Advisors in the Family Business Succession Process:

Their Challenges, Roles and Role Adjustment throughout the Process, as well
as their Influence on Agency Costs, objective Post-Succession Performance
and the Level of Satisfaction

DISSERTATION
of the University of St. Gallen,
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy in Management

submitted by

Alexandra Michel
from
Bern

Approved on the application of

Prof. Dr. Thomas Markus Zellweger
and
Prof. Dr. Nadine Kammerlander

Dissertation no. 4547

D-Druck-Spescha, St. Gallen, 2016

 2

The University of St. Gallen, School of Management, Economics, Law, Social Sciences
and International Affairs hereby consents to the printing of the present dissertation,
without hereby expressing any opinion on the views herein expressed.

St. Gallen, May 30, 2016

The President:

Prof. Dr. Thomas Bieger

 I

ACKNOWLEDGEMENT

Only the one who walks his own way can't be overtaken. Marlon Brando

This famous quote by Marlon Brando guided me through my dissertation project.

In 2013 I started my thesis with the goal to use my knowledge and my unique access to
family firms, due to my employment as an advisor of small and medium sized corporate
clients at Credit Suisse, in order to investigate in an academic way how advisors during
the succession process can be of a benefit for family firms. Thereby, my motivation
rooted in the fact that research as well as practice has a huge knowledge on the topic,
however, so far these two areas have been poorly connected with each other.
Hence, I pursued this aim of connecting theory and practice on the so far
understudied topic of advising family businesses during the succession process with
motivation and passion. Now, three years later, I proudly hand in my dissertation. During
these three years I learned a lot about academic working as well as the practical
challenges of advising family businesses within their succession process. I completed
three scientific papers, all based on different methodologies, in order to analyze the topic
of advising family businesses profoundly and from different perspectives.
At this point I would like to thank the following very important people who all
supported me along my way. First, I thank my referee Prof. Dr. Thomas Zellweger and
my co-referee Prof. Dr. Nadine Kammerlander, for giving me the chance to write this
thesis, for guiding me throughout the process, and for inspiring me whenever I was at a
dead end. Second, I thank my two supervisors at Credit Suisse, Mr. Roland Schaller and
Mr. Rolf Hofstetter, for supporting me at work as well as for approving my collection of
data among corporate clients of the bank. Finally, my very special thanks go to my loving
family for always being there for me and having me taught to walk my own way.

Nidau, Mai 2016 Alexandra Michel

 II

TABLE OF CONTENT
ACKNOWLEDGEMENT .................................................................................................... I
LIST OF FIGURES ............................................................................................................ V
LIST OF TABLES ............................................................................................................. VI
EXECUTIVE SUMMARY .............................................................................................. VII
ZUSAMMENFASSUNG ............................................................................................... VIII
1. INTRODUCTION .................................................................................................. 1
1.1 Main Topic and overall Research Gap ................................................................... 1
1.2 Structure of the Dissertation ................................................................................... 2
1.3 Definitions of Family Business, Succession and Advisors .................................... 4
2. OVERVIEW OF ACADEMIC PAPERS ............................................................... 5
2.1 Research Gaps and Research Questions ................................................................. 5
2.2 Methodologies ........................................................................................................ 7
2.3 Key Characteristics of the three Papers .................................................................. 9
3. TRUSTED ADVSIORS IN A FAMILY BUSINESSS SUCCESSION-
PLANNING PROCESSAN AGENCY PERSPECTIVE ................................. 11
3.1 Abstract ................................................................................................................. 11
3.2 Introduction ........................................................................................................... 12
3.3 Theoretical Background and Key Concepts ......................................................... 15
3.3.1 The Succession-Planning Process .................................................................. 15
3.3.2 The Role of Trusted Advisors in Family Firms ............................................. 19
3.3.3 Agency Theory and Family Businesses ......................................................... 20
3.4 Trusted Advisors in the Family Business Succession-Planning Process: A
Conceptual Model ................................................................................................. 22
3.5 The Triadic Relationship of Incumbent, Successor, and Trusted Advisor: Bias and
Efficiency .............................................................................................................. 34
3.5.1 Balanced and efficient setup of the triadic relationship ................................. 34
3.5.2 Biased and inefficient setups of the triadic relationship ................................ 35
3.6 Discussion ............................................................................................................. 40
 III

3.7 Limitations, Future Research, and Conclusion ..................................................... 42

4. CHALLENGES AND ROLES OF ADVISORS IN THE FAMILY BUSINESS
SUCCESSION PROCESSA QUALITATIVE STUDY .................................... 44
4.1 Abstract ................................................................................................................. 44
4.2 Introduction ........................................................................................................... 45
4.3 Theoretical Background........................................................................................ 48
4.3.1 The Succession Process in Family Firms ....................................................... 48
4.3.2 The Challenges and Role of the Trusted Advisor during Family Business
Succession ...................................................................................................... 50
4.4 Methodology ......................................................................................................... 51
4.4.1 Empirical Setting ............................................................................................ 51
4.4.2 Data Collection ............................................................................................... 55
4.4.3 Data Analysis ................................................................................................. 56
4.5 Results ................................................................................................................... 60
4.5.1 Summary of Cases.......................................................................................... 60
4.5.2 A Model of Advisors Role Adjustment and its Effect on Satisfaction ......... 74
4.6 Discussion, Limitations, and Future Research ..................................................... 79
4.6.1 Contributions to Theory ................................................................................. 79
4.6.2 Limitations and Future Research ................................................................... 81
4.6.3 Conclusion ...................................................................................................... 82
5. THE ADVISORS INFLUENCE ON POST-SUCCESSION PERFORMANCE 83
5.1 Abstract ................................................................................................................. 83
5.2 Introduction ........................................................................................................... 84
5.3 Theoretical Background........................................................................................ 87
5.3.1 Advisors and the Family Business Succession Process ................................. 87
5.3.2 Advisors, Family Business Performance and Satisfaction............................. 88
5.4 Development of Hypotheses ................................................................................. 90
5.4.1 Advisors Presence and its Influence on the Outcomes of the Succession
Process ............................................................................................................ 90
5.4.2 Advisors Behavior and its Influence on the Outcomes of the Succession
Process ............................................................................................................ 91
 IV

5.5 Methodology ......................................................................................................... 93

5.5.1 Sample and Data Collection ........................................................................... 93
5.5.2 Measures......................................................................................................... 95
5.5.3 Control Variables ........................................................................................... 97
5.6 Results ................................................................................................................... 99
5.6.1 Results for Hypothesis 1 ................................................................................ 99
5.6.2 Results for Hypothesis 2 .............................................................................. 103
5.7 Discussion, Limitations, and Future Research ................................................... 107
5.7.1 Contributions to Theory, Limitations and Future Research ......................... 107
5.7.2 Conclusion .................................................................................................... 110
6. CONCLUDING CHAPTER ............................................................................... 111
6.1 Summary of Contributions ................................................................................. 111
6.2 Limitations and Future Research ........................................................................ 114
6.3 Conclusion .......................................................................................................... 116
REFERENCES ................................................................................................................ 117
CURRICULUM VITAE .................................................................................................. 128
 V

LIST OF FIGURES
Figure 1Mapping of the three Papers ............................................................................... 3
Figure 2Potential Configurations of the Triadic Relationship ....................................... 39
Figure 3Data Structure ................................................................................................... 57
Figure 4Model of Role Adjustment ............................................................................... 75
Figure 5General Model of the Advisors Challenge to Achieve Incumbents and
Successors Satisfaction in Each Phase ............................................................ 75
Figure 6Variance among the Cases ............................................................................... 78
 VI

LIST OF TABLES
Table 1 Key Characteristics of the three Papers ............................................................ 10
Table 2 Overview of Theoretical Papers in connection with the Succession Planning
Process .............................................................................................................. 16
Table 3 Trusted Advisors during Succession: An Agency Perspective ........................ 22
Table 4 Overview of the Sample ................................................................................... 53
Table 5 Overview of Data Sources ................................................................................ 54
Table 6 Exemplary Quotes ............................................................................................ 58
Table 7 Adaption of the ASQ Obstfeld Construct ......................................................... 98
Table 8 Descriptive Statistics for H1Means, Standard Deviations and Pearson
Correlations .................................................................................................... 100
Table 9 Regression for ROA in period n ..................................................................... 101
Table 10 Regression for Satisfaction with the outcome of the succession .................. 102
Table 11 Descriptive Statistics for H2Means, Standard Deviations and Pearson
Correlations .................................................................................................. 104
Table 12 Regression for ROA in period n ................................................................... 106
Table 13 Regression for Satisfaction with the formal advisor .................................... 107
 VII

EXECUTIVE SUMMARY
Succession is a crucial and challenging event for many family businesses that often
has a major impact on their future firm performance or even their survival. Therefore,
incumbents and successors of family businesses increasingly build on the support of
advisors within the transfer process. This dissertation aims to explore potential benefits,
drawbacks, challenges and roles of trusted advisors involvement into the process as well
as their influence on succession outcomes such as performance and satisfaction.
In order to address these research gaps, three different methodical approaches were
pursued to investigate the advisors involvement: first, an extensive literature review and
a subsequent conceptual analysis, second, a qualitative study based on depth-in interviews
with incumbents, successors and the advisor of five family businesses, and third, a
quantitative study based on survey data gathered among almost 200 privately owned
businesses as well as these firms respective objective performance data.
This thesis makes several contributions to literature as well as to practice. First, it
outlines how the advisors involvement into the succession process influences agency
costsin particular those related to goal divergence and information asymmetriesand
thereby assess four typical constellations of advisors involvement (bias towards
successor, bias towards incumbent, unbiased advisor, separate advisors for incumbent and
successor). Subsequently, a balanced model of advisor involvement is proposed as a
potential solution to reduce agency costs.
Second, this dissertation outlines how the challenges the advisor faces during the
process lead to different roles what frequently also provoke temporary negative feelings
for the incumbent and/or successor. It is proposed that the elicitation of these negative
feelings is important to ensure progress during the succession process. Further, it
elaborates on how also the advisor undergoes a mutual role adjustment during the process
and it suggests that full role adjustment of the advisor supports the incumbent and the
successor in modifying their own roles what ultimately has a positive effect on the
outcome of the succession process and the future performance of the firm.
Finally, by combining survey data and objective performance data this thesis
confirms a strong positive influence of a formal advisor on post-succession firm
performance as well as on the level of satisfaction of incumbent and successor. Thereby,
it further shows that not only the sole presence but also the way how the advisor behaves
during the process can affect performance and satisfaction either positively or negatively.
 VIII

ZUSAMMENFASSUNG
Die Regelung der Nachfolge ist ein Schlsselereignis im Lebenszyklus eines
Familienunternehmens und hat oft einen entscheidenden Einfluss auf den knftigen
Unternehmenserfolg oder sogar das berleben einer Firma. Darum sttzen sich
bergeber und bernehmer von Familienunternehmen vermehrt auf den Rat von Beratern
im bergabeprozess. Die vorliegende Dissertation will dabei potentielle Chancen,
Risiken und Rollen von Beratern im Nachfolgeprozess sowie deren Einfluss auf das
Resultat der Nachfolge betreffend Firmenerfolg und Zufriedenheit der Akteure genauer
analysieren
Dazu wurden drei verschiedene methodische Vorgehensweisen gewhlt: erstens
eine Literaturanalyse mit einer konzeptuellen Analyse des Nachfolgeprozesses, zweitens
eine qualitative Studie, welche auf vertieften Interviews mit den bergebern,
bernehmern und dem Berater von fnf Familienunternehmen basiert, und drittens, einer
quantitativen Studie basierend einerseits auf einem Fragebogen, der an beinahe 200 kleine
und mittlere Familienunternehmen gesandt wurde, und andererseits auf den objektiven
Erfolgszahlen dieser Firmen.
Diese Dissertation leistet diverse Beitrge an Forschung und Praxis. Erstens zeigt
sie, wie sich der Einbezug von Beratern auf die agency costs im Speziellen jene im
Zusammenhang mit Zielkonflikten und Informationsasymmetrienauswirkt. Dabei
werden vier typische Konstellationen von Beratern im Nachfolgeprozess diskutiert und
schlussendlich ein Modell zur Lsung der Konflikte vorgestellt.
Zweitens zeigt die Dissertation, mit welchen Herausforderungen der Berater im
Nachfolgeprozess konfrontiert wird und wie diese zu verschiedenen Rollen fhren, die
der Berater einnimmt. Diese Rollen fhren zeitweise auch zu negativen Emotionen im
Prozess, die jedoch notwendig sind, um diesen voranzutreiben. Hierbei durchluft auch
der Berater selbst einen Rollenwandel im Nachfolgeprozess und untersttzt dabei den
bergeber und bernehmer bei der Findung ihrer jeweils neuen Rollen.
Drittens werden in einer finalen Studie Fragebogendaten und objektive
Geschftszahlen miteinander verglichen, um zu zeigen, dass die Prsenz eines externen
Beraters im Nachfolgeprozess sowohl den Firmenerfolg, gemessen in Zahlen, wie auch
die Zufriedenheit beim bergeber und bernehmer erhht. Weiter wird gezeigt, dass
nicht nur die Anwesenheit eines Beraters sondern auch dessen Art und Weise zu beraten
den Firmenerfolg und die Zufriedenheit entweder positiv oder negativ beeinflusst.
 1

1. INTRODUCTION

1.1 Main Topic and overall Research Gap

For the vast majority of family businesses successiondefined as the transfer of
leadership responsibility and ownership from one generation to the next is a crucial
challenge which many firms fail to master successfully (De Massis, Chua & Chrisman,
2008; Handler, 1994; Venter, Boshoff & Maas, 2005). Previous literature shows that
succession is a long-term process that often spans several years or even decades (Cabrera-
Suarez, De Saa-Perez & Garcia-Almeida, 2001; Fiegener, Brown, Prince & File, 1994)
and includes numerous challenges, stemming in particular from the incumbents and
successors potentially divergent goals (e.g., Chrisman, Chua & Sharma, 2004) and
informational asymmetries between them (e.g., Dehlen, Zellweger, Kammerlander &
Halter, 2014). These challenges are associated to an increase of agency costs that
potentially further prolong the process, detract from the satisfaction of all involved
parties, or might even lead to negative feelings and finally the failure of the business
transfer and/or a decrease in firm performance (e.g., Miller, Steier & LeBreton-Miller,
2003).
However, due to the growing complexity of the succession process caused by an
increasing number of radical environmental changes and intensifying dynamism of the
business world (e.g., Astrachan, 2010), recent studies have started pointing to the
important role trusted advisors nowadays play in the business succession process (Strike,
2012; 2013) and within the last five years more than 80 studies on family business
advisors have been conducted (own literature review recently conducted). Advisors are
acknowledged to improve the flow of the succession process by mentoring both involved
parties, the incumbent and the successor (Salvato & Corbetta, 2013), by acting as
troubleshooter that moderates the needs of these two parties (Lane, Astrachan, Keyt &
McMillan, 2006; Thomas, 2002), or by mediating the process of sense-making among
family business members in slowing down the decision process, facilitating doubt and
thereby bringing new perspectives into account (Strike & Rerup, 2015). Thus, family
business scholars (e.g., Strike, 2012) have called to dedicate more scholarly effort to
investigate the role of advisors in the succession process and to study the involvement of
 2

advisors in a more systematic way as previously done. In particular, the involvement of an

advisor throughout the succession process replaces the previously discussed dyadic
relationship of incumbent and successor (Handler, 1994) by a triadic relationship of
incumbent, successor, and advisor (Michel & Kammerlander, 2015). Only if the advisor
succeeds in providing knowledge and advice to both parties, the succession process
proceeds smoothly and without much interpersonal conflicts. Otherwise the less
integrated party is likely to feel neglected and to express negative feelings what
potentially leads to a decreased satisfaction of successor and incumbent with the
succession process, a decline of their commitment, and, in the worst case, a failure of the
succession process (Hilburt-Davis & Senturia, 1995; Kaye, 1996). Moreover, a decreased
satisfaction of the successor might also affect the post-succession firm behavior, and in
particular firm performance, in a negative way (Shepherd, Patzelt & Wolfe, 2001).
Therefore, it is crucial for a successful outcome of the succession processfrom a
theoretical as well as from a practical point of viewto gain more insights on how an
advisor manages to equally involve the incumbent and successor into the process, thereby
leads to a smoother transition and eventually a superior outcome in terms of performance
and satisfaction (e.g., Reay, Pearson & Dyer, 2013). Surprisingly, despite of the
undoubted importance of an advisor in the succession process, literature so far has no
clear answer to the overall question of how an advisor intervenes into the succession
process, what challenges he or she thereby faces, how the role of the advisor changes and
how the advisor and his or her behavior influences post-succession performance and the
level of satisfaction among the actors of the family business.

1.2 Structure of the Dissertation

After a brief overview of the three research papers (chapter 2), on which this
dissertation is based, I aim to contribute to the prior described gap in literature by
covering the following three different approaches and sub-topics: In the first paper
(chapter 3) I conceptually analyzed the advisors influences within the triadic relationship
of incumbent, successor and advisor, potential constellations of advisors involvement as
well as his or her influence on agency costs. In the second paper (chapter 4) I conducted
an exploratory multi-case study and developed a process-model on the advisors different
roles and their influence on satisfaction. In the third paper (chapter 5) I conducted a
 3

quantitative study and investigated an advisors influence on post-succession performance

as well as on the post-succession level of satisfaction of incumbent and successor by
combining survey data and objective performance data of Swiss family businesses that
recently completed succession. Figure 1 provides an overview of how the three papers
with their specific focuses are related to each other in order to contribute to the overall
research gap outlined in Chapter 1.1.

