Succession Stories: Navigating the Path to Leadership Transition
Even before the Emmy award-winning satirical television series, Succession, became a household name, families in business were discreetly designing their own succession plans. At its core, succession planning is a proactive strategy to ensure the next chapter for a business—be it in leadership, governance, strategy, or ownership—is thoughtfully charted well before any precipitating event forces decisions.
In this article, we’ve prepared three case studies to illustrate the diverse approaches families have taken toward succession planning. From mentorship and structured transitions to governance structures and cautionary tales, these examples highlight the critical lessons family enterprises can learn to secure their legacy and avoid pitfalls. Whether a family business is navigating its first generational transition or recalibrating after decades, these stories underline that it’s never too early to start planning.
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Brinker Group
Larry Brinker Jr., current President and CEO of the Brinker Group, has spent much of his career at the business his father started. Founded in Detroit in 1989, Brinker is a group of family owned and operated construction services companies. Through growth and acquisitions over the years, Brinker has led over $4 billion in construction projects. “When others left the city because times were tough, we doubled down and stayed put. Because we’re in this to strengthen the community.” Brinker prides itself on more than building but rather building places for people to belong.
Larry and his father have a close relationship, which his father feared jeopardizing when it came time for the eventual leadership transition. In anticipation of his planned retirement, Larry’s father made the strategic decision to hire a mentor to ease the succession. This gentleman had recently sold his own construction company and was brought in for the sole purpose of preparing and training Larry to become President and CEO of Brinker in four years. “The first year, I was a fly on the wall. I was in every meeting and had no idea what was going on half the time. Year two, I started to understand what was going on. By year three, I was helping to make decisions. By year four, he was allowing me to make decisions for the company.” By the time he was 30 years old, Larry, with four years of dedicated leadership training, was confident in his ability to run the company.
Larry reflects on the opportunity to learn without the pressure of working directly for his father. While leadership succession can be rather difficult when it is between two family members, the ability to learn from mistakes yet operate independently can be a hard balance for families to strike. Larry comments on the fact that he has seen a lot of these transitions go unplanned, and the mutual respect he and his father had for each other throughout the transition allowed him to learn without push and pull. “Our succession plan should be a case study.”
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LVMH
LVMH needs no introduction. The European luxury goods empire, chaired by one of the wealthiest men on the planet, Mr. Bernard Arnault, has been in the Arnault Family’s control for the last few decades. But who was Mr. Arnault before LVMH? Born third generation (G3) into a construction business, when Mr. Arnault was 28, his father gave him the keys. After a brief stint in the U.S. to dabble in real estate, Mr. Arnault returned to Paris and bought a bankrupt textile conglomerate which he later used to finance the takeover of LVMH at the age of 39. Fast forward 45 years, 75 brands, and a presence in 81 countries – LVMH is dominating the luxury business.
For a brand that emerged by “gobbling up many European luxury houses that had been weakened by bickering family owners”, Mr. Arnault is determined to keep the business within his family’s control. On a mission, he persuaded the board to increase the mandatory retirement age for the CEO and chairman to 80 from 75—perhaps a coincidence that Mr. Arnault was 74 when he initiated this change. He also “tinkered with the corporate structure of his empire” to ensure the decision-making resided equally in his five children, each with a 20% stake which they cannot sell for 30 years. Even upon sale, it will require unanimous board approval.
As expected, all five Arnault children play an integral role in the family business, each taking on substantial responsibilities. Most notably, the eldest, Frédéric Arnault, holds the position of CEO at TAG Heuer, while his sister, Delphine Arnault, has been serving as Executive Vice President of Louis Vuitton. In line with his ongoing succession plan, Bernard Arnault took another significant step last November, appointing his 32-year-old son, Alexandre Arnault, as Deputy CEO of Moët Hennessy, the wine and spirits division of LVMH. This decision represents an important development in the broader succession strategy, ensuring that the next generation of Arnaults are being groomed for executive leadership roles.
Who’s Next?
The question for the Arnault Family is not just who will become ‘the successor’ but who can navigate the challenges and demands within the luxury sector while adapting to revolving consumer demands. While each child is deeply involved in the business, the real question remains: Do any of them possess the ability to lead LVMH as their father has? As one of the children put it, “there’s the risk that none of us will be able to run the business as successfully as he has.”
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Wilko
Behind every family business’ brand is a loyal customer and employee base—both of which can be easily neglected if overshadowed by family greed. Wilko, a discount home retail chain, was founded by James Wilkinson in Leicester, U.K. in 1930. Fast forward to August 2023, the brand collapsed with £37 million in operating losses on the books and was forced to let go of 12,000 employees. After a series of loans followed by bankruptcy, the family settled on an asset sale to The Range for £5 million.
For a family-owned business that started during the Great Depression and survived many economic headwinds, they could not survive the leadership transition to G4. So, what led to the brand’s demise after a stable 90 years in business and 400 store openings along the way?
The advantages of harnessing concentrated ownership can elevate businesses and expedite decision making but can also lead to fewer qualified voices in the room, depending on the composition of the family’s ownership structure. For the Wilko business, the tides of success began to change in 2015 when one of the branches of the family wanted to fully exit the business. Karin Swann, G3 and granddaughter of the founder, quit the board which left her cousin, Lisa Wilkinson as chair. Consequently, Karin sold her shares leaving Lisa’s family branch as the sole family owner. Over the next few years, the family withdrew over £77 million from the business, even in years of operational and financial loss. If that wasn’t enough, the family drew a £3 million dividend in the last financial year.
But it wasn’t just the firm’s insolvency; operating resources were poorly allocated. Brick and mortar stores were outdated, resulting in hugely undervalued sales of distribution centers. Wilko made desperate attempts to generate cashflows but couldn’t compete in the post-pandemic era against its value competitors. Conversely, there were disproportionately high capital expenditures made to store locations in affluent neighborhoods that needed it the least.
The Result
As the adage goes, shirtsleeves to shirtsleeves in three generations. Due to poor management, excessive family payouts, and disproportionate investments in store locations, Wilko was strained and forced to cut jobs. Not only were many employees affected, but there was also a long list of suppliers, vendors, and customers that were ultimately hurt by the family’s greed and lack of planning.
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Wingspan’s Thoughts
The stories of Brinker Group, LVMH, and Wilko offer valuable insights into the importance of succession planning in family businesses. Brinker Group exemplifies a successful transition, with Larry Brinker Jr. receiving mentorship from a strategic hire to ensure a smooth handover of leadership. Similarly, LVMH showcases a multi-generational succession strategy where Bernard Arnault is simultaneously grooming all of his children to lead the luxury empire.
In contrast, Wilko’s collapse highlights the dangers of poor succession planning. A divided family, short-term financial gains, and mismanagement led to the company’s downfall, demonstrating how neglecting succession planning can have devastating consequences.
These examples emphasize the vital responsibility family businesses have in preparing for the future. Effective succession planning involves not just who, but how the next generation will be prepared for leadership. For family-owned businesses, initiating the process early and aligning core values with a long-term vision is crucial for ensuring lasting success and sustainability.
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