Final Year Project

SUCCESSION PLANNING IN FAMILY OWNED BUSINESSES

MEHREEN YOUSUFBB-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 FORCEKARACHI INSTITUTE OF ECONOMICS AND

TECHNOLOGY

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LETTER OF APPROVAL

Thesis Title: SUCCESSION PLANNING IN FAMILY OWNED BUSINESSES

By: MEHREEN YOUSUF BB-03-06-3479

Thesis Supervisor: Mr. COL RAZA KAMALAcademic 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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LETTER OF TRANSMITTAL

April 7, 2010

Mr. COL RAZA KAMALProject SupervisorPAF 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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LETTER OF AUTHORIZATION

APRIL 7, 2010

MEHREEN YOUSUFBB-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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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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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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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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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 developmentAnd 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 Findings/Analysis

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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, entry and succession phase for focus of change. The research has

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several new areas, such as succession processes in kinship culture and successor development practices within the local cultural and social context. SUCCESSFUL SUCCESSIONCaspar, 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 MEMERBERSFox, 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. The successor and the business itself.

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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). Sue Birley, Dennis Ng, and Andrew Godfrey, (1999) describe that there are three types of groups

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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.

The first is the founder homo-social reproduction model. Here successors are brought in to the firm early, experience it

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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 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

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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 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

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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 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

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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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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

Independentvariable

DependentVariable

Ho 1 Main variable Succession planning Family Ownership

Sub variableEducationEarly entryStability of family structureMerger ownership/managementFamily cohesionInterpersonal style

PartnershipFinancial stability External environmentInternal environmentexpansion of business

Ho 2

Independentvariable

Dependentvariable

Moderatingvariable

Main variable

Smooth Succession transition

Family businessEducation

Sub variables Succession of Partnership Relevant

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policiesStability of businessNo diversification

Financial stability External environmentInternal environment

interestEducationexperience

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:

11%

89%

TYPE OF BUSINESS

SolePartner

64%21%

14% 1%

SECTORS

MSCnGCoG

89%

8% 1% 2%

LIFE SPAN

3A3B3C3D

6%

94%

SUCESSION PLANNING

YESNO

39%54%

7%

EDUCATION

UGGM

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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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 TESTINGLISREL 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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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 ( ) (Byme, 1998). The ratio of chi-square to theΣ θ 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.

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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 VARAIBLES

EDUACTION STABILITY OF FAMILY STRUCTURE

FAMILY COHESION

MERGER/OWNERSHIP MANAGEMENT

INTERPERNAL STYLE

AVERAGE 3.74 4.06 3.96 3.90 3.68

DEPENDENT VARIABLES

PARTNERSHIP FINANCIAL STABILITY

EXTERNAL ENVIRONMENT

INTERNAL ENVIRONMENT

BUSINESS 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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Table 3: lisrel testing

Name of the Test

Indices Recommended Value My findings DECISION

Root Mean Square Residual

RMSR Maximum 0.10 0.00 GOOD FIT

Goodness of Fit

GFI Minimum 0.90 for good fit

Adjusted Goodness of Fit

AGFI Minimum 0.90 for good fit

T Chi square CFI Minimum 0.90 for good fit

0.81 GOOD 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

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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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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.246. 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.

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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

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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

EXAMPLEThe rating scale used for this questionnaire is from 1-5 where

1) high 2) medium 3) Neutral4) low5) Very low

The respondent only has to write the number in front of the questionFor example: I enjoy while doing job. 4

QUESTIONNAIRE

Please type/encircle your choice

1) Sectors o Manufacturingo Services o Consumer goodso Commodity goodso Others , please specify

2) The business you are in o Sole proprietorshipo Partnership

3) Life span of your organizationo 5 yearso 7 yearso 10 yearso More than 10 years

4) How many successions have taken place in your organization

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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.

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9) How much effectively does the similarity of interest among family members improve succession planning.

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.

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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)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.

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APPENDIX C

RESUME

Knowledge Mehreen YousufC-3 block-7, Gulshan-e-IqbalTel# 4977329, Cell# 0331-2369989E-Mail mehvi_math@hotmail.com

OBJECTIVE:

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 YousufDate & Place of Birth: 4th august 1989Nationality: 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.

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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 Making different things that could show my creativity

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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. 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

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TABLE OF CONTENT

LETTER OF APPROVAL................................................................................................2

LETTER OF TRANSMITTAL........................................................................................3

LETTER OF AUTHORIZATION...................................................................................4

ACKNOWLEDEMENT....................................................................................................5

ABSTRACT.......................................................................................................................6

INTRODUCTION.............................................................................................................7

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..........................................................................................................................30

APPENDIX D..................................................................................................................32

LETTER FOR PERMISION..........................................................................................32

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