Figure 1Mapping of the three Papers

 4

1.3 Definitions of Family Business, Succession and Advisors

Family businesses can be either defined through ownership or management which
means that a family owns the majority of a business and/or is involved into its
management (Sharma, 2004). Thereby, the overall aim is to define and pursue a common
vision for the business that creates value and sustains across generations of the family
(Chua, Chrisman & Sharma, 1999). In the remainder of this dissertation, I will only
address to firms as family businesses if they are privately owned by a family and are also
managed by at least one family member. This definition is also valid for the two data-
based chapters 4 and 5.
Succession in family businesses is widely seen as the process which transfers
ownership and management from an incumbent generation to a successor generation.
Researchers widely agree that succession is one of the most important processes during
the life cycle of a family business (Handler, 1994). The succession process mainly
includes the following two steps: firstly, it consists of the selection of the successor which
includes questions concerning the setting of criteria or the definition of a pool of possible
candidates (Le Breton-Miller, Miller & Steier, 2004), and secondly, the preparation of the
management transfer and ownership control from an elderly to a younger generation
(Sharma, Chrisman & Chua, 2003b).
Literature on trusted advisors distinguishes between three types of advisors: formal
advisors, informal advisors, and family firm boards (Strike, 2012). Formal advisors are
externally hired and can be either content experts, who are specialists within a specific
area such as financing, law or products, or they can be process-oriented experts, who
focus on the development of the firm or the implementation of new structures (Hilburt-
Davis & Senturia, 1995). In contrast to formal advisors, informal advisors are not
officially involved into the business but they are highly trusted individuals such as close
friends, spouses, other family members, mentors, or business partners (Strike, 2013). As a
third type of advisors family firm boards or also called advisory boards are frequently
mentioned in literature (Strike, 2012). This dissertation focusses solely on formally hired
advisors.
 5

2. OVERVIEW OF ACADEMIC PAPERS

2.1 Research Gaps and Research Questions

Despite the recent advantages of scholarly knowledge about the influence of
trusted advisors in family firms, our understanding of their role and the associated
benefits and drawbacks is still superficial (see Strike, 2012). In particular, there is a lack
of knowledge what constellations of the triadic relationship between incumbent,
successor, and advisor result in minimized agency costs and how such constellation can
be achieved along the succession process. In a first step, I aim to contribute closing this
gap by integrating the abundant body of literature on the succession process (Sharma,
2004; Sharma, Chrisman, & Gersick, 2012) and the nascent research stream on family
business advisors (e.g., Strike, 2012; Reay et al., 2013) into a conceptual model on
advisors involvement.
Moreover, it also remains unclear what challenges an advisor faces during the
succession process, how exactly an advisors role might change within the process and
how the different roles trigger a higher or lower satisfaction among incumbent and
successor (Reay et al., 2013). By conducting in a second step an exploratory multi-case
study and developing a process-model on the advisors roles and their influence on
satisfaction, I aim to contribute to this further gap in literature.
Finally, scholars have recently called for more research on how much family
businesses do rely on an external advisor and if so, whether the performance of the
businesses is indeed superior to those firms having no advisor during succession (e.g.,
Strike 2012; Strike & Rerup, 2015; Reay et al., 2013). By conducting in a third a step a
quantitative study I aim to provide more insights on this relationship between the
presence of a formally hired advisor and objective post-succession firm performance as
well as subjective post-succession satisfaction. Thereby, I combine objective performance
data from the annual statement reports of the respective firms with survey data.
The first paper (chapter 3) focusses on trusted advisors in the family business
succession-planning process by analyzing their role in four phases of the process
trigger, preparation, selection, and trainingfrom an agency perspective. Particularly, it
focusses on goal divergence and information asymmetry and the advisors influence on
 6

these two constructs. Thus, the first paper aims to answer the following research
questions: (1) How can agency theory elucidate the specific benefits and drawbacks
associated with trusted advisor involvement along the different phases of a family firms
succession-planning process? and (2) Based on those theoretical deductions, what
constellations of the roles and relationships of incumbents, successors, and trusted
advisors are likely to maximize or minimize agency costs during the succession process?
The second paper (chapter 4) focusses on the succession process and the advisors
different roles within this process. Thereby, this paper aims to profoundly understand the
various challenges the advisor faces within the process, what roles he or she engages in
and how the role adjustment of the advisor affects incumbents and successors
satisfaction which is an important factor in determining the outcome of the process (e.g.,
Sharma, Chrisman & Chua, 2003a). Thus, the research questions of the second paper are
the following: (1) Does the role of the advisor change during the succession process, and
if so: how? (2) How do the advisor and his or her role-related activities affect the level of
satisfaction of the incumbent and the successor throughout the process?
The third paper (chapter 5) focusses on the advisors influence on the family firms
objective post-succession performance as well as on the subjective post-succession level
of satisfaction among incumbent and successor. Previous work (e.g., Michel &
Kammerlander, 2015) has revealed that engagement of an advisor throughout the
succession process comes along with both, benefits and drawbacks. As such, the
performance implications of advisor engagement remain largely unclear. To address this
gap in research, I aim to answer the following research questions:
(1) How does a) the level of performance and b) the level of satisfaction of a family
business after succession differ depending on whether a formal advisor has been engaged
during the succession process or not? And (2) how does the tertius iungens behavior 1 of
the formal advisor influence a) the level of performance as well as b) the level of
satisfaction.

1
The tertius iungens behavior is defined as the behavior of the third who joins in an existing group
(here for example incumbent and successor). In contrast to the tertius gaudens, where the third party takes
advantages from disconnections among group members, the tertius iungens aims to connect group
members with each other in order to increase the whole networks advantages and not just the thirds
advantage (Obstfeld, 2005).
 7

2.2 Methodologies
In the first, conceptual paper I provide a brief overview of the extant research on
trusted advisors, succession planning, and agency theory in family firms. Subsequently, I
outline how trusted advisors either increase or decrease important agency costs
throughout the four phases of the succession-planning process. I thereby relayed on ten
important, previously published studies that investigated the succession planning process
in detail and linked their findings to the four phases applied in the first paper. These
previous studies separated the succession planning process into four (Brun de Pontet,
Worsch & Gagne, 2007; Handler, 1994; LeBreton-Miller et al., 2004; Sharma et al.,
2003b) up to eight (De Massis et al., 2008) individual phases. In the course of
synthesizing this body of prior literature, I matched those phases to the steps proposed in
this first article (trigger, preparation, selection, and training) by adapting and/or merging
phases. Subsequently, the first paper discusses in detail how an advisor increases and
decreases agency costs in each of the four phases as well as four commonly observed
constellations of the relationship between incumbents, successors, and trusted advisors.
Thereby, it analyzes the costs and benefits associated with those constellations and
finally, it provides implications for research as well as practice. Based on the literature
review and a systematic integration of the literature streams on the succession process
(e.g., Sharma, 2004; Sharma et al., 2012) and family business advisors (e.g., Reay et al.,
2013; Strike, 2012), I aimed to answer the research questions.
In the second, qualitative paper due to the nature of the research questions that
focus on understanding a process (Langley, 1999; Yin, 1994), I build on a multi-case
study approach (Eisenhardt, 1989). The first step of my data collection process consisted
of gathering and analyzing primary and secondary documents on five selected succession
cases. For instance, I was able to consult internal documents such as business plans,
balance sheets, protocols of succession planning meetings, and various contracts related
to the business transfer. My main data source consisted of a total of 26 semi-structured
interviews with the incumbents, successors, as well as the advisor of the five selected
cases. I interviewed the respondents in two waves. In a first wave, I asked the
interviewees to re-narrate the succession process, to describe the role of the advisor, and
to openly speak about their level of satisfaction during the succession process. In a second
 8

round of interviews I presented my preliminary findings to the interviewees and asked for
their feedback. This round of interviews also consisted of in-depth discussions about the
role-adjustments that happened during the succession process and their effect on the level
of satisfaction.
In the third, quantitative paper, I closely worked with a corporate client advisor
team consisting of eight relationship managers of a large Swiss Bank, who are all
responsible for a portfolio consisting of around 150 to 350 small and medium-sized
corporates. This whole team together advised around 180 family businesses of whom they
knew that a succession process took place within the last five years either with their
support or not. All those family businesses are located in Switzerland. From August until
October 2015 I collected survey data on these family businesses with a questionnaire that
investigated, first, weather a formally hired advisor has been present during succession or
not, second, attributes of the advisors behavior, if present, and third, subjective
evaluations of firm performance and satisfaction. In around one third of the cases we were
able to send the questionnaire to both, incumbent and successor, what lead to a total
number of 240 questionnaires being sent out. The response rate after three months was 44
% and the absolute number of returned questionnaires was 103. I then combined these
subjective performance data with objective data (annual statement reports) provided by
the Swiss bank. In the subsequent analysis, I used linear regression models in order to test
whether firms with a formal advisor were superior in terms of objective post-succession
firm performance and subjective post-succession satisfaction.
 9

2.3 Key Characteristics of the three Papers

As previously discussed all three papers address different research gaps within the
field of advisors involvement into family business succession. Additionally, they apply
different theoretical constructs and different methodologies. Table 1 provides an overview
of these main characteristics as well as the authorship, their publication status and their
unique contribution to theory and practice. All three papers have been written by the first
author, who was also solely engaged in the collection and analysis of data used for papers
2 and 3. For papers 1 and 2 the second author provided crucial support and feedback
mainly concerning the story development and methodical approaches.
Moreover, the following two remarks are not visualized in Table 1: first, an even
earlier version of the second paper was also presented at the IFERA 2015 Annual
Conference in Hamburg, where it won the Best Paper Contribution to Practice Award,
and second, after having received feedback on the third paper from Academy of
Management Reviewers, I aim to further develop this paper in order to submit it in 2016
for publication consideration to a high-ranked entrepreneurship Journal such as for
example the Journal of Business Venturing or Entrepreneurship Theory and Practice.
 10

Table 1 Key Characteristics of the three Papers

Authorship Research Gap Theoretical Constructs Methodology & Sample Contributions Publication Status

Paper 1: Trusted Advisors in a Family Businesss Succession-Planning ProcessAn Agency Perspective

Alexandra Michel & Advisors involvement Agency theory, in Conceptual; literature Systematic overview of Accepted at the IFERA
Nadine Kammerlander into the succession particular goal review and development the effects of advisors 2014 Annual
process and its positive divergence and of a balanced model of involvement into the Conference,
and negative influences information asymmetry. the advisors succession process on Lappeenranta, Finland.
on agency costs. involvement. agency costs.
Published at the Journal
Proposition of a balanced of Family Business
model of the advisors Strategy (JFBS), 2015, 3,
involvement. 45-57.
Paper 2: Challenges and Roles of Advisors in the Family Business Succession ProcessA Qualitative Study
Alexandra Michel & Challenges and roles of Family business, family Qualitative; 5 in-depth Overview of advisors Accepted at the 75th
Nadine Kammerlander advisors within four business succession and case studies of Swiss challenges. Annual Academy of
process steps of family family business advisors. Family Firms. Management Meeting
Role adjustment on
business succession. 2015, Vancouver,
behalf of the advisor;
Canada.
Influence of different extension of Handlers
advisors roles on model (1994). Invited for Revise and
satisfaction of incumbent Resubmit at the Journal
Necessity of advisors
and successor. Family Business Review
triggering negative
(FBR).
emotions.
Paper 3: The Advisors Influence on Post-Succession Performance
Alexandra Michel The Advisors influence Family business advisors Quantitative; final Advisors positive Under Review at the 76th
on objective post- and family business post- sample of 103 family influence on objective Annual Academy of
succession performance succession performance. businesses who post-succession Management Meeting
and subjective post- completed succession performance. 2016, Anaheim, USA.
succession satisfaction. within the last 5 years.
Advisors positive To be submitted to a
influence on post- high-ranked Journal in
succession satisfaction. 2016.
 11

3. TRUSTED ADVSIORS IN A FAMILY BUSINESSS

SUCCESSION-PLANNING PROCESSAN AGENCY
PERSPECTIVE
Alexandra Michel & Nadine Kammerlander

3.1 Abstract
Family business succession is a complex and challenging process, in which family
members often build on the support of trusted advisors who can be seen as the most relied
external source of advice and knowledge that family businesses draw on. Based on an
extensive literature review, this article aims to synthesize prior research on both advisors
and succession to systematically describe and analyze the role of trusted advisors during
the succession-planning process. Based on arguments from agency theory, we discuss
potential benefits and drawbacks associated with the involvement of trusted advisors
along the four phasestrigger, preparation, selection, and trainingof the succession-
planning process and outline how trusted advisors can mitigate but also enhance agency
costsin particular goal divergence and information asymmetryduring each of these
four phases. Subsequently, we discuss four typical constellations of advisor involvement,
which vary in their agency costs and thus have different levels of bias and efficiency. We
thereby outline several inefficiencies that result from the common setup in which an
incumbent and a successor both rely on their own trusted advisors or a team of expert
advisors and propose a balanced and efficient model of advisor involvement as a potential
solution which reduces the agency costs. This conceptual article contributes to research
on succession, agency theory, and trusted advisors in family firms.
 12

3.2 Introduction
Family business succession is a crucial and in many cases long lasting process that
may absorb the attention and resources of a family for years (Cabrera-Suarez, De Saa-
Perez & Garcia-Almeida, 2001). Numerous examples around the world show that
succession is also a challenging process that many businesses struggle with (Mussolino &
Calabro, 2014), in particular with defining the right timing, finding the right successor,
and managing the succession process in a fortunate way (Sharma, 2004).
In light of the challenges that arise during the succession process, researchers and
practitioners have recently started to point to the crucial role played by trusted advisors in
the succession process (e.g., Strike, 2012). Trusted advisors are defined as the most-relied
external source of business advice for members of family businesses, including, for
instance, lawyers, accountants, and consultants with whom family members have enjoyed
long-lasting professional relationships (LaChapelle & Barnes, 1998; Nicholson, Shepherd
& Woods, 2010). On the one hand, trusted advisors are expected to provide important
capabilities such as expert knowledge and high-quality feedback and thus improve the
quality of family members decisions, the strategic planning process, and ultimately the
firms performance (Davis, Dibrell, Craig & Green, 2013; Reay, Pearson & Dyer, 2013;
Strike 2012). In particular, trusted advisors can improve the efficacy of the succession
process by mentoring both incumbents and successors, providing new insights on the
succession (Salvato & Corbetta, 2013), or acting as agents to bring different opinions
together and achieve compromise solutions (Lane, Astrachan, Keyt & McMillan, 2006;
Thomas, 2002). However, trusted advisors are also associated with possible costs and
drawbacks, stemming from agency costs, particularly those costs that result from
divergent goals (e.g., Chrisman, Chua & Sharma, 2004) and informational asymmetries
(e.g., Dehlen, Zellweger, Kammerlander & Halter, 2014) between the incumbent, the
successor, and the advisor. Those drawbacks include heavy pressure on incumbents
(Hilburt-Davis & Senturia, 1995), an overly task-oriented approach that neglects involved
parties emotions (Goodman, 1998; Kaye, 1996), and narrow coaching that results in a
reduction in the independence of successors actions and decisions (Lane, 1989).
Despite recent advances in the scholarly knowledge about the influence of trusted
advisors in family firms, our understanding of their role and its associated benefits and
 13

drawbacks is still superficial (see discussion in Strike, 2012). In particular, the precise
benefits and disadvantages associated with trusted advisor involvement remain unclear to
date. In addition, there is a lack of knowledge about the drivers of efficient and unbiased
(as opposed to inefficient and biased) triadic constellations of incumbents, successors, and
trusted advisors. We aim to contribute to closing this gap by integrating the abundant
body of literature on the succession process (e.g., Sharma, 2004; Sharma, Chrisman &
Gersick, 2012) with the nascent research stream on family business advisors (e.g., Reay et
al., 2013; Strike, 2012) and by building a conceptual model on the impact of involving a
trusted advisor in a family business succession. Thereby, we consider leadership and
ownership transfers to both family-internal and -external successors. Moreover, we
concentrate on the planning process (Cabrera-Suarez et al., 2001; Sharma, Chrisman &
Chua, 2003b), which is particularly determinative of the outcome of the succession
process (De Massis, Chua & Chrisman, 2008; Le Breton-Miller, Miller & Steier, 2004;
Sharma, Chrisman & Chua, 1997) because the absence of a thorough succession plan
enhances the risk of business failure (Barach, Gantisky, Carson & Doochin, 1988;
Seymour, 1993).
In particular, we aim to answer the following research questions: (1) How can
agency theory elucidate the specific benefits and drawbacks associated with trusted
advisor involvement along the different phases of a family firms succession-planning
process? and (2) Based on those theoretical deductions, what constellations of the roles
and relationships of incumbents, successors, and trusted advisors are likely to maximize
or minimize agency costs during the succession process? After a brief overview of the
extant research on trusted advisors, succession planning, and agency theory in family
firms, we focus on how trusted advisors either increase or decrease important agency
costs throughout the four phases of the succession-planning process. Subsequently, we
discuss four commonly observed constellations of the relationship between incumbents,
successors, and trusted advisors and analyze the costs and benefits associated with those
constellations. We argue that a constellation with two or more instead of one trusted
advisors is not only inefficient, but also increases agency costs. Furthermore, we discuss
that lack of bias (i.e. when the trusted advisor does not favor either party) is a crucial
prerequisite for agency costs being minimized rather than maximized through advisor
involvement in family firms.
 14

Our article contributes to the literature in several ways. First, we advance the
research on trusted advisors in family businesses by building on agency theory to
systematically investigate the advantages and disadvantages stemming from trusted
advisor involvement. Most extant studies on family firm advisors are characterized by a
focus on anecdotal evidence and lack of theoretical rigor (see critique by Jaffe & Lane,
2004; Strike, 2012; Swartz, 1989; Upton, Vinton, Seaman & Moore, 1993). Second, we
further extend the literature on family business succession by systematically integrating
the role played by trusted advisors and his or her impact on agency costs. Instead of the
dyadic relationship between an incumbent and a successor (Handler, 1994), we move to
the triadic relationship between incumbents, successors, and trusted advisors, which
alleviates several agency costs but gives rise to other agency costs. Thereby, we focus in
particular on agency costs in form of goal divergence and information asymmetry and
outline in detail how trusted advisors on the one hand mitigate and on the other hand
increase those costs. Third, we discuss several constellations of trusted advisor
involvement commonly observed in practicesuch as relying on advice from several
consultants or engaging a close accountant to manage the succession processand
identify their related agency costs. After the identification and an extensive discussion of
the positive and negative effects of trusted advisors on agency cost, we synthesize a
proposition of a balanced and efficient model that reduces those agency costs. Fourth, we
also advance research on agency theory. Although there is a large body of research on
agency costs in family businesses, most of this research focuses on classical owner-
manager relations. This manuscript extends this predominant view by including the
trusted advisor as a further actor that, while neither being owner nor manager of the firm,
can affect the level of agency conflicts in the firm. Doing so provides a more nuanced
picture of agency costs in family firms that is not restricted to dyadic relationships but
considers a triadic relationship.
 15

3.3 Theoretical Background and Key Concepts

3.3.1 The Succession-Planning Process

Succession in family business is widely seen as the process that transfers

ownership and leadership from an incumbent to a next-generation successor, who may or
may not be a family member (Sharma, 2004; Steier & Miller, 2010). Researchers agree
that succession is one of the most important processes of a family businesss life cycle
due to its substantive effect on the firms strategy, culture, and also its survivability
(Ahlers, Hack, & Kellermanns, 2014; Cater III & Kidwell, 2014; Handler, 1994). The
succession-planning process, which is the focus of this paper, is the first and one of the
most important parts of the overall succession process and has two main goals: first, the
selection of the successor, which includes setting criteria or defining a pool of possible
candidates (Le Breton-Miller et al., 2004); and, second, preparation for the transfer of
management control as well as ownership shares from an older to a younger generation
(Sharma et al., 2003b). Because the planning process embraces every succession-related
activity from the incumbents first consideration of his or her exit to the actual transfer of
leadership and ownership, it is determinant of the outcome of the entire succession
process and thus, is particularly worthy of study (Chittoor & Das, 2007; Sharma et al.,
1997). Based on an extensive review of prior literature on family firm succession, we
synthesize four important phases of the succession planning process: the trigger phase,
the preparation phase, the selection phase, and the training phase (Brockhaus, 2004; De
Massis et al., 2008, Murray, 2003; Le Breton-Miller et al., 2004). Those phases can differ
in length and can either occur consecutive or (partly) in parallel2. Table 2 provides an
overview of ten important, previously published studies that investigated the succession
planning process in detail and links their findings to the four phases applied in this
manuscript.

