to transfer the ownership during owner’s lifetime in
family owned
Business.
4) How much does the joint family system living effect in improvement of the
family business.
5) How significant do the large number of potential successors help in
succession. ______
6) Does marriages outside family, effect cohesion in succession planning.
7) Rate the effect of mutual trust among siblings in your organization.
8) Similarity of social network between family members has a positive impact on
cohesion of the family.
9) How much effectively does the similarity of interest among family members
improve succession planning.
27

28. 10)How closer is your managerial style to your predecessor
11)How much effect does poor communication between members of the family
have on succession planning
12)How important is training in improvement of managerial style in your
organization
13)How important is to work in family business from an early age and gain direct
experience.
14)How effective will the coach/mentor other than family member impact family
succession.
15)How much does the untimely death of owner effect business stability
16)How much does conflict effect family business environment
17)How much is the effect of mergers and partnerships effect family businesses
18)What is the impact of external factors like political, economical instability
having on the business.
19)How much do the changes in the government regulation affect your business.
20)So changes in the social environment affect your business.
21)How much does the partnership outsider affect the stability of the business.
22)How often has there been partnership conflict in your organization.
23)How much are you in favor of external partnership to acquire capital.
24)Rate the firm stability of you organization.
25)Financial stability improves if your companies go public.
26)Raising capital during recession has been a problem for your organization.
27)How does the external environment affect the expansion of the business.
28

29. 28)I am fully satisfied with the expansion of my fixes assets during the last
decade.
29)How much of expansion being affected after the change of succession.
APPENDIX C
RESUME
Knowledge Mehreen Yousuf
C-3 block-7, Gulshan-e-Iqbal
Tel# 4977329, Cell# 0331-2369989
E-Mail mehvi_math@hotmail.com
OBJECTIVE:
29

30. To seek a position with progressive organization that offers career growth to work
In a competitive and challenging environment to fully utilize my professional and
Academic skills.
PERSONAL PROFILE:
Father’s Name: Mohammad Yousuf
Date & Place of Birth: 4th august 1989
Nationality: Pakistani
C.N.I.C. # 42201-6253477-4
ACADEMIC EDUCATION:
Present Bachelor in business administration-from Pakistan Air Force Karachi institute of
information and economics technology- with CGPA-3.09
2006 - Intermediate (Pre-Medical) Dewa college
2004 – Matriculation, Shaheen Public school
PROJECTS/RESEARCH REPORTS:
Research on topic ‘succession planning in family owned businesses in Pakistan’
The topic was actually about those families owned businesses that went through a
tragedy like certain death of owner then what happen to those businesses and who
owned the business after the founder.
SKILLS AND EXPERIENCE:
o Achieved command on Microsoft office.
o Create different things in daily life.
o Ability to organize things and honest with all people.
o Power to arrange people as a team.
o Take opinion from customer about the particular product and tested the
communication skill.
o Gained information through attending guest speaker session and different
subject related workshop
SPOKEN LANGUAGES:
 Urdu
 English

EXTRACURRICULAR ACTIVITIES:
 Playing basketball.
 Watching television
 Search on internet the information that could increase my technological
30

31.  Making different things that could show my creativity
APPENDIX D
LETTER FOR PERMISION
Dear Sir,
I wish you well. This note is an effort to renew our relationship.
Mehreen Yousuf a student of BBA is doing a research project on
“succession planning in family owned businesses in Pakistan “under my
supervision. Before I give her your reference to participate in this
research I thought it appropriate to obtain your concurrence.
31

32. Your participation will only be limited to finalizing a questionnaire,
participate in survey and also give your ideas on this subject. There is
paucity of data/material as far as Pak businesses are concerned
therefore your inputs will be able to refine management practices
related to this topic.
She is an enterprising student and needs your support. Her email
address is mehvi_math@hotmail.com
With best of regards and expecting a favorable reply as soon as possible.
You may concur directly to the student.
Raza kamal
Associate Professor
PAF- Karachi Institute of Economics and Technology
TABLE OF CONTENT
LETTER OF APPROVAL ................................................................................................ 2
LETTER OF TRANSMITTAL ........................................................................................ 3
LETTER OF AUTHORIZATION ................................................................................... 4
ACKNOWLEDEMENT .................................................................................................... 5
ABSTRACT ....................................................................................................................... 6
INTRODUCTION ............................................................................................................. 7
32

33. AIM OF THE STUDY....................................................................................................... 8
1. LITERATURE REVIEW: ............................................................................................ 9
2. METHODOLOGY OF THE STUDY ................................................................. 17
2.1. HYPOTHESIS: ................................................................................................. 17
2.2. SAMPLING: ...................................................................................................... 18
2.3. METHOD OF SURVEY: .................................................................................. 19
2.4. STATISTICAL TESTING................................................................................ 19
3. FINDINGS OF THE STUDY .............................................................................. 21
3.1. STATISTICAL TESTING: .............................................................................. 21
CONCLUSION: ............................................................................................................... 22
RECOMMENDATION: ................................................................................................. 23
APPENDIX A ................................................................................................................. 24
BIBLIOGRAPHY:.......................................................................................................... 24
APPENDIX B: ................................................................................................................ 26
QUESTIONNAIRE ........................................................................................................ 26
RESUME ......................................................................................................................... 29
APPENDIX D ................................................................................................................. 31
LETTER FOR PERMISION ......................................................................................... 31
33