2
At times those phases might have unclear starting and ending points, in particular the first phases can
even occur rather unconsciously and/or in an unplanned, unsystematic way. As this article focuses on the
impact of trusted advisors in each of the four phases, we henceforth assume a conscious and rather defined
nature of all four phases.
 16

Table 2Overview of Theoretical Papers in connection with the Succession

Planning Process
Author / Phase 1 Phase 2 Phase 3 Phase 4
Year
This article Trigger Preparation Selection Training
Achieving incumbents Definition of goals, Definition of selection Set-up of appropriate
awareness and guidelines and a criteria, a pool of training for the
readiness for timeline for the possible candidates and successor
succession succession process agreement on a
successor
Brockhaus Industry Strategic Family Business Selection of Successor Development of the
(2004) Analysis Analysis Different possibilities successor and
Answer questions Answer questions about and criteria to select a Relationship Issues
whether an internal strength and successor How to train the
succession or the weaknesses of the successor, get him or
selling of the firm are business and what kind her exposed to the
better of successor is required business and achieve a
good relationship
Brun de Ground Rules Nurturing Successors Selection Hand-off / Transition
Pontet, Presence of a clear Public Progress on Confidence in Get in touch and gain
Worsch & Successor Succession successors leadership confidence from other
Gagne skills stakeholders
(2007)
Cabrera- Predecessor Business Context and Successor Motivation Successor Training
Suarez, De Motivation Family Context Needs and satisfactions and Quality
Saa-Prez & Overcoming of Analysis of factors of successor Predecessor-Successor
Garcia- psychological fears such as economic Relationship
Almeida about succession situation, culture, Academic,
(2001) cohesion, commitment entrepreneurial training
and early exposure to
the business
De Massis, Defining Roles Evaluation Formalization of Training
Chua & Clear role definition of Evaluation of gaps criteria Train and expose the
Chrisman incumbent and between the potential Formalization of successor to the
(2008) successor during the successors needs and rational and objective business and provision
transition and abilities criteria for selection of sufficient feedback
composition of a team and communication of
decisions
Gersick, The Trigger Disengaging an Choosing Commitment to the
Lansberg, Aging generates Exploring Selection of a successor New Structure
Desjardins pressure for change, Alternatives for making leadership Committing to this new
& Dunn acknowledgment by the Acknowledgment of to continue structure, the successor
(1999) incumbent termination of the old and the support of it
structure and evaluation
of possible future
directions and
candidates
Handler Stage of Owner- Stage of Training and Stage of Partnership Stage of Transfer
(1994) Manager Development The successor becomes The successor is ready
based on Incumbent as sole Stage of first contact of the manager and the to be the new leader /
Churchill & operator and successor successor with the incumbents stays on chief decision maker
Hatten with no role business as a helper board as overseer / and the incumbent rests
(1987) whereas the incumbent delegator maybe as consultant
is still the monarch
Lambrecht Interpreneurship Written Plan Agreement and Studies, formal
(2005) Relationship between Planning of the transfer official start in the internal education
incumbent and future family business and external
changes Agreement and start of experience
the successor form the Training of the
bottom of the ladder successor
 17

Le Breton- Ground Rules & First Nurturing / Selection Hand-off / Transition

Miller, Steps Development of Design of a legitimate Process / Installation
Miller & Start to plan the Successor(s) process by establishing Establishing criteria for
Steier succession process and Establishing between selection criteria and the successors
(2004) establishment of a needs and prospective select successor performance, prepare
shared vision successors abilities incumbent and
successor for their new
roles
Murray Trigger Preparation, Choice Commitment and
(2003) Achieve readiness of Disengagement and Selection of a successor Implementation
the incumbent to start Exploration and what changes Implementation of new
the process Evaluation of dreams accompanies this structure and exposing
and their feasibility for choice of the successor
succession
Sharma, Post-Succession Post-Succession Role Successor Selection Communication of
Chua & Business Strategy of Incumbent and Training Decision
Chrisman Developing a vision or Defining the role of the Selecting and training a Communicating the
(2003b) strategic plan for the departing incumbent successor decision to key
company after stakeholders
succession

The previous studies listed in this table separated the succession planning phase into four (e.g, Brun de
Pontet et al., 2007; Handler, 1994; LeBreton-Miller et al., 2004 & Sharma et al., 2003b) up to eight (De
Massis et al., 2008) individual phases. In the course of synthesizing this body of prior literature, we
matched those phases to the steps proposed in this article (trigger, preparation, selection, and training) by
adapting and/or merging phases. The terms provided in bold font in this table, reflecting the main
description of the respective phase, are taken literally from the respective papers.

The first step in succession planning is an incumbents readiness to hand over the
business, which is often initiated by a trigger (Murray, 2003). The trigger to consider
ones own exit from a business can be a result of developmental pressures such as age or
health, internal forces such as family, a predestined succession candidate, or company
management, or external pressure for a change, for example, from accountants or
customers (Gersick, Lansberg, Desjardins & Dunn, 1999). One important aspect of
succession readiness is an incumbents willingness to hand over the business (Brun de
Pontet, Worsch & Gagne, 2007): While owner-managers of family firms typically possess
the general desire to handover the business to their children one day (e.g., Chua,
Chrisman & Sharma, 1999), it is frequently observed that family firm incumbents are
characterized by emotional attachment to the firm (Morgan & Gomez-Mejia, 2014) and
by a reluctance to let go (Sharma, Chrisman, Pablo & Chua, 2001). As a consequence,
they tend to postpone their decision to withdraw from the business again and again with
 18

succession candidates remaining in a prolonged waiting position, known as the prince

Charles syndrome (Rothwell, 2010).
After succession is initialized in the trigger phase, the preparation of the
succession process begins. The first task in this phase is to create an initial vision of how
the business should operate in the future, which is shared by the incumbent andif
already availablethe succession candidate. Moreover, it is necessary to specify the
goals, rules, and guidelines that every involved party must follow during the succession
process, and a time planincluding milestonesmust be defined (Le Breton-Miller et
al., 2004). In family businesses, in which incumbent and successor have already shared a
long history, this process is likely less complicated due to a common understanding of the
businesss identity and needs that has grown over years (Sharma et al., 1997).
The preparation phase of the succession process is followed by the selection phase,
which consists of tasks such as defining the pool of candidates, criteria for and rules of
selection, and guidelines for the successors future training. In family firms the selection
criteria used by the incumbent are often guided by personal fit as well as family needs and
are less driven by profit-maximization as compared to non-family firms (Chua, Chrisman
& Sharma, 2003; Westhead & Cowling, 1997). During this phase, a communication plan
is defined that governs how to share news about the succession to stakeholders such as
employees, suppliers, or customers, including timing and who bears responsibility for
issuing succession-related communications (Le Breton-Miller et al., 2004).3
After a successor has been chosen, the succession process enters the training
phase, in which he or she is trained and prepared for his or her new role. Family firms
typically take an approach to training that is more personal and relationship-oriented
compared to that of non-family firms, which prefer a more formalized, task-oriented
approach (Fiegener, Brown, Prince & File, 1994). Therefore, in a family business
commitment to the business and to the quality of the incumbent-successor relationship are
important because those commitments have a positive effect on succession planning and
successor training (Lansberg & Astrachan, 1994; Seymour, 1993).

3
Communication of the succession plan involves exchange with various family and non-family
stakeholders. As each of them has different needs and goals, setting up a comprehensive communication
plan is a rather complex task that might be difficult to perform. However, as this manuscript focuses on
the relationships of incumbent, successor, and trusted advisor, the specifics of such communication are out
of the scope of this manuscript.
 19

3.3.2 The Role of Trusted Advisors in Family Firms

The literature on trusted advisors in family businesses distinguishes among three

types of advisors: formal advisors (many of whom are trusted advisors), informal
advisors, and family-firm boards (Strike, 2012). Formal advisors are hired by the family
or the firm and hold either an external or an internal position. They can be content
expertsi.e., specialists within a specific area such as financing, law, tax, investments, or
productsor they can be process-oriented consultants who focus on developing the firm
or implementing new structures. In principle, both types of advisors can serve as trusted
advisors. Nevertheless, family firms often seek a trusted advisor that embodies a
combination of the twoi.e., a process-oriented consultant with succession-specific
knowledge (Strike, 2012). Often, formal advisors are hired only temporarily (Hilburt-
Davis & Senturia, 1995). In contrast to formal advisors, informal advisors are not
officially involved in the business. They are highly trusted individuals such as close
friends, spouses, other family members, mentors, or business partners, who may support
the firm with their advice, support, and empathy (Strike, 2013). As a third type of advisor,
the family-firm (advisory) board is frequently mentioned in the literature (Strike, 2012).
Research has identified several characteristics shared by trusted advisors, in
addition to deep content knowledge, which foster the consulting process and increase the
likelihood of a positive outcome. Trusted advisors are often characterized by attributes
such as honesty, integrity, loyalty, predictability, and empathy (Strike, 2012). In addition,
an advisors goal orientation also positively affects his or her ability to provide innovative
advice. It has further been found that compared to advisors with an avoidance orientation,
advisors with a high learning orientation are better at taking feedback that reflects the
clients needs and combining that feedback with existing information sources to provide
innovative, new solutions (Davis et al., 2013). Most trusted advisors help the family in a
subtle way, capturing and influencing attention to an issue and then facilitating collective
action (Strike, 2013). Therefore, it is important that a trusted advisor is well embedded
into the family firm to provide effective advice (Barbera & Hasso, 2013). Moreover,
independence and the willingness to share knowledge and follow a teamwork approach
have been shown to increase advisors efficacy in family firms (Su & Dou, 2013). In the
remainder of this paper, we focus on externally hired, trusted advisors because due to
 20

their firm- and family-external, independent perspective, they are expected to provide
family businesses with specific benefits (Lane et al., 2006).

3.3.3 Agency Theory and Family Businesses

Agency theory highlights specific conflicts that arise when a (business) owner (i.e.,
a principal) assigns responsibility to a delegate (i.e., an agent) (Fama & Jensen, 1983).
Conflicts thereby particularly arise due to diverging goals of principal and agent as well
as due to an asymmetric distribution of information among them (Eisenhardt, 1989). One
of the underlying assumptions of agency theory is that the agent is primarily striving for
maximizing his or her own benefit instead of that of the principal, in other words the
goals of agent and principal substantially diverge. This goal divergence is exacerbated by
the inherently different attitudes toward risk of the principal and the agent (Fama &
Jensen, 1983). Besides diverging goals, principals are also challenged with monitoring the
behavior of the agent. It is assumed that the principal has inferior knowledge about the
actions taken by the agent, while the agent often has less than perfect information on the
principals precise goals and motivation, in other words there is substantial informational
asymmetry between the two parties (Eisenhardt, 1989).
Referring to family businesses, researchers have long assumed that family firms
have zero or at least insignificant agency costs due to aligned interests of owners and
(family) managers in those firms (Jensen & Meckling, 1976). More recent research,
however, has revealed that agency costs are also prevalent in family firms (e.g.,
Chrisman, Chua & Litz, 2004), for instance due to nepotism (Schulze, Lubatkin, Dino &
Buchholtz, 2001) or expropriation of minority shareholders (Cronqvist & Nilsson, 2003;
Arosa, Iturralde & Maseda, 2010).
Within the last years, scholarly interest in the agency costs associated with family
firm succession has grown (Aguilera & Crespi-Cladera, 2012; Chrisman, Chua, Steier,
Wright & McKee, 2012; Pieper, 2010). Divergent goals and interests among the involved
parties arise, for example, if the incumbent strives for continuity of the firm and the
preservation of traditions, whereas the successor seeks sometimes-radical ways to
distinguish him- or herself (Brun de Pontet et al., 2007). Additionally, informational
asymmetries exist among incumbent and successor. On the one hand the incumbent is
expected to possess much deeper knowledge about the firm, its performance, strengths
 21

and weaknesses than the successor. On the other hand the successor has superior
knowledge about his or her own abilities and about the plans he or she has with the
business post-succession (Dehlen et al., 2014).
The involvement of an external advisor, adds an additional agent with own goals
and a specific set of information to the process. Following the underlying assumptions of
agency theory, the advisor can be expected to strive for maximizing his or her own
benefit. At the same time, the trusted advisor possesses specific expert knowledge,
experience, and skills to contribute to mitigating agency costs.

3.4 Trusted Advisors in the Family Business Succession-Planning
Process: A Conceptual Model
In the following section, we will analyze in detail how trusted advisors can
enhance and/or mitigate agency costs, in particular information asymmetries and goal
divergence among involved parties, in each of the four phases of succession planning.
The results of this analysis are summarized in Table 3.
Table 3Trusted Advisors during Succession: An Agency Perspective
Phase Decreased Agency Costs
Trigger Moderates goal conflicts due to
incumbents reluctance and lack of
readiness
Mitigates information asymmetries
about potential exit choices and
specifics of the succession process
Preparation Moderates stakeholders goal
conflicts caused by different vision
or goals
Mitigates lack of experience, process
and expert knowledge (e.g., finance,
tax, law) by providing accurate
content and process information
Selection Moderates diverging goals related to
selection criteria and intra-family
rivalries
Mitigates lack of information about
succession options and possible
candidates
Training Moderates goal conflict regarding
intensity and extent of training
Introduces institutional training
methods
Mitigates information asymmetry
regarding successors abilities
Increased Agency Costs
Goal divergence and information
asymmetry between an advisor and an
incumbent leads to:
Focus on ones own goals
Enforcement on the incumbent
leads to further reluctance
Unapproved advice
Over-identification of the advisor
with the family
Goal divergence and information
asymmetry between an advisor and an
incumbent and/or successor leads to:
An incumbents too favorable
perspective on the business
Neglect of emotions
Focus on textbook, not adapted
solutions
An advisor that is overly process
focused
Goal divergence and information
asymmetry between an advisor and an
incumbent and/or successor leads to:
Neglect of firm specifics
Neglect of incumbents or
familys subconscious
preferences
Advisors lack of sensitivity
Advisor following own agenda
Goal divergence and information
asymmetry between an advisor and an
incumbent and/or successor leads to:
A reduction of in the successors
independence
Non-firm-adjusted training due to
too-tight coaching
Too much responsibility in the
advisors hands
No development of successors
leadership ability
22
Implications
Enforcement on incumbent
Enforcement on family
Provocation of hostile reactions and
increased reluctance to further cooperate
Biased judgment of the advisor due to
over-identification
Unbalanced advise
Misleading information by the
incumbent
Insufficient balance among family,
incumbent, and task
Neglect of feelings and emotions
Enhanced reluctance of incumbent to
withdraw
Selection of a qualified but not suitable
successor
Emotion-laden discussions
Rejection of intervention
Feelings of offense and reluctance
Hurt feelings
Reinforcement of conflict
Reduced successor independence
Insufficient preparation of the successor
Lack of confidence in the successor
Enforcement on successor
Resentment, discontent, and suspicion by
stakeholders
Edging successor out of job
 23

The Trigger Phase. The trigger phase (Murray, 2003), often also called pre-
succession phase (Nordqvist, Wennberg & Hellerstedt, 2013), is the first phase in the
succession planning process. Often, in this phase, the attention of the incumbent as well
as of, for instance, family members and potential succession candidates (if already
available) is drawn for the first time on the concrete steps associated with succession. The
major challenges in this phase are (1) that the incumbent must become aware of the need
for succession in the near (as opposed to the far) future, (2) that the incumbent needs to
build up his or her willingness to withdraw and prepare both the business and the family
for succession, and (3) that the succession process must be initiated (Brun de Pontet et al.,
2007; Murray, 2003). In this context, the incumbent often lacks the experience and ideas
to cope with the common initial feelings of resistance to letting go (Hilburt-Davis &
Senturia, 1995). Moreover, he or she is often doubtful of finding a successor with
sufficient leadership and governance skills as well as commitment to the business (Brun
de Pontet et al., 2007; Cabrera-Suarez et al., 2001).
The incumbents reluctance to let go and his or her often vague and unspecific
fears about the future often imply goals that diverge from those of his or her family
members and the successor candidate (if already available). In particular, the involved
parties often disagree regarding the following topics (e.g., Brun de Pontet et al., 2007):
when to start the procedure (incumbents often vote for a postponed initialization), how to
process the succession (incumbents often do not see the need for formalized evaluation of
what they believe is a healthy and well-performing business), and when to handover
ownership and leadership (incumbents often prefer longer timespans until the official
succession). Moreover, this initial phase is also challenged by information asymmetries
between the incumbent on the one hand and the family and the successor candidate on the
other hand: In particular, the latter do not possess full information on the incumbents
real intentions to step back and whether and how to execute the succession process
because many incumbents prefer not to communicate their intentions in a clear way or
tend to keep changing their minds due to their intense feelings of uncertainty (Hilburt-
Davis & Senturia, 1995). Principal-principal conflictsa long overlooked form of agency
problems (Young, Peng, Ahlstrom, Bruton & Jiang, 2008)between the incumbent (i.e.
current principal) and the successor candidate (i.e. future principal) as well as family
 24

members (often possessing some shares of the firm and thus also principals) are the result
of such uneven distribution of information and divergence of interests.
Advisors can alleviate those principal-principal problems by adopting the role of a
neutral, external mediator who facilitates discussions among the incumbent, the successor
candidate (if available), and family members. In particular, based on previous experience
with succession cases and interpersonal skills, he or she can promote the communication
among all involved parties and thereby reduce informational asymmetries. Moreover, due
to their education, training, and experience, advisors can provide important and objective
information on the succession process, especially they can point out when a specific
change is needed and the succession process has to be started (Lane et al., 2006; Swartz,
1989; Upton et al., 1993) due to objectively assessable criteria such as age or health of the
incumbent (Cadieux, Lorrain & Hugron, 2002; DeTienne, 2010; Dyer & Handler, 1994).
Additionally, advisors can help the incumbents dispose of their vague human fears
regarding the unknown future of the firm and themselves: Advisors do so by providing
comprehensive information on potential exit choices as well as the specifics of the
succession process and by closely coaching the incumbentmeasures that help the
incumbent to get ready for the succession and overcome the reluctance to step aside (Brun
de Pontet et al., 2007; De Massis et al., 2008; Salvato & Corbetta, 2013; Strike, 2012) and
thereby align the goals of the incumbent with those of other family members as well as
the potential successor candidate.
However, the involvement of an advisor can also imply agency costs between the
incumbent (i.e. principal) and the advisor (i.e. agent) if the advisors own goals are not
aligned with those of the other involved parties and/or if communication does not flow
smoothly among the involved actors. Concerning the goal alignment in the trigger phase,
advisors typically aim for a timely official start of the succession process for the purpose
of generating revenues, whereas incumbents typically show an initial reluctance to step
aside. More specifically, an advisor who lacks the required sensitivity likely enforces the
incumbent and his or her family to consider succession, even if they are not ready to
engage in such a process (Hilburt-Davis & Senturia, 1995). The incumbent and his or her
intimates, in turn, likely react with an even increased level of reluctance to engage in the
succession-planning process. Thus, to avoid such increased conflicts based on diverging
goals, the advisor must first gain at least tacit approval by the incumbent before starting
 25

the succession process (Lane, 1989), otherwise, the incumbents reaction to the advisors
succession-related suggestions can be negative or even hostile (Upton et al., 1993). Such
issues are especially salient if the advisor has been hired for instance by the successor
candidate rather than by the incumbent him- or herself (Lane, 1989).
Moreover, the involvement of a trusted advisor can also further disturb the
information flow and result in increased informational asymmetries: In particular if the
advisor over-identifies with one party, for instance because of a long-lasting and trusted
relationship, the advisors suggestions become less neutral and his or her expert and
process knowledge (Hilburt-Davis & Senturia, 1995) is less evenly distributed among the
involved parties. As a consequence, the communication among the incumbent, family
members, and the succession candidate (if available) becomes less open, which, in turn,
further reinforces the asymmetrical character of available information on the succession
process. The presence of an outside individual (i.e. the advisor), and simultaneous lack of
open communication, likely increases the uninformed parties reluctance to follow the
advisors recommendations and increases conflicts among all involved individuals.
In case such goal divergence and informational asymmetries are present, the
advisor will not work on solutions that best match the firm and its owner, thus resulting in
classical principal-agency conflicts with the advisor (i.e. the agent) providing
recommendations that do not fit the incumbent (i.e. the principal). The likely outcome of
such principal-agent conflicts is the reluctance of the incumbent to further continue the
succession process which leads to our first two propositions:

Proposition 1: In the trigger phase, trusted advisors can mitigate principal-

principal conflicts by drawing attention to succession, supporting the incumbent in coping
with reluctances, officially starting the process, and proactively communicating with all
involved stakeholders. Thereby advisors reduce information asymmetry and improve the
goal alliance.

Proposition 2: However, if the goals of an incumbent and advisor are not aligned
in the trigger phase, then the involvement of a trusted advisor likely forces the incumbent
into decisions for which he or she is not yet ready, ultimately provoking the incumbents
reluctance and leading to a hostile reaction from all involved parties. In this case,
 26

problems of goal divergence and information asymmetry are even increased leading to
increased agency costs.

The Preparation Phase. Tasks belonging to the preparation phase of the

succession planning process include especially agreement on strategic, financial, and
timing related aspects. A careful preparation of such aspects is crucial in order to ensure
the continuity of the business as well as family harmony (Le Breton-Miller et al., 2004).
Often, major challenges occur within this phase because expert knowledge in areas such
as tax and law or process knowledge is required (Kaye & Hamilton, 2004; Strike, 2012;
Upton et al., 1993)knowledge which incumbents, the potentially available successor
candidates, and their respective firms often do not possess.
We argue that within this phase, problems of information asymmetry, particularly
due to a lack of process and task knowledge, and problems of divergent goals between the
incumbent and other stakeholders such as family members and the potential successor
candidate are prevalent leading to principal-principal agency costs. As members of family
businesses often lack experience of how to set up the succession process and lack
knowledge which tasks have to be fulfilled and at what time, a clear process plan with
defined tasks and a proper documentation of the progress is often missing. As a
consequence, information about what is going on and why, as well as about agreed next
steps, is not equally distributed among the involved actors, leading to severe
informational asymmetries. Reasons why goal divergence arises are similar to what has
been discussed for the trigger phase: Family members and/or the potential successor
candidate likely aim for a rather quick succession planning with milestones coming
quickly after each other, whereas the incumbent wants to take substantial time finding the
ideal successor. As a consequence of such informational asymmetries and simultaneous
goal divergence, the principal-principal conflicts between the incumbent, the family
members, and the successor candidate (if available) as described in the trigger phase are
continued and even enhanced in the preparation phase.
Trusted advisors can again mitigate those agency problems, in particular through
their experience with similar cases and their deep content and process knowledge. First,
due to their training and knowledge in succession planning and strategic
management, advisors can contribute to improve the preparation phase by helping the
 27

stakeholders defining a vision, goals, and guidelines for the succession process, which
contributes to alleviating concerns regarding the other parties intentions and to aligning
goals of all involved individuals. Additionally, based on their prior experience with
similar cases, advisors can organize a task group where each member has a specific role
and establish a clear timeline including the definition of milestones (Chrisman, Chua,
Sharma & Yoder, 2009; Le Breton-Miller et al., 2004; Morris, Williams, Allen & Avila,
1997). Such actions reduce uncertainty among the participants and thus reduce the risk of
conflicts based on ignorance or misinterpretation. Second, in order to avoid further
conflicts based on diverging goals the trusted advisor can also mitigate conflicts between
the incumbent, the family, and the successor candidate through shifting the focus from
emotional issues to a more objective and rational perspective that focuses on the process
and its various tasks (Upton et al., 1993), thereby adopting the role of a neutral,
arbitrating outsider. Third, advisors can provide additional expert knowledge for example
concerning procedural or financial aspects (Gedajlovic, Carney, Chrisman &
Kellermanns, 2012; Hilburt-Davis & Senturia, 1995; Ward, 1997). In doing so trusted
advisors reduce again informational asymmetries among the involved parties and thus
reduce the risk of conflicts among the principals. In case the advisors lack required
specific knowledge or skills to improve the information level, they are typically able to
draw on resources from their professional network. In sum, the involvement of trusted
advisor increases the goal alliance between incumbent, family members, and the
successor candidate and reduces information asymmetry through provision of process and
task knowledge leading to an overall reduction of principal-principal conflicts.
However, bringing in an external advisor during the preparation phase also leads to
further agency costs, which subsequently decrease the possibility of a positive outcome of
the preparation phase. We argue that information asymmetry and goal divergence are
reinforced for two reasons. First, CEOs typically tend to focus on the strengths of their
firms (Poza, Hanlon & Kishida, 2004) and assess their businesses fitness for succession
more favorably than other individuals with more objective, outsider perspectives. In
particular trusted advisors, due to their experience with business transfers and their
independent, external perspectives, adopt a more critical perspective of the firms
strengths. In order to sustain their internal belief system (confirmation bias),
incumbents are inclined to hide important information about the firms strengths,
 28

weaknesses, and outlook from the advisor. However, advisors who have incomplete
information are unable to provide well-tailored support to a firm and its stakeholders. We
thus argue that in the likely case of information asymmetry between incumbent and
advisor, the advisors recommendations are not well grounded in firm specifics, neglect
important aspects, and eventually are of limited benefit to the overall succession process.
Moreover, the preparation phase can be further complicated by goal divergence
between the advisor (on one side) and the incumbent, the succession candidate, and
family stakeholders (on the other side). Advisors with deep expert knowledge are often
inclined to focus too closely on expertise issues and neglect the idiosyncratic firm
characteristics as well as emotional aspects that are particularly important to family
stakeholders (Goodman, 1998; Kaye, 1996). A trusted advisors focus on textbook
solutions and his or her own goals, rather than adjusting his or her advice to the specific
needs of the family business entails further goal conflicts. This divergence of goals
increases the resistance of the involved parties to further cooperate with the advisor and
can ultimately result in the delay or termination of the succession process. Thus goal
divergence and information asymmetry lead to agency conflicts, in which the agent (i.e.
the advisor) provides inferior suggestions regarding for instance strategic and financial
aspects to the principal (i.e. the incumbent), in case the informational flow from the
incumbent to the advisor is insufficient and in case the advisor is focused on his or her
own goals. In summary, we propose as follows:

Proposition 3: In the preparation phase, trusted advisors can mitigate principal-

principal conflicts by providing process and task knowledge, clearly defining rules,
guidelines and a timeline as well as mitigating conflicts. Thereby advisors improve the
goal alliance and reduce information asymmetry.

Proposition 4: However, if an incumbent and an advisor in the preparation phase

do not fully share information (for example, because the incumbent is suppressing facts)
or if a divergence of goals occurs (for example, due to neglected emotions), then the
involvement of a trusted advisor likely leads to inappropriate recommendations to and
resistance by the involved parties that increase problems of goal divergence and
information asymmetry and ultimately agency costs.
 29

The Selection Phase. After the preparation phase, the selection of the successor
takes place (Chittoor & Das, 2007; Harveston, Davis & Lyden, 1997; Le Breton-Miller et
al., 2004). Within this phase, a pool of possible internal and/or external candidates as well
as the ultimate selection criteria for a successor is defined. Subsequently, one has to
assess the fit of the identified succession candidate(s) with the business strategy as well as
the competitive environment, and finally agree on a succession option which fits best with
the incumbent, the firm, and the family (Brockhaus, 2004; Le Breton-Miller et al., 2004).
The major challenges of this phase for the family business are again related to goal
divergence and information asymmetry. In this period important discussions need to take
place among the affected stakeholders about the successor selection as well as details on
the business transfer (Le Breton-Miller et al., 2004). Often those discussions are conflict-
laden and highly emotional, since each involved party has idiosyncratic interests. Most
importantly, the preferences regarding the successor frequently diverge. While the
designated succession candidate wants to ensure that he or she is chosen as successor,
family members might wish for a candidate willing to pay a high sales price in order to
ease the familys financial situation. The incumbents preference can depend on various
factors such as sympathy with a candidate or perceived fit with the firms culture and
strategy. Further typical controversial subjects in this regard are again the preferred time
schedules, but also the perceived fair sales price (if applicable), and the desired level of
post-succession strategic change. To strengthen their own positions during negotiations,
each actor is incentivized to hide informatione.g., facts about the firms value or post-
succession plansfrom each other (Dehlen et al., 2014), which ultimately leads to an
asymmetric distribution of information and to severe conflicts among the involved
principals.
A trusted advisor can reduce such principal-principal agency conflicts and
contribute to the positive outcome of the selection phase by assuming a mediating role
that aims to resolve goal conflicts, and by fostering an efficient information flow between
incumbent and successor candidates, which reduces information asymmetries. In other
words, trusted advisors firstly mitigate problems of goal divergence by providing support
in defining (and agreeing on) objective selection criteria, and by helping the parties to
concur in the successor selection. When it comes to defining the pool of potential
succession candidates, advisors can provide valuable input based on their access to their
 30

external professional network and thus enlarge the pool of potential candidates (Strike,
2012). Thereby advisors provide more options and thus increase the probability that one
candidate fulfills the interests of all involved parties. Moreover, trusted advisors reduce
information asymmetries by providing objective outsider information to the conflict-laden
discussions among the incumbent, the family members, and the successor candidates and
by stimulating the exchange of information in such discussions (Lane et al., 2006).
However, besides this mitigating effect on agency conflicts, trusted advisors can
also lead to increased agency conflicts resulting in an inferior outcome of the selection
phase. First, as noted above, all involved partiesthe incumbent as well as other family
membersmight have some subconscious preference for (or reluctance against) one or
more of the available successors based on, for instance, sympathy or family ties.
Moreover, firm specifics such as organizational culture frequently require a specific type
of successor. This type of information, however, often remains tacit and is not
communicated to the advisor (Upton et al., 1993). As a consequence of such
informational asymmetries, the advisor will base his or her recommendation on mostly
rational selection criteria and neglect the tacit preferences and needs of family members
and the firm4 (Hilburt-Davis & Senturia, 1995). Thus, the successor proposed by the
advisor is likely well-qualified, however, that successor is not necessarily a suitable
successor for the long run due to neglected firm specifics as well as family preferences
(Le Breton-Miller et al., 2004; Upton et al., 1993). In such case the recommendations
provided by the advisor (i.e. the agent) regarding to whom to transfer ownership and
leadership of the firm do not match the vision of the incumbent (i.e. the principal).
Second, the incumbent and the chosen successor often have divergent goals, in
particular with respect to the timing of the transfer of ownership and leadership (Brun de
Pontet et al., 2007), the sales price and financing (if applicable), and the firms future
strategic focus. Such principal-principal conflicts are exacerbated by the involvement of
an advisor if he or she is not able to adopt a neutral position and moderate the conflicts
among the current and future principal. This is for instance the case if the advisor lacks
the experience and sensitivity related to how to conciliate such emotion-laden situations,
or if that advisor either follows his or her own agenda, or lacks crucial information.
4
A similar outcome is expected if the criteria are communicated to the advisor but neglected by him or
her, for instance due to insensitivity or a lack of experience.
 31

Similar to the previous phases, the involvement of an advisor can impede the selection
phase if one or more of the individuals involved do not accept his or her intervention.
This is expected to result in feelings of offense and reluctance and in the worst-case
scenario can lead to severe conflicts between incumbents and successors (Herz Brown,
1998; Kaye, 1996). Our outlining in connection with the selection phase leads to the
following propositions:

Proposition 5: In the selection phase, trusted advisors can mitigate principal-

principal conflicts by supporting the incumbent and family in defining clear selection
criteria, by enlarging the pool of possible successor candidates, by mitigating conflict-
laden discussions, and ensuring the equal share of information among all involved actors.
Thereby advisors improve the goal alliance and reduce information asymmetry.

Proposition 6: However, if incumbents, successors, and trusted advisors do not

fully share information about firm specifics during the selection phase (for example due
to neglected facts by the advisor) or the advisors intervention is not accepted (for
example, due to the advisor and the other involved parties divergent goals), then the
involvement of a trusted advisor likely leads to the choice of an inappropriate successor,
feelings of offense, reluctance, or even severe conflicts among the involved parties what
even increases problems of goal divergence and information asymmetry and thus agency
costs.

The Training Phase. After having agreed on a successor, the successor-training

phase begins (Le Breton-Miller et al., 2004). The overall aim of this phase is for the
successor to acquire necessary governance, leadership, and business-related skills and to
gain acceptance and trust from all involved parties (Cabrera-Suarez et al., 2001; Fiegener
et al., 1994; Le Breton-Miller et al., 2004). A major task in this phase is that the successor
gets in contact with all relevant stakeholders within and outside of the firm, such as
employees, customers, and suppliers. The successor must fully understand the business,
including its strengths and weaknesses, and must gain knowledge about how its internal
processes work to identify promising opportunities and to further develop the business
(Brockhaus, 2004; Goldberg, 1996).
 32

Agency conflicts among principals arise in this phase, in case there is no pre-
defined, institutional training for the successor available and in case there is disagreement
between the incumbent and the successor about what type of training is appropriate and in
which areas the successor lacks ability and experience (Miller, Steier & LeBreton-Miller,
2003). In order to make sure that the business is transferred to a most capable candidate
(Dehlen et al., 2014) the incumbent typically prefers a long training phase, whereas the
successor, due to his or her goal of taking over full responsibility as soon as possible,
strives to minimize the training phase. As a consequence, the successor is incentivized to
hide his or her true level of ability from the incumbent and, in turn, the incumbent does
not provide all the knowledge the successor would need to successfully lead and govern
the firm. Through this hiding of crucial information from both parties, informational
asymmetry is increased, often resulting in insufficient training of the successor and, as a
consequence, leading to inferior capabilities of the new firm owner-manager.
In this phase, well-equipped and skilled trusted advisors generate compromise
solutions in cases of diverging goals regarding the scope and intensity of the training and
decrease the informational asymmetries between the two parties regarding the successors
capabilities as well as requirements to lead and govern the firm. In particular, trusted
advisors mitigate problems of information asymmetry between incumbent and successor
by objectively evaluating the successors abilities, by closely coaching the successor, and
by moderating possible conflicts between the two actors (Brun de Pontet et al., 2007;
Lane, 1989). During this phase, trusted advisors often set up a detailed training plan for
the successor including firm internal training, which ensures the successors involvement
into all business areas, as well as appropriate external training possibilities (Miller et al.,
2003). Such a detailed plan, created by a well-informed but neutral individual is most
likely to match with the goals of both, incumbent and successor, and to be accepted by
both parties.
However, involved advisors can also lead to increased agency costs in the training
phase because advisors often reduce the successors independence through excessively
tight coaching, and, in extreme cases, even edge them out of their jobs (Lane, 1989). Such
behavior is the result of an advisor primarily following his or her own goals and aiming to
give evidence of his or her own leadership skills (Hilburt-Davis & Senturia, 1995).
Increased independence and lack of managerial discretion of the successor, however, can
 33

also occur if the incumbent lacks trust in the successors capabilities (Brun de Pontet et
al., 2007) and subsequently mandates the advisor to enforce an extended training,
coaching, and supervising program. Another root cause of overly tight training and a lack
of responsibility handover is severe informational asymmetries, for instance, if the
successor is not willing to disclose his or her real capabilities in presence of an external
agent, the advisor.
The outcome of such inappropriate measures within the training phase is that the
successor is poorly prepared for his or her role as owner-manager of the firm and, in some
cases, is even edged off from the leadership role because of a lack of discretion and a
subsequent lack of trust from other stakeholders. In other words, the actions of an agent
(i.e. the advisor) in such case are counterproductive to the goals of the principals, leading
to increased agency costs, thus we summarize:

Proposition 7: In the training phase, trusted advisors can mitigate principal-

principal conflicts by providing accurate training for the successor, ensuring the
successors involvement into the business, assessing the successors abilities, coaching
the successor, and by mitigating conflicts between incumbent and successor concerning
the training. Thereby advisors improve the goal alliance and reduce information
asymmetry.

Proposition 8: However, if the goals of the incumbent, successor, and trusted

advisor in the training phase are not aligned (for example, due to different opinions about
appropriate training methods or to the presence of a dominant advisor with his or her
own leadership ambitions), then the involvement of a trusted advisor likely leads to the
successor receiving inefficient training or even failing through which problems of goal
divergence and information asymmetry and consequently also agency costs are increased.
 34

3.5 The Triadic Relationship of Incumbent, Successor, and Trusted

Advisor: Bias and Efficiency
Traditionally, the family business research has referred to the incumbent and the
successor as the primary actors in the succession-planning process and has analyzed their
relationship and related agency costs, particularly in the forms of information asymmetry
and divergent goals (Handler, 1994; Howorth, Westhead & Wright, 2004; Le Breton-
Miller et al., 2004; Sharma et al., 1997). In our conceptual article, we integrate the trusted
advisor as an individual that can mitigate but also create agency costs into the succession-
planning process. Thus, we extend the dyadic incumbent-successor relationship to a
triadic relationship among incumbent, successor, and trusted advisor.
In the previous sections, we discuss the potential contributions of trusted advisor
involvement based on their ability to decrease principal-principal agency costs arising out
of information asymmetry and divergent goals between incumbent and successor. Below,
we examine four different, commonly observed, constellations of the relationship among
incumbents, successors, and trusted advisors, and discuss under what conditions their
benefits and costs are most salient.

3.5.1 Balanced and efficient setup of the triadic relationship

We argue that in order to harvest the benefits of a trusted advisors involvement,

the advisor needs to act as steward of both, the incumbent as well as the successor. In
such a constellation, which we label simultaneously balanced and efficient (see Figure
2a), the trusted advisor seeks to generate a continuous flow of information that distributes
outside as well as inside information equally to the incumbent and the successor. The
advisor acts as facilitator rather than gate-keeper of knowledge. Moreover, the advisor
puts his or her own interests into the back and strives to balance the needs of the
incumbent and the successor, thereby maximizing the cumulate utility function of all
involved parties and minimizing goal divergence through mediation. In such a
constellation, the principal-agent conflicts associated with advisor involvement (P1-4) are
minimized, whereas the alleviating effect of advisor involvement on the principal-
principal agency conflicts (P1-4) is maximized. We thus summarize:
 35

Proposition 9: The presence of one unbiased and balanced advisor who provides
equal knowledge to the incumbent and the successor, and who keeps both parties goals
in mind, minimizes agency costs in a triadic setup of incumbent, successor, and advisor
and therefore results in a more efficient, smoother and satisfying succession-planning
process.

3.5.2 Biased and inefficient setups of the triadic relationship

We continue to argue that trusted advisors increase rather than decrease extant
agency costs if the advisor is biased toward either the incumbent (see Figure 2b) or the
successor (see Figure 2c).
The first situation (Figure 2b) visualizes a bias of the advisor towards the
incumbent. In other words the advisor works as the incumbents steward, directing
informational flows more towards the incumbent and less towards the successor. As a
consequence, informational flows among the involved parties are hampered and the
successor feels less informed and maybe even neglected. Mistrust of the successor
towards the incumbent as well as the advisor can emerge from such a setup. Moreover,
working as the incumbents steward, the advisor is unlikely to strive for goal divergence,
instead he or she will aim to maximize the favored partys benefits, for instance by
aligning timing, financial, or strategic decisions to the incumbents interest. Again, such
perspective taking of the advisor, will raise dissatisfaction and resentment of the
successor and ultimately exacerbate agency conflicts between the current and the future
principal.
Such a bias towards the incumbent can arise as the result of having a backward-
looking advisor. This is, for instance, the case if there has been a long lasting and close
business relationship between the incumbent and his or her trusted advisor, for instance,
an accountant (Strike, 2012) but also a banker, lawyer, psychologist, or management
consultant. In such a case, the trusted advisor has often served the incumbent for many
years, for instance as a financial consultant. Often, in such cases, the trusted advisor is
paid by the incumbent (not the firm or the successor), leading to financial
interdependencies. Moreover, the emotional aspect of sharing a joint history with various
common experienceswhich may also include the experience of difficult times
strongly connects the two individuals. Furthermore, especially if the trusted advisor has
 36

accompanied the incumbent for many years, the two individuals are likely to be of
roughly the same age and are expected to share several important values and beliefs,
which (partially unconsciously) leads to a better understanding in general. We conclude
that in the case of a backward-looking trusted advisor, the advisor is likely to be biased
towards the incumbent. We thus summarize:

Proposition 10: If a trusted advisor is biased towards the incumbent (e.g., due to a
long-lasting professional relationship, shared memories, and/or age similarities with the
incumbent), the trusted advisor no longer reduces information asymmetries and goal
divergence among incumbent and successor, but instead increases those problems,
leading to high levels of mistrust and principal-principal conflicts.

In the second constellation (Figure 2c), the advisor acts as the steward of the future
principal, i.e. the successor. In this case, the trusted advisor is fully aligned with the
successor, but not with the incumbent. Consequently, the flow of information is disturbed
because information and knowledge are primarily shared between the trusted advisor and
the successor. Thus, the neglected party (i.e. the incumbent) is expected to lose faith in
the trusted advisor and become reluctant to heed his or her suggestions (Boyd, Upton &
Wircenski, 1999). In sum, in this constellation, the trusted advisor does not contribute to a
smooth information flow and does not provide important pieces of knowledge and advice
that are accepted by all involved stakeholders. Moreover, the advisor is unlikely to
arbitrate and aim for goal divergence, yet he or she takes the perspective of the successor
and aims to maximize his or her benefits. Thus, we argue that in this situation, the trusted
advisor exacerbates existing principal-principal conflicts between the incumbent and the
successor.
Such a bias towards the successor arises if a purely forward-looking individual
serves as trusted advisor. In this case, the trusted advisor focuses on the future of the
business and, thus, is more likely to be aligned with the successor than with the
incumbent. We argue that three root causes entail such a constellation. First, this
constellation can occur when the advisor sees an urgent need for a change in business
strategy. This occurs, for example, if the business is in financial trouble and a complete
change in management is necessary to achieve a successful turnaround. Because age often
 37

entails inertia, the trusted advisor probably feels the need to pin his or her hopes on the
successor. Second, this constellation can occur when the trusted advisor perceives the
successor as potential future employer. In this case, the trusted advisor foresees the
opportunity to build a long-lasting professional relationship with the successor and earn a
salary, whereas the incumbent will soon retire and thus is unlikely to generate future
revenues for the advisor. Third, this constellation can occur when the trusted advisors
age is closer to that of the successor. In such a case, the advisor and the successor will
most likely have a general better understanding, resulting in a preference (perhaps even
unconsciously) for the successors interests. Because of this constellation, the trusted
advisor is likely to be biased towards the successor, thereby neglecting the incumbents
demands and needs. We summarize our arguments in the following proposition:

Proposition 11: If a trusted advisor is biased towards the successor (e.g., due to a
need for radical organizational change, due to a perceived opportunity for a future
mandate, and/or due to age similarities with the successor), the trusted advisor no longer
reduces information asymmetries and goal divergence among incumbent and successor,
but instead increases those problems and contributes to high levels of mistrust and
principal-principal conflicts.

A fourth often-applied form of trusted advisor involvement occurs when an

incumbent and a successor both rely on their own trusted advisor (or team of advisors),
whom each often have already known for years (see Figure 2d). This leads to a balanced
and robust setup because both partiesincumbent and successorenjoy an equal level of
trusted-advisor support, and each partys trusted advisor acts in favor of his or her
particular client and provides knowledge and advice to that side of the transaction.
Through this equal distribution of support, the model gains balance and robustness
towards bias. Each trusted advisor clearly represents and is committed to only one client,
who pays his or her fees. Accordingly, it is unlikely that this setup is biased in favor of
one side.
However, we argue that this setup comes at substantial cost, much of them rooted
in exacerbated principal-principal conflicts among the incumbent, the successor, and other
involved family members. While dedicated advisors facilitate the information flow from
 38

outside sources to the advised party (e.g., knowledge how to properly set up a succession
process), they likely impede the information flow from one involved party to another
(e.g., sharing the incumbents knowledge about the firms health with the successor),
since the advisors are incentivized to work for their clients benefit rather than
maximizing the utility function of all involved parties. Information asymmetries between
incumbent and successor are thus even increased in such a setup. Following a similar
argumentation, due to the symmetric setup of such a constellation, none of the involved
agents (i.e. advisors) will assess it as his or her duty to arbitrate among the involved
parties leaving the problems associated with goal divergence unsolved. As a consequence,
the majority of the above discussed advantages of an advisor involvement (see
Propositions 1-4) are annihilated in such constellation with exacerbated principal-
principal conflicts as well as potential principal-agent conflicts threatening the overall
outcome of the succession planning process.
Besides agency costs, also direct costs are increased for such constellations of
advisor involvement: With an increasing number of advisors involved, the costs of fees
and salaries increasea consequence that can be particularly detrimental for smaller
family firms that have limited financial resources (Upton et al., 1993). Moreover, the
succession-planning process in such cases is challenged by the fact that with two coequal
advisors, there is no ultimate responsible for managing and coordinating the process. With
two or even more advisors, there are several, potentially diverging, opinions about how to
manage the process in addition to those of the incumbent and successor; consequently,
agreeing on next steps can become complicated. Even more complex solutionssuch as
those involving a third advisor or a third team of advisors managing the processfurther
increase costs, decrease decision-making speed, and increase the likelihood of
informational asymmetry. Therefore, due to the further drawbacks and increased
complexity that entail inefficiency, we conclude that smaller firms in particular gain from
involving just one trusted advisor, not two or more consultants, in leading the process
(Hilburt-Davis & Senturia, 1995; Upton et al., 1993). The aspects discussed above lead to
our final proposition:
 39

Proposition 12: If there are two or more trusted advisors involved, the presences
of those advisors reinforces the existing informational asymmetries and diverging goals
among incumbent and successor and hence leads to overall higher agency and direct
costs. The resulting constellation can be labeled as robust yet inefficient.

Figure 2Potential Configurations of the Triadic Relationship

a) Balanced and efficient model b) Incumbent-dominated model

c) Successor-dominated model d) Balanced model with two advisors

 40

3.6 Discussion
Although there is a huge body of literature on the succession process in family
businesses (e.g., Sharma, 2004; Sharma et al., 2012), the role of trusted advisors in this
process is still understudied. This is surprising, given the important role of those
individuals. Building on the emerging stream of research on family business consultants
(Strike, 2012), our goal is to systematically analyze the role of trusted advisors during the
four important steps of the succession-planning process. Our analysis is inspired by the
ideas of Chua et al. (2003) and Howorth et al. (2004), which link the influence of non-
family managers to agency costs such as divergent interests and informational
asymmetries (Eisenhardt, 1989; Fama & Jensen, 1983) and on Chrisman at al. (2012),
who study agency costs for specific types of MBOs. In addition, we contrast potential
benefits of advisors involvement with the potential costs of advisor involvement (e.g.,
Hilburt-Davis & Senturia, 1995; Kaye, 1996; Lane, 1989; Upton et al., 1993). In
particular, we emphasize that agency costs (Eisenhardt, 1989) among all three parties of
the triadic relationship can be on the one hand reduced and on the other hand enhanced in
the presence of an advisor especially if those cost are not managed well. Our step-by-step
analysis of the effect of trusted advisors on succession-planning-process outcomes thus
reveals the double-edged nature of trusted advisor involvement which can both, increase
and decrease agency costs, and contributes to a more balanced and nuanced discussion of
the role of family firm advisors (Strike, 2012). Thereby, this article not only contributes to
the literature on trusted advisors in family firms but also to the literature agency theory. It
shows that the trusted advisor, although he or she is neither owner nor manager of the
firm, can substantially alter the relationships between the principals and agents and the
firm and thereby influence the level of agency conflicts. As such, this manuscript suggests
that the role of potential advisors should be included in further studies analyzing agency
costs in organizations. Put differently, it indicates that the simplistic dyadic relationship
applied by classic agency studies might be replaced by more complex triadic ones.
Additionally, our article also contributes to the literature on family firm succession
(e.g., Gersick et al., 1999; Handler, 1994; Le Breton-Miller et al., 2004; Sharma et al.,
2003b). Until now, many studies have emphasized the importance of focusing on both
parties involved in family firm succession (i.e., the incumbent and the successor), not
 41

only one (Handler, 1994). We further extend this literature by including the trusted
advisor in the studied relationship. As practical evidence shows, many family firms that
undergo a succession process use a trusted advisor in one way or another (Reay et al.,
2013). As our analysis shows, trusted advisors can substantially influence the outcome of
the succession processin either a positive or a negative way depending on how well
potential agency conflicts are managed. Thus, neglecting the role played by trusted
advisors in the family firm succession process potentially leads to overlooking important
elements of the dynamics of the process and thus, to a distorted understanding of the
process.
Moreover, we note the potentially detrimental outcomes caused by a trusted
advisors bias towards one of the involved parties or focus on his or her goals, such as
quickly concluding the succession process (Hilburt-Davis & Senturia, 1995; Howorth et
al., 2004; Kaye, 1996; Lane, 1989; Upton et al., 1993), and argue that the optimal setup
for trusted advisor involvement is characterized by efficiency (i.e., only one instead of
multiple trusted advisors) and lack of bias (i.e., the trusted advisor considers the needs of
the incumbent and the successor equally) because in such cases agency costs are
particularly low. Finally, we aim to identify the conditions that allow a trusted advisor to
achieve a good balance between the incumbent and the successor (i.e., the situation
displayed in Figure 2a). Only when the trusted advisor is not only experienced and
educated but also successfully balances the needs of both parties, does he or she act as a
maximally efficient moderator between the incumbent and the successor (Boyd et al.,
1999; Hilburt-Davis & Senturia, 1995; Howorth et al., 2004). In such constellations, the
trusted advisor can reduce agency costs, in particular by mitigating information
asymmetries among the stakeholders, moderate the parties divergent goals, and
consequently, effectively contribute to the succession-planning process (Chua et al., 2003;
Jaffe & Lane, 2004; Strike, 2013).
Besides the outlined theoretical contributions, these implications are also of great
importance for practice because: On the one hand our findings sensitize incumbents
and/or successors to the point that the succession process is likely most successful if it is
accompanied not only by a highly qualified but also by an unbiased and equally informing
advisor. While this is a challenging task, anecdotal evidence shows that such advisors do
exist. In order to identify such an advisor, family firms should not rely on reasons of
 42

convenience (e.g., taking the extant accountant or lawyer whom the incumbent knows for
a long time) but rather consider the experience and prior success of the advisor in
accompanying family business successions. Anecdotal evidence show, that the more
experienced the advisor is the more likely he or she pursues both parties goals and
informs them equally. In addition, family firms are advised to scrutinize whether the
opinions and beliefs of the selected trusted advisor are compatible with both, the
incumbent as well as the advisor. Moreover, when selecting an advisor each party also has
to bear the other party in mind and check whether the advisor is able to equally serve both
sides. On the other hand our propositions also sensitize advisors to carefully representing
the wishes and needs of both parties equally because through this they can increase the
probability that both parties stay on board and will work together to a successful outcome
of the succession processan outcome, which will in turn positively influence the
advisors reputation.

3.7 Limitations, Future Research, and Conclusion

Within our theorizing, we identify several benefits and costs of trusted advisors
during the individual phases of the succession-planning process. We strongly recommend
that researchers build on these first conceptual insights and empirically test whether and
under what conditions the benefits or costs of trusted advisors are dominant. In
conducting such a study, it will be crucial to differentiate among the individual phases of
the succession-planning process. As our analyses show, the costs and benefits of trusted
advisor involvement differ from phase to phase. In a similar vein, the ultimate effect of
trusted advisor involvement might depend on the phases in which he or she is engaged
and, as our propositions reveal, also depends on whether one or more advisors are
retained. Moreover, we encourage scholars to study the role and impact of various family
and non-family stakeholders in this process.
Although we aimed to systematically integrate the extant literature, several aspects
of trusted advisor involvement require further research. For instance, we implicitly
assume that trusted advisors possess certain knowledge (which both, incumbents and
successors, lack) due to their experience and education that can lead to a reduction of
agency costs. In subsequent research, it might be beneficial to conduct additional studies
 43

about the effect of prior experience and education on the trusted advisors effectiveness.
Moreover, our analysis investigates the easiest possible case, in which one incumbent
hands over the business to one successor. However, as the literature shows, team CEO
efforts are a common phenomenon (Miller, Le Breton-Miller, Minichilli, Corbetta &
Pittino, 2014). This complexity must be integrated into the model of family-firm
succession advisors, because informational asymmetries and goal divergence might be
even more salient in those cases.
A second implicit assumption in our model is the parties trust in the advisor
(Howorth et al., 2004; Strike, 2013) because only highly trusted advisors have been
shown to be effective advisors (Kaye & Hamilton, 2004). Thus, similar to education
and experience, trust among key parties can play an important role and should attract
further scholarly attention. However, trust cannot be seen as an isolated construct in
family-firm succession, as it is closely tied both to the amount of informational
asymmetries and to goal alignment.
Furthermore, our model does not include contextual, cultural, and institutional
factors. Is a trusted advisor more often involved in a stable economic environment or in a
dynamic environment? Do families in certain cultures seek more often for advice than in
others? Does a family firm seek advice if it is economically healthy or is the contrary the
case? Further theoretical and empirical effort is required to answer these important
questions.
In conclusion, firms with trusted advisors seem to engage in more strategic and
succession planning than those without (Blumentritt, 2006). However, the involvement of
a trusted advisor not only is associated with a large number of potential benefits but also
is associated with disadvantages. It is only when the triadic relationship among
incumbents, successors, and trusted advisors is well managed that the benefits of advisor
involvement are likely to outweigh its additional costs.
 44

4. CHALLENGES AND ROLES OF ADVISORS IN THE

FAMILY BUSINESS SUCCESSION PROCESSA
QUALITATIVE STUDY
Alexandra Michel & Nadine Kammerlander

4.1 Abstract
Succession is a challenging process during which family businesses increasingly
rely on the support of advisors. Using in-depth qualitative data, we study an advisors
challenges and roles during this process. We first outline a set of challenges that the
advisor faces during succession and how he or she responds to them by assuming
different roles throughout this process. In particular, we propose that, at several points,
the advisor must temporarily trigger negative feelings to further advance the process. We
also suggest that complete role adjustment by all actors contributes to a successful
outcome by engendering high overall levels of satisfaction.
 45

4.2 Introduction
Leadership succession constitutes an enormous challenge for most family
businesses; indeed, many firms regularly fail to master this critical phase (e.g., Miller,
Steier & Le Breton-Miller, 2003; Sharma, 2004; Zahra & Sharma, 2004). In many cases,
the reason that the succession process fails is more closely related to procedural factors,
emotional aspects, or personal disagreements between the generation handing over the
business (the incumbent) and the generation taking over the business (the successor) than
to technical aspects, such as financials (De Massis, Chua & Chrisman, 2008; Miller et al.,
2003; Venter, Boshoff & Maas, 2005). Disagreements between these two major parties
often cause negative feelings that eventually result in a poor outcome of the succession
process (Eddleston, Otondo & Kellermanns, 2008) and decreased satisfaction for the
involved parties (Sharma, Chrisman & Chua, 2003a). Therefore, it is crucial to ensure that
the transition process proceeds smoothly (e.g., Bird, Welsch, Astrachan & Pistrui, 2002;
Morris, Williams, Allen & Avila, 1997).
With respect to the mitigation of interpersonal disagreements and the eventual
improvement of the flow of the succession process, recent studies have begun to note the
importance of involving trusted advisors in family business succession (Strike, 2012;
2013). For example, the involvement of a trusted advisor during succession is perceived
to increase planning activities (e.g., Strike, 2012), and research has indicated that the
extent of succession planning is positively correlated with satisfaction regarding the
succession process (Lumpkin & Brigham, 2011). Given the complexity of the succession
process, which is caused by the often emotionally laden relationship between the
incumbent and the successor (e.g., Astrachan, 2010; Morris et al., 1997), trusted advisors
are perceived to reduce succession-related challenges by providing support to the family
business (Davis, Dibrell, Craig & Green, 2013). Indeed, a large body of recent family
firm literature has built theory on and provided empirical evidence for the positive aspects
of advisor involvement (e.g., Distelberg & Schwarz, 2015; Salvato & Corbetta, 2013;
Strike & Rerup, 2015).
However, while prior research has revealed the advantages of advisor involvement,
we know surprisingly little about the following critical aspects of this involvement: What
challenges, if any, do advisors face during the succession process? What roles do advisors
 46

assume and what activities do they engage in to overcome these challenges? How do they
ultimately manage to ensure a high level of satisfaction among all involved parties (e.g.,
Reay, Pearson & Dyer, 2013; Strike 2012)? It is important to determine answers to the
aforementioned questions, given the centrality of the succession process for family firms
and the observed high failure rate for this process. Specifically, despite the general
agreement on potential advantages of advisor involvement (e.g., Naldi, Chirico,
Kellermanns & Campopiano, 2015; Strike, 2013), there is ample anecdotal evidence of
incumbents and successors that are dissatisfied with the advisors involvement and,
despite the increasing reliance on trusted advisors, many family firm owner-managers still
consider leadership succession a major threat to their company (Lansberg, 1988).
To answer these questions, we conduct an exploratory case study involving an in-
depth examination of the challenges one advisor has faced during five recent succession
processes and how he handled these challenges as well as the impact of the advisors
involvement on the satisfaction of the incumbent and the successor. Based on rich insights
gleaned from interviews, meeting participation, and secondary data, we then develop a
process model of advisors role adjustments throughout the succession process.
This study contributes to the literature in at least two ways. First, this research
contributes to literature on family firm advisors (e.g., Naldi et al., 2015; Reay et al., 2013;
Salvato & Corbetta, 2013; Strike, 2012; 2013) by distilling the challenges that an advisor
faces throughout the succession process and by revealing how adapting roles throughout
the process can help the advisors overcoming these challenges. Thereby, we build theory
that integrates research on advisor involvement and satisfaction during the family
business succession process (e.g., Le Breton-Miller, Miller & Steier, 2004; Sharma, 2004)
and explain how the different roles played by the advisor throughout the process and his
or her activities positively or negatively affect the satisfaction levels of the incumbent and
successor during each phase of succession. As part of our analysis, we find evidence that
the advisors activities frequently lead to temporary, negative feelings for the incumbent
and/or successor, which are addressed and converted into positive feelings with the
advisors help during subsequent steps in the succession process. We propose that the
elicitation of these transient negative feelings is important for ensuring progress during
the succession process.
 47

Second, the findings of this study contribute to the literature on family business
succession by extending Handlers (1994) seminal work on mutual role adjustment by
integrating advisors into the model. One key finding of our study is that in order to cope
with the challenges of the process, not only the incumbents and the successors but also the
advisors must appropriately adjust their roles during each phase of the succession process;
in particular, the advisor must shift from an initializer who triggers and starts the process
to a process planner, to a task supporter, and finally to a coach of the successor. We
present these findings in an extended version of Handlers (1994) role model and we
suggest that by supporting the incumbent and successor as they successfully adjust their
own roles throughout the succession process, the advisor ultimately increases these
individuals overall satisfaction. Our cross-case analysis indicates that there were
relatively high overall satisfaction levels for cases in which all three actors in the triadic
incumbent-successor-advisor relationship successfully thoroughly adjusted their roles. In
contrast, lower satisfaction levels were observed for cases in which one or more actors
(including the advisor) failed to appropriately adjust their roles.
 48

4.3 Theoretical Background

4.3.1 The Succession Process in Family Firms

Succession, defined as the transfer of leadership responsibility to a next generation

member, is one of the most important processes during the life cycle of a family business
(Handler, 1994). The succession process is frequently perceived as challenging because of
the complexity of the process, e.g., need to handle proper process planning (e.g.,
Motwani, Levenburg, Schwarz & Blankson, 2006), the uncertainty that it implies for the
future of the firm, the incumbent, and the successor (Hilburt-Davis & Senturia, 1995), as
well as potential communication problems or interpersonal disagreements among the
involved parties (e.g., Eddleston et al., 2008). The succession process consists of four
partly sequential but partly parallel phases: the trigger phase, preparation phase,
selection phase, and training phase (Brockhaus, 2004; De Massis et al., 2008; Le Breton-
Miller et al., 2004; Michel & Kammerlander, 2015; Murray, 2003). During the trigger
phase, the incumbent becomes aware of the need for his or her exit from the business, and
the succession process starts (Brun de Pontet, Wrosch & Gagne, 2007; Murray, 2003).
After the succession process is initialized in the trigger phase, the preparation of the
process starts. Tasks to be completed in this phase include the creation of a vision for how
the business should be operating in future; the definition of goals, rules, and guidelines;
and the development of a time plan with milestones (Le Breton-Miller et al., 2004). While
a potential succession candidate is often present from early on, in the subsequent selection
phase, tasks such as the formal definition of selection rules and arrangements for the
future training of the successor are completed (Le Breton-Miller et al., 2004). After a
successor has been officially determined, he or she must be trained and prepared for the
new role in the training phase. In this phase, the training of the successor is initiated, and
the contract details are specified and agreed upon for the final transfer (Lansberg &
Astrachan, 1994; Seymour, 1993).
Already more than two decades ago, Handler (1994) pointed to one crucial success
factor that might help to overcome some of the aforementioned challenges within the
leadership succession process: in order to successfully cope with the various challenges of
the succession process and reduce interpersonal conflicts, the involved parties
incumbent and successor both must take various roles throughout the process and
 49

undergo a mutual role adjustment5. While the duration of the phases differs from case to
case, it is crucial that both parties adjust their roles to ensure a successful outcome of the
succession process. Only if the incumbent is willing to let the business go and ultimately
act at most as a consultant for the family firm and only if the successor has the ability and
willingness to simultaneously become the new leader, can the management responsibility
actually be handed over and the business be effectively run by the younger generation
(e.g., De Massis, Kotlar, Chua & Chrisman, 2014; Dyck, Mauws, Starke & Mischke,
2002; Morris et al., 1997). Since its development, the model of mutual role adjustment
has been previously applied and validated in both scholarly (Dyck et al., 2002;
Kellermanns & Eddleston, 2004; Le Breton-Miller et al., 2004) and practice-oriented
(Brun de Pontet et al., 2007; Sharma, Chrisman & Chua, 1997) studies. Role adjustment
can engender not only a more successful outcome of the succession process but also
increased satisfaction for the incumbent and successor (Handler, 1994; Sharma et al.,
2003a). In line with Handlers findings, Sharma and colleagues (2003a) identified the
following prerequisites for the incumbent and successor being satisfied with the
succession process: the propensity of the incumbent to step aside; the successors
willingness to take over; the agreement among family members to continue the business;
the acceptance of individual roles; and the extent of succession planning. However, as the
perception of the incumbent and the successor on the other partys actual versus desired
role often diverges (Sharma et al., 2003a), many succession processes require a
moderating party that helps overcoming personal disagreements and that improves
communication between the incumbent and the successor such as a trusted advisor
(Strike, 2012).

5
The incumbent transforms from first being a sole operator, who leads the business on his or her own, to
a monarch, who still has the position of the decision-making leader, to a delegator, who delegates
increasingly more work, to finally a consultant who no longer makes any decisions. At the same time, the
successor transforms form first having no role at all, to a helper who fulfills certain tasks, to that of a
manager, who fulfills most of the important tasks, to finally that of the new leader (Handler, 1994).
 50

4.3.2 The Challenges and Role of the Trusted Advisor during Family Business
Succession

Owing to the huge challenges and the consequent high failure rates of the
succession process, especially in second or later generation family businesses (e.g.,
Morris et al., 1997), family business research has recently started to emphasize the
important role played by advisors throughout the succession process (e.g., Reay et al.,
2013; Salvato & Corbetta, 2013; Strike, 2012; 2013). Thereby, trusted advisors can be
defined as a business-external source that provides objective and subtle advice to the
leaders of family businesses. Objective advice includes expert knowledge, such as
answers to technical questions related to financial, organizational, or tax issues, whereas
subtle advice concerns the advisors tactics and behavior to influence the attention of the
advised individuals in a certain direction (Strike, 2013).
Advisors can positively influence the succession process by mentoring both of the
involved parties, the incumbent and the successor (Distelberg & Schwarz, 2015; Salvato
& Corbetta, 2013); by acting as troubleshooters who moderate the needs of these two
parties (Lane, Astrachan, Keyt & McMillan, 2006; Thomas, 2002), an activity that
reduces interpersonal disagreement (Strike, 2013); and/or by mediating sense-making
processes among family business members by slowing down the decision process and
considering new perspectives (Strike & Rerup, 2015), thereby ensuring a successful
succession outcome and eventually improving firm performance (e.g., Naldi et al., 2015).
Specifically, a trusted advisor can help both parties the incumbent and successor to
stay on board and closely work together in order to successfully transfer the business
from an older to a younger generation (e.g., Salvato & Corbetta, 2013). Additionally,
trusted advisors are perceived to have the ability to capture and influence the attention of
the two other actors who are directly involved in the business on issues they may
overlook (Reay et al., 2013; Strike, 2012, 2013; Strike & Rerup, 2015) or to address not
only business but also family questions (Swartz, 1989). From their outside perspective,
which offers them a more distant judgment of the present situation, advisors can quickly
anticipate and mediate potential conflicts among the involved actors (Lane et al., 2006;
Swartz, 1989). Thereby, the advisor inherits a function of mediated sense-making by
 51

achieving a critical rethinking concerning certain issues among family business members
such as the incumbent and successor (Strike & Rerup, 2015).
However, anecdotal evidence shows that taking on a moderating role between the
incumbent and the successor can be a challenging task. Indeed, numerous real-life
examples (Miller et al., 2003) of failed succession processes show that the advisor is often
not effective in making the succession process smooth and successful. In many cases,
incumbents and/or successors express their dissatisfaction with the advisor involvement,
which may, in turn, reduce their level of commitment, and, in the worst case, cause the
succession process to fail (Hilburt-Davis & Senturia, 1995; Kaye, 1996). Moreover, a
decrease in the successors satisfaction might also negatively affect post-succession
outcomes for the firm, particularly firm performance (Naldi et al., 2015; Shepherd, Patzelt
& Wolfe, 2011). Despite the evidence that advisor involvement might imply several
challenges, we still lack a systemic studying of those challenges and how advisors aim to
successfully cope with them in order to ultimately achieve high satisfaction among all
involved parties.

4.4 Methodology

4.4.1 Empirical Setting

Owing to the nature of our research questions, which focus on understanding a

process (Langley, 1999), we build on a qualitative, case study approach (Yin, 1994). As a
research context, we chose the succession process of five small and medium-sized family
businesses (in which the majority of shares were owned by a family and annual sales were
between 2 and 8 million EUR) in one specific region of Switzerland, which allowed us to
mitigate problems caused by environmental variation (Eisenhardt, 1989). The focus on
small and medium-sized companies fits our research questions, as the influence of
advisors might be particularly salient in those types of firms. All five companies had the
same legal form (a specific type of privately owned firms), and in all cases, succession
took place within the last five years. Table 4 provides an overview of key characteristics
of the sample firms.
 52

The five recent succession cases were chosen based on three criteria: First, we
followed a theoretical sampling procedure (Miles & Huberman, 1994). Thereby, inclusion
criteria were the following: all firms of the sampling were (1) small (2) family firms 6 (3)
operating within a specific region and (4) had completed a succession process within the
last five years. These similarities in terms of size, type of organization, geography, and
stage of transition allowed us to compare the different cases and identify similarities but
also heterogeneity among them, particularly with regard to the level of satisfaction of the
incumbent and successor. Second, all five succession processes were guided by the same
advisor7. This unique setting allowed us to make profound observations related to the
incumbents and successors level of satisfaction (which varied tremendously throughout
the sample), which cannot be explained by alternative explanations, such as the advisors
capabilities or integrity. Since the advisor has been active in family business consultancy
for more than 20 years, it is also unlikely that the advisors increasing level of experience
can explain the differences observed among the five cases. Furthermore, by having the
same advisor in all five cases, we can ensure that other factors, such as the personality of
the advisor, are constant. Third, privileged access to not only interviewee partners but also
important documents such as financing models, business plans, and most importantly,
meeting protocols further informed the case selection process. Moreover, in three out of
the five cases, one of the authors was able to participate in several of the succession
meetings as assistant of the advisor and thereby gained important insights into the
dynamics of the succession processes.

6
All firms were owned and managed by one or a few family members, and their perceptions of being a
family firm were confirmed in the interviews. Yet, not all firms ultimately succeeded in having a family
member as successor. A comparison across cases, however, reveals that the family status of the successor
cannot explain the different levels of satisfaction observed in our sample. In addition, a cross-case analysis
of the five cases shows that the processes identified in this study hold true for cases with and without
family members as successors.
7
In four of the five cases the advisor had already acted as the advisor of the family firm for many years
before the succession took place. In those four cases the incumbent hired the advisor in need of support to
cope with succession. In one case it was the successor who had heard of the advisors reputation and
therefore hired him.
 53

Table 4Overview of the Sample

Age of
Revenues Beginning Year of Number
Size Firm Age Incumbent Number of
Firm Branch in Mio. Generation of Actual of
(FTE) in Years at the end of Incumbents
CHF Transition Transition Successors
Transition
Construction
Alpha of 25 - 50 5 to 10 25 50 2 2008 2009 60 3* 1
Machines
Sub
Beta construction 25 - 50 <5 50 75 3 2010 2011 57 1 1
Work
Metal
Gamma 25 - 50 <5 25 50 3 2011 2013 59 2** 1
Processing
Metal
Delta 25 - 50 5 to 10 25 50 2 2010 2012 71 4*** 2
Processing
Metal
Zeta 0 - 25 <5 50 75 3 2008 2010 60 1 1
Processing

* Three shareholders who are brothers. Interviews were conducted with the majority shareholder (70 %)
** One married couple
*** One married couple and two minority shareholders. Interviews were conducted with the married couple (80 %)
 54

Table 5Overview of Data Sources

1st round 2nd round
Firm Date Interviewee Date Interviewee Other internal and external Sources Observations
Alpha Jul 2014 Incumbent Aug 2014 Incumbent Homepage, Business plan, CV Successor, None
Successor Successor Contract, Bank Protocols, other contracts (e.g.,
Advisor Advisor work contract, loan)
Beta Jun 2014 Incumbent Aug 2014 Incumbent Homepage, Business plan, CV Successor, Participation in more than 5
Successor Successor Contract, Bank Protocols, other contracts (e.g., succession meetings incl.
Advisor Advisor work contract, loan), newspaper article closing of the deal
Gamma Jun 2014 Incumbent Aug 2014 Incumbent Homepage, Business plan, CV Successor, Participation in more
Successor Successor Contract, Bank Protocols, other contracts (e.g., than 3 succession meetings
Advisor Advisor work contract, loan), newspaper article

Delta Jun 2014 Incumbent Aug 2014 Incumbent Homepage, Business plan, CV Successor, Participation in more
Successor Successor Contract, Bank Protocols, other contracts (e.g., than 3 succession meetings
Advisor Advisor work contract, loan)
Zeta Jul 2014 Incumbent Aug 2014 Incumbent Homepage, Business plan, CV Successor, None
Successor Successor Contract, Bank Protocols, other contracts (e.g.,
Advisor Advisor work contract, loan)
SUM 15 interviews 11 interviews ca. 45 documents more than 11 meetings
 55

4.4.2 Data Collection

The first step of our data collection process consisted of gathering and analyzing
primary and secondary documents on the five selected cases. For instance, we were able
to consult internal documents such as business plans, balance sheets, protocols of
succession planning meetings, and various contracts related to the business transfer.
Moreover, we were able to study publically available documents such as company
reports, newspaper articles, and company websites. These documents helped us to gain an
initial understanding of the timeline and cornerstones of the succession processes even
before we entered the interview phase and thus helped us make the interviewing process
more efficient. In later stages of the research, these documents, as well as the personal
observations of one author, who had participated in several of the succession planning
meetings, allowed us to triangulate the findings of the interviews.
Our main data source consisted of a total of 26 semi-structured interviews with the
incumbent, successor, and advisor in the five selected cases. We interviewed our
respondents in two waves. In a first wave, we asked the interviewees to renarrate the
succession process, to describe the role of the advisor, and to openly speak about the
observed challenges, their feelings, satisfaction, and/or dissatisfaction during the
succession process. To make the discussions about satisfaction more systematic and
comparable across the cases, in the next step, we specifically questioned the interviewees
by using a scheme of five variables previously used by Sharma et al. (2003a) in order to
measure satisfaction with the succession process: (1) the propensity of the incumbent to
step aside, (2) the successors willingness to take over, (3) the agreement among the
family members to maintain family involvement in the business, (4) the acceptance of
individual roles, and (5) the extent of succession planning. Moreover, we asked the
interviewees to comment on their level of satisfaction per phase of the succession process.
In so doing, we were able to triangulate the interviewees open comments on their level of
satisfaction from the re-narration phase. In the interviews with the advisor, we slightly
adapted the interview guide, focusing particularly on the challenges that occurred as well
as the activities of all involved parties throughout the process. After the first round (a total
of five interviews with successors, five interviews with incumbents, and five interviews
with the advisor; length between 50 and 75 minutes), the authors engaged in a first round
 56

of data analysis and synthesized the findings, particularly regarding the challenges faced
within the process, the roles and role adjustment of the involved parties and their level of
satisfaction. In a second round of interviews (a total of five interviews with the
successors, five interviews with the incumbents, and one interview with the advisor in
which all five cases were discussed and compared to each other), we presented our
preliminary findings to the interviewees and asked for their feedback. This round of
interviews (duration between 25 and 55 minutes) also consisted of in-depth discussions
about the advisors activities, the role adjustments that occurred during the succession
process and their effect on the parties level of satisfaction. Based on the new insights and
feedback gained from this round as well as the observations made by the first author
during the initial succession meetings, we made several slight adaptations to the model.
All interviews were tape recorded and transcribed verbatim within one week. Table 5
provides an overview of the data sources.

4.4.3 Data Analysis

We began the inductive data analysis process with a grounded analysis of the
individual cases through the lens of our research questions (Glaser & Strauss, 1967),
thereby applying axial coding (Strauss & Corbin, 1990). We therefore adopted Van
Maanens (1979) two-step process and first extracted first-order concepts from the
interviews that were related to the research questions that guided this study. In a
subsequent step, we interpreted the respondents cognition in light of the corresponding
context and compared our interpretations with findings in the extant literature, in
particular research on roles and satisfaction throughout the succession process (Handler,
1994; Sharma et al., 2003a). This allowed us to distill abstract, second-order concepts and
to induce grounded theory. The data structure and the corresponding statements are
visualized in Figure 3. Table 6 provides some exemplary quotes for each second-order
concept.
 57

Figure 3Data Structure

*Based on Handler (1994)

 58

Table 6Exemplary Quotes

Overarching
2nd order concept Example citations
Themes
1a1) The first big challenge in this case was to even talk about succession. Thereby, I clearly had to confront the
1) Challenges of incumbent in a very direct manner. Advisor, Beta
1a) Trigger Challenges
Advisor 1a2) Also in this case, the first big milestone I had to achieve was actually starting the succession process, as the
incumbent was at this time already 69 years old. Advisor, Delta
1b1) In this case the preparation was extremely challenging as the incumbent was very emotional and the successor
1b) Preparation quite young and he therefore got easily influenced by these negative emotions. Advisor, Beta
Challenges 1b2) In this case I always had to advance the process because often a few weeks went by and they had done anything
further to move on in the process. Advisor, Delta
1c1) Here I always had to ensure that the communication was done properly. The incumbent preferred rather not to
tell anyone that he decided on a successor. Advisor, Delta
1c) Selection Challenge
1c2) In this case we made the mistake to communicate the decisions made by the incumbent too late to the successor.
Therefore he felt insecure and I had to do some efforts to bring him back on board. Advisor, Gamma
1d1) Well, I here I had, and still have, to closely coach the young successor. Advisor, Beta
1d) Training Challenge 1d2) Here I faced to challenge to really insist that they continue [even during the training phase]. Thereby, I
persistently called every week and asked what the status is. Advisor, Zeta
2a1) It was clearly the advisor [who initiated the process]. I think he was the first person with whom we discussed
succession. Incumbent, Delta
2) Role of Advisor 2a) Initializer 2a2) I did not want to discuss issues related to the succession, but everyone put pressure on me to do so especially
the advisor, because he was concerned that something unexpected might happen to me before the succession was
settled [].Incumbent, Beta
2b1) He set up a great plan with milestones. It was clearly defined what we had to do, what the accountant had to do,
what the reviser had to do. This was very helpful. Incumbent, Gamma
2b) Process Planner
2b2) He set up a plan with milestones and a timeline, which both made me calmer and less afraid as I knew the next
steps then. Incumbent, Delta
2c1) From time to time, the advisor called and asked how it is going. When I told him, that the incumbents wife still
does not want to make any decisions about the succession, he immediately talked to the incumbent. He never let up.
2c) Task Supporter Successor, Zeta
2c2) And then you suddenly have to ask for advice as you have never before done those tasks. This was strange, as I
was used to deciding on my own, but the advisor helped me in a very good way. Incumbent, Alpha
2d1) [] but the role of the advisor was of great importance, because I did not have any other support and he had
lots of experience. He told me about examples of other succession cases and showed me what went well and what went
2d) Coach wrong. This helped me to become aware about which things I had to be careful of. Successor, Zeta
2d2) He [the advisor] really coached the successor, as he was very young at this time, and I am happy that the
advisor still does this today. Incumbent, Beta
 59

3a1) He already entered the firm as a school boy during holidays but with no responsibilities. Incumbent, Beta
3) Role of
3a) Sole Operator 3a2) First, all the decisions were still made by me, as he was just a regular employee and had to get to know the firm.
Incumbent
Incumbent, Alpha
3b1) I think this is normal, first all the decisions were made by me, and then more and more the delegation began.
Incumbent, Zeta
3b) Monarch
3b2) It is somehow difficult to let go if you are used to just deciding quickly and not asking some third party.
Incumbent, Gamma
3c1) I was happy that I could hand over a lot of responsibilities. Incumbent Alpha
3c) Delegator 3c2) I did not make any decisions anymore. I was content working on the tasks and no longer leading the firm.
Incumbent, Beta
3d1) Today, the incumbent is more working in his garden behind the firm building and just comes in to greet or if we
have a specific question. Successor, Zeta
3d) Consultant
3d2) Sometimes he [the incumbent] comes and asks me for advice and then I am happy to help. But otherwise I am no
longer interested in management decisions. Incumbent, Alpha
4) Role of 4a1) When I entered the firm, I had no role. The first three months I was more observing everything. Successor, Alpha
4a) No Role
Successor 4a2) I entered the firm occasionally during school holidays but had no role. Successor, Beta
4b1) My role did not change much. I still have the same tasks for which I am responsible and the successor just
supports me in fulfilling them. Incumbent, Delta
4b) Helper
4b2) I was first just responsible for the administration together with the accountant. But thereby I learned a lot about
the business. Successor, Zeta
4c1) I do not expect him to ask me anymore. He will decide on his own. Incumbent, Alpha
4c) Manager 4c2) He already had much responsibility in the operating business, and if we were on holidays, he was our deputy.
Incumbent, Gamma
4d1) Today, he is fully the new leader, and I can concentrate myself on my passion, the technical aspects without
further responsibilities anymore. Incumbent, Alpha
4d) New Leader
4d2) Today, I am fully the leader of the business in every sense, and the incumbent sometimes does not come by for
weeks. Successor, Zeta
5a1) Yes, [the advisors involvement in the trigger phase] resulted in a great deal of happiness because I
was able to hand over huge responsibilities. Incumbent, Alpha
5a2) There are still some details to be dealt with ; however, the satisfaction and happiness will surely
5) Satisfaction 5a) Contentedness increase toward the end. Successor, Alpha
5a3) At this point [training], I was very content. I now had a firm and also just became a father of twins to
whom I once can inherit the firm. Successor, Beta
5b1) This made me afraid, because so much was at stake. For a while, I was in a very sad mood. Incumbent, Delta
5b2) This was without a doubt a time that consisted of strong fears and desperation. As a consequence, I also had
5b) Frustration health problems; I felt really stricken. Successor, Zeta
5b3) Well during the preparation, I was also afraid of what will happen to the firm and what the consequences will be.
Incumbent, Gamma
 60

Subsequently, we began the cross-case analysis, looking for common patterns and
themes (Eisenhardt & Graebner, 2007) across the individual succession cases. A major
part of our efforts was dedicated to ensuring the reliability of our analysis. In keeping
with Lincoln and Gubas (1985) suggestions, we triangulated our data with documents,
protocols, and one authors personal observations from the initial succession meetings and
we also followed up with emails to our informants in order to fill in missing details.
Discrepancies among the authors about the interpretation of data were debated until
consensus was reached. As soon as we had a strong match between the theory and the
data, we reengaged in communication with our informants and experts to validate our
observations and to discuss alternative explanations in the second wave of interviews.

4.5 Results
We structured the process of data presentation according to the four phases of the
succession process. In the following, we will first describe the first order data that we
observed for the five individual succession processes during the four phases. In a second
step we will synthesize the findings from the individual cases and present an overarching
model, in which we build theory on the advisors role adjustment throughout the
succession process and the effect thereof on the incumbents and successors level of
satisfaction.

4.5.1 Summary of Cases

The Trigger Phase. All five studied cases (named Alpha, Beta, Gamma, Delta, and
Zeta for confidentiality reasons) show that in the first phase the trigger phase the
biggest challenge was to mentally prepare the incumbent for the subsequent succession.
Often, the advisor saw himself confronted with and had to cope with negative emotions
such as anger on behalf of the incumbent directed at the external party, i.e., the advisor.
More specifically, the advisor had to officially initialize the succession process by setting
up the project management, including the responsibilities and timelines. In so doing, the
advisor fulfilled the role of an initializer in all five cases. In each case, this role taken
by the advisor affected the satisfaction of both the incumbents, whose roles at this time
 61

were that of a sole operator, and the successors, who all had no role at this stage of the
process. However, the level of satisfaction, particularly in the beginning of this phase
substantially varied, depending on whether and how well the advisor managed the task to
prepare the actors (especially the incumbents) before actually starting the succession
process. This preparation was considered a huge challenge for the advisor in his role as
initializer because in the majority of the cases the incumbents were not yet ready to start
the process, therefore showed strong negative emotional reactions to the advisor
addressing the topic of succession, and in some cases even tried to actively fight against
it.
In two of the cases, Alpha and Gamma, the incumbents were fully aware of the
need to start the succession process; thus, they contacted the advisor with the request to
initialize the process. As such, the advisor could immediately start with the process and
task management. For the incumbents of Alpha and Gamma (as well as the succession
candidates, who were already available), the advisors official initialization of the
succession process engendered a high level of satisfaction from the beginning onward.
The incumbents of these firms stated that they felt satisfied that the succession process
was now handled in a professional way and they were optimistic that, with the support of
the advisor, the succession process would progress successfully. For instance, the
incumbents of Gamma and Alpha stated in the interview:

[In the trigger phase,] I felt happy and was satisfied that everything could
continue. Incumbent, Gamma
Yes, [the advisors involvement in the trigger phase] resulted in a great
deal of happiness because I was able to hand over huge responsibilities.
Incumbent, Alpha

In the three other cases of our sample, Beta, Delta, and Zeta, the advisor had to
face the challenge that the incumbents were not ready to let go right away. Therefore, the
advisor first had to confront the incumbents with the need for succession in order to be
able to fulfill his role: in these cases, it was the advisor who was assigned to the
emotionally difficult tasks to first address the topic of succession and to initiate the
succession process. However, due to his intimate knowledge on the family and the
 62

business, gathered through his long-term professional relationship with the family firm he
was able to cope with this. For instance, the incumbent of Delta reflected on the
initialization of the succession process.

It was clearly the advisor [who initiated the process]. I think he was the
first person with whom we discussed succession. Incumbent, Delta

In these three cases, one of the advisors first challenge in his role as an initializer
was to psychologically prepare the three incumbents for the discussions about succession
before the process could actually begin. In one case (Zeta), the incumbent was simply not
aware of the need for succession, when the advisor first addressed this topic, and in two
cases (Beta and Delta), the incumbents felt considerable resistance toward letting go.
These incumbents felt that it was too early for them to withdraw, as reflected in the
following interview quote:

I did not want to discuss issues related to the succession, but everyone put
pressure on me to do so especially the advisor, because he was
concerned that something unexpected might happen to me before the
succession was settled []. Incumbent, Beta

In these cases, the advisors initiation of the succession process first stimulated
intensive negative feelings and dissatisfaction among the incumbents. The quote above is
also in line with the protocols of these early stage succession meetings, in which the
incumbents initial negative feelings were recorded as follows:

Incumbent seems to feel stressed, refused from time to time talking about
the succession process and tried to change the topic. Meeting Protocol,
Beta

The incumbents of Beta and Delta in particular showed extreme levels of

emotional attachment to their firms and expressed considerable fear about not only the
future of the company but also their own future, as well as sadness (Delta) and anger
(Beta):
 63

This made me afraid, because so much was at stake. For a while, I was in
a very sad mood. Incumbent, Delta
I got very afraid. I had the impression everyone was looking for their own
advantages, and no one was caring about me and my responsibilities. I
will not get the bank balances anymore, no payroll accountings, and this
made me very angry. Incumbent, Beta

According to the advisor, confronting the incumbents with the topic of succession
and thereby triggering these negative feelings was although being difficult a necessary
intermediate step in this phase to show these incumbents the necessity of succession. The
advisor considered it to be part of his role as initializer to first trigger any negative
feelings and, through lengthy and open discussions, increase the incumbents readiness
to let go.

[...] The turning point was when I spoke openly and clearly to the
incumbent and told him what he had to do and what the solution could be
[]. I did this in a very direct manner. This was extremely difficult
because I had to channel the emotions, mostly on behalf of the incumbent,
into the right direction. Advisor, Beta

This claim, that the advisors role in intermediately triggering negative feelings
was necessary for progress during the succession process, was further supported by the
successors of the three firms. They all claimed that they were initially afraid that it might
take a very long time for the incumbent to finally overcome his or her reluctance to
engage in the succession process.

and then, another few weeks had passed by without anything happening
[]. But the advisor noticed this. When he did not hear anything from us
for two weeks, he called us and asked us for the reason of this. When I
replied to him that several issues still had to be clarified before we could
continue, he immediately called the incumbent and talked to him.
Successor, Zeta
 64

Yes, we always knew what we strived for. This was clear for us but not
always for the incumbent. But then the advisor increased the pressure on
the incumbent, and this was necessary [for the successful continuance of
the succession process]. Successor, Delta

Only after the advisors intervention, which required not only frequent discussions
and direct communication about the issues but also a deep understanding of the
incumbents emotions, were the three incumbents sufficiently prepared to cope with the
topic of succession. The advisor could then officially initialize the process. Ultimately, at
the end of the trigger phase, the advisor was able to completely fulfill his role as
initializer in all five cases and thereby to help the incumbents and successors to adapt
their roles. As a consequence, at the end of the trigger phase, the level of satisfaction
among all the incumbents and successors was rather high. The advisor summarized this as
follows:

[In all five cases], I had the feeling that what matters was the continuance
and that everyone was satisfied [at the end of this first phase]. Advisor

The Preparation Phase. In the subsequent preparation phase, the advisor helped
the incumbents to prepare the actual transfer of the business and supported the successors
in preparing themselves for the process and their future role as new leaders. In order to
cope with the challenges associated with these tasks, the advisor had to adjust his role
from being an initializer with an outside perspective to that of what we call a process
planner. In this new role, the advisor became a more integral part of the succession team
by actively working on the planning of the process, such as defining tasks and milestones
or planning financial issues and taxes. Again, these role-related activities led to various
levels of satisfaction among both the incumbents, whose role was that of a monarch in all
cases, and the successors, whose role was that of a helper. Also in the role of the process
planner the advisor faced major challenges in dealing with the incumbents and the
successors fears, uncertainties, and reluctances that evolved as a consequence of the
increased process transparency and the clearly specified goal of transition.
 65

In all cases, the advisor was able to strongly fulfill his role as process planner who
had the ultimate responsibility for planning the succession process 8 and took charge of
certain preparation tasks, such as handling financials and taxes. This is reflected in the
following two quotes from the incumbents of Alpha and Gamma.

The advisor exactly knew the process. He told me from the beginning
about what the crucial points that I had to keep in mind were; he knew
exactly what he was doing. Incumbent, Alpha
He set up a great plan with milestones. It was clearly defined what we had
to do, what the accountant had to do, and what the reviser had to do. This
was very helpful. Incumbent, Gamma

Furthermore, apart from this task-related consulting, in all five cases, the advisor
faced the challenge to motivate the incumbents and successors to help them coping with
their emotions, in particular with regard to the uncertainty regarding many aspects of the
succession process which was still largely present at this early stage of the process. The
advisor assessed this part of his role as particularly challenging. As in the trigger phase,
the advisors overall aim was to increase satisfaction among the incumbents and
successors while acting as process planner. He immediately succeeded with this goal with
three of the five incumbents (Alpha, Beta and Zeta) and one successor (Gamma), who all
felt satisfied and well integrated into the process. The incumbents experienced primarily
feelings of great hopefulness and excitement about the further progress of the succession
process. One incumbent explained:

I felt hopeful all the time [during the preparation phase]. Incumbent,
Alpha

Among the successors, only the one of firm Gamma was fully satisfied throughout
the preparation phase. He stated that he fully trusted the advisor, whom he had known for
many years, and that he felt very well involved into the process.

8
In the case of Alpha, this role was shared by the advisor and a tax expert of the family firm.
 66

However, in all other cases, the advisors process planning activities first implied
negative feelings and dissatisfaction among both the incumbents and the successors. In
general, the successors and incumbents experienced substantial uncertainty (Alpha, Beta)
or even fear (Gamma, Delta, Zeta) after the advisor had presented their future tasks to
them.

[Hearing about all those aspects] scared me. All those succession-related
aspects created a lot of uncertainty. Successor, Beta
At the beginning of the preparation phase, I was very scared, I think [].
Incumbent, Gamma
This was without a doubt a time that consisted of strong fears and
desperation. As a consequence, I also had health problems; I felt really
stricken. Successor, Zeta

For instance, with regard to the incumbents, the owner-manager of Delta was very
afraid of the succession process per se what was also observed by one of the authors
during a succession meeting. The advisor finally had to manage this challenge to alleviate
her worries by sharing some success stories of prior cases that he had worked on. This is
reflected in her following quote:

I was afraid during the preparation phase []. However, the advisors
calm way of communicating was extremely helpful. This was very
comforting. Incumbent, Delta

With regard to the successors, four of them (Alpha, Beta, Delta, and Zeta) were
particularly dissatisfied, as they felt uncertain about their future and generally showed
considerable respect for the tasks facing them. In two cases (Alpha, Zeta), these negative
feelings were further reinforced through external factors.9 With regard to the unsatisfied
successors, the advisor aimed to fulfill his role as process planner by offering them
solutions to manage their negative feelings and thereby increase their overall satisfaction.

9
With regard to these external factors, in the case of Alpha, an additional private advisor of the
incumbent, who did not adhere to the defined rules, disturbed the process. In the case of Zeta, an impostor,
who offered to lend illegal money to the successor, disturbed the succession process.
 67

In order to achieve this goal he faced the challenges on the one hand only to focus on the
next milestones of the process (instead of focusing on the end of the succession process)
and on the other hand to constantly motivate the successors to proceed. This is shown in
the following interview quotes:

The advisor was a calm anchor during the entire process. Successor, Beta
The advisor always tried to advance the process because we often
stagnated. Incumbent, Delta

According to the advisor, these periods of lower satisfaction were challenging but
also necessary because all the involved parties needed to become aware of what was
expected from them during subsequent phases of the succession process. In particular, the
successors needed to become aware of the required skills and knowledge (which they
often lacked at this point of time). Only with the awareness, commitment, and dedication
of all parties to put all effort into building up the required capabilities could a positive
outcome of the succession process be achieved. To help the incumbents and successors
address their feelings of uncertainty and overcome the dissatisfaction, the advisor
intensively coached them. In particular, he therefore had to show empathy and explained
that he understood their negative feelings. He also provided them with information about
the subsequent process steps and their future tasks. Moreover, he had to manage the
balancing act of motivating them while at the same time pushing the process further in the
direction of the second big milestone which was considered as a huge challenge by the
advisor. The following quotes refer to the advisors coaching activities during the
preparation phase:

The advisor always gave me the feeling that he is not biased to the
incumbent but that he is also on my side. This was very important to me
because otherwise it would not have turned out well, and I would not have
been satisfied with the process. He also tried to mediate between the
incumbent and me. Successor, Zeta
 68

I never showed my fears in the big discussion round []. However, I

always had the impression that the advisor knew exactly how I felt. He
always assured me that everything will turn out well. But he also tried to
convince me that I had to let go. Incumbent, Delta

Only after having coped with these crises was the advisor able to generate
satisfaction among the actors. Ultimately, at the end of the preparation phase, the level of
satisfaction was rather high again in all five cases.

The Selection Phase. In the selection phase, the advisor supported all five
incumbents and successors with tasks such as communicating the impending succession
most important, the choice of successor to all stakeholders. In so doing, the advisor
needed to adjust his role from a process planner, who plans specific aspects such as
financials, to that of what we call a task supporter. In this new role, the advisors major
challenge was to shift his involvement from execution to support. In all five observed
cases, the incumbents role in this phase adjusted to that of a delegator, and the
successors role changed to that of a manager who now started to take over important
roles in the firm. In the selection phase, the advisors role adjustment also triggered
various levels of satisfaction on behalf of the incumbents and successors. In his role as
task supporter the advisor had to manage the crucial challenge to help the incumbents as
well as the successors to overcome their uncertainties and reluctances in connection with
the actual communication of the decisions made in this phase. Nevertheless, in sum, we
observed that both parties incumbents and successors experienced this phase of the
process in a more positive light than they experienced the previous preparation phase.
While in one case (Alpha), the incumbent and successor proactively fulfilled most
of the tasks of this phase on their own, in four of the five cases (Beta, Gamma, Delta,
Zeta), it was the advisor himself who had to structure the tasks of this phase by discussing
possible execution options with the incumbents, by motivating the successors to commit
themselves, and by supporting both parties in communicating the succession, as shown in
the protocols of the respective meetings and in the following interview quote:
 69

For this task you need a lot of time, you need several appointments, and
you need to clearly discuss the incumbents goals with him alone. Here,
you need to have the courage to ask whether he had already spoken to the
children, to his wife, etc., and what are his favorite options. This is crucial
[]. Advisor, all cases

As in the previous phases, the advisor aimed to engender high satisfaction.

However, in contrast to the two previous phases, he immediately succeeded with this
challenge in bringing about positive feelings among all the incumbents and successors in
the selection phase. Negative feelings, such as uncertainty, were rare in this phase. All
five incumbents stated that they felt satisfied and experienced feelings of happiness
during the selection phase, as they felt their business was in good hands now. This is,
for instance, reflected in the following quote:

At this point, I was very satisfied. I felt hopefulness and happiness. I have
always thought that he [the successor] would once become the leader in
the family firm. However, he never wanted to, and so I was very happy
when he finally committed himself to the business. Incumbent, Beta

Similarly, all successors experienced a high level of satisfaction associated with

positive feelings of joy and happiness during this phase. While three successors (Gamma,
Delta, and Zeta) admitted that they were initially somewhat afraid of their own courage
and that they somewhat doubted whether their decision to become a successor was right,
they generally felt honored to have the chance to take over the business, as shown in the
following quote:

Of course, this resulted in happiness happiness that I got the chance to

take over this firm. However, it also led to doubts [whether I am really
able to fulfill this new role]. Successor, Gamma

Moreover, all five successors explained that it was the advisors persistent
encouragement and constant pressure on the incumbents that engendered their high
satisfaction. This is represented by the following quote from the successor of Zeta:
 70

From time to time the advisor called and asked how it is going. When I
told him that the incumbents wife still does not want to make any
decisions about the succession, he immediately talked to the incumbent.
He never let up. Successor, Zeta

The Training Phase. In the last phase before the actual transfer in the training
phase the advisor provided support in mainly two areas: On the one hand, he helped set
up the successors training process and helped familiarize the successor with the business
through close coaching. On the other hand, he managed various remaining administrative
tasks, such as tasks related to financials and taxes. Thereby, in order to face these
challenging tasks the advisor had to change his role once again from having been a task
supporter for the incumbent and successor to that of what we call a coach. In his
adjusted role, the advisor supported the incumbents and particularly the successors in
becoming ready for the actual transfer of the family business. Thereby, a major challenge
of the advisors role as a coach was to deal with disagreements (especially on behalf of
the successor) on proposed training methods and in some cases also a lack of motivation
for the training.
In contrast to the three previous phases in which the advisor fully completed his
role adjustment we observed that in this phase the advisor struggled in some cases and the
intensity of the advisors role adjustment varied across the five cases in the training phase.
Specifically, we noticed that in three of the cases (Beta, Gamma, Delta), the advisor did
not fully manage to adjust his role to that of a coach but partly remained in the role of a
task supporter. As a consequence, the incumbents in these three cases did not properly
adjust their role to that of a consultant in the final stage, and the successors stayed in the
role of a manager and did not become the new leader. In this phase, the advisor also
triggered mixed levels of satisfaction, which tended to be especially low in the three cases
without full role adjustment.
In all five cases in our sample, it was the advisor who, in the training phase,
completed the final administrative details concerning taxes, finances, the organization,
and communication and thereby pushed the succession process toward the final milestone.
Moreover, as in the previous phases, in the training phase, the advisor faced the challenge
 71

to engage in intense coaching when any of the involved actors expressed dissatisfaction,
as the following quote shows:

The advisor insisted that we continue [even during the training phase]. He
really advanced the process by calling every week and asking what the
status is. Successor, Zeta

In addition, in three cases (Beta, Delta, and Zeta), it was the advisor who set up at
least one training instrument for the successors, such as a business plan or management
training. This is shown in the following quotes:

But still there is a lot to be done. You have to do a business plan, you have
to run from X to Y, you have to compile documents, and so on []. But the
role of the advisor was of great importance, because I did not have any
other support and he had lots of experience. He told me about examples of
other succession cases and showed me what went well and what went
wrong. This helped me to become aware about which things I had to be
careful of. Successor, Zeta
This was a very informative period for me; it was not negative, and
concerning the advisor, I do not know anything that he could have done
better. Successor, Beta

In the training phase, it was also the overall aim of the advisor to generate high
satisfaction. However, he only fully succeeded in doing so in the two cases of Alpha and
Zeta, where all the actors the incumbent, successor, and advisor fully adjusted their
roles. In these two cases, the advisors involvement as coach led to high satisfaction
among the two successors because they felt well prepared in their role as new leaders and
because they were looking forward to the successful closure of the succession process. As
a consequence, they experienced feelings of happiness during the training phase, as
explained by the successor of Alpha:

There are still some details to be dealt with ; however, the satisfaction
and happiness will surely increase toward the end. Successor, Alpha
 72

However, the incumbents of Alpha and Zeta initially did not share this high level
of satisfaction. Instead, they noted being angry at the beginning of this phase. These
negative feelings were triggered by the challenging discussions between the advisor and
the incumbents about training methods, new roles after succession, and administrative
details. Thereby, temporary disagreement about specific procedures emerged between the
advisor and the incumbents of these firms, resulting in a lower satisfaction, as shown in
the following quote:

I had to talk to the advisor. Even though we had known each other for
many years and we had a good relationship with each other, I had to
clarify what went wrong in my opinion. I missed the advisors will, his
brio to support us. At that moment, I thought that we had the wrong
advisor. Incumbent, Zeta

Moreover, the incumbents were initially uncertain about whether they would be
able to cope with their new roles after the succession process. The advisors insistence
that their new roles must be strictly applied after the transfer generated additional fear, not
only for the successors, but also for the incumbents, as the following quote by the
incumbent of Alpha shows:

It was a strange feeling. I was not responsible anymore. I did not see any
more how much money comes in and how much goes out []. Of course,
this lead to strong negative emotional reactions. Incumbent, Alpha

By showing empathy, coaching them on how to address their feelings of

uncertainty and anger, and engaging in intense discussions about, for instance, the
necessity of role adjustment and the proposed training program, the advisor was able to
alleviate the concerns of the incumbents of Alpha and Zeta. As a consequence, at the end
of the training phase, both the incumbents and the successors of Alpha and Zeta were
highly satisfied.
In the other three cases (Beta, Gamma, and Delta), the advisor did not manage to
fully change his role to that of a coach but remained a task supporter, mostly because of
time constraints. As a consequence of this only partial role adjustment, the incumbent and
 73

successor also did not adjust their roles properly. In these three cases, the level of
satisfaction among the incumbents and successors was rather low throughout the training
phase (and remained low afterward). The incumbents noted experiencing substantial fear
throughout this phase because, similar to the incumbents of Alpha and Zeta, they were
uncertain about their future roles. However, as the advisor remained a task supporter and
struggled to adjust to his role as coach, he was unable to fully alleviate these concerns (as
he did in the cases of Alpha and Zeta).
Additionally, the successors of those three cases (Beta, Gamma, and Delta)
experienced a low level of satisfaction in the training phase. Similar to the incumbents,
the successors felt frightened as they watched the advisor completing the final
administrative tasks, since they felt insecure about their future role. Given the lack of
substantial coaching regarding the training (as the advisor did not fully adjust his role),
one of the successors (Gamma) had the impression that the advisor was biased toward the
incumbent, with whom he closely worked together. In this phase, the incumbent of one
firm (Gamma) remained a delegator, whereas two incumbents (Beta, Delta) even reverted
back into the role of a monarch because of the continuous level of dissatisfaction among
the actors in these two cases which was also observed by one of the authors during several
meetings in this phase.
While the advisor, through intense discussions and coaching, aimed to motivate the
incumbents and successors of Beta, Gamma, and Delta again, he only achieved this
important goal temporarily. The incumbent of Gamma noted that at that time, when we
[the advisor and I] sat together, he managed to calm me down and reduce my fears, but
he also explained in the interview that his level of satisfaction decreased again right after
the official transfer of the business. This phase of temporary satisfaction and,
subsequently, a steep decrease in positive feelings right after the official takeover is also
illustrated in the following two quotes:

At first I was very happy happy that I had taken over the company. But
then, this happiness quickly turned into disillusion []. Maybe the
advisor should have intervened more because he knew the incumbents
fears. Successor, Beta
 74

[] sometimes I get very angry, for instance, if I have to wait for an

answer about business-related issues from the successor. I would prefer to
complete the task immediately and not wait for the decisions of the
successor [], and this makes me angry and inpatient. To be honest, I do
not want to do that for another five years. That would not work []; I
would end up not enjoying the work anymore, and after having decided
everything on my own in the last 23 years, this is hard. Incumbent,
Gamma

In conclusion, in the three cases without full role adjustment, a high level of
satisfaction was only temporarily achieved but could not be permanently maintained. In
contrast, in the two cases (Alpha and Zeta) in which full role adjustment was achieved by
all three actors, we did not observe such disillusion. Instead, the incumbents and
successors expressed a high level of satisfaction at the time of the interviews and
mentioned experiencing mostly positive feelings, such as joy and happiness, toward the
succession process.

4.5.2 A Model of Advisors Role Adjustment and its Effect on Satisfaction

In comparing our findings across the five family firms, we aim to identify
similarities as well as differences among the cases. First, our data shows that the advisor
faced several common challenges throughout the succession process, namely coping with
the fears, uncertainties but also reluctances and dissatisfactions of incumbent and
successor when confronted with the topic of succession. Those negative feelings were
often directed towards the external party involved in the process, namely the advisor.
Moreover, in order to overcome these challenges and to achieve a smooth succession
process, the advisor underwent a certain role adjustment in all five cases (see process
model below; Figure 4). There is also consistent evidence across all cases that the advisor
must trigger several negative feelings and thus phases of dissatisfaction in most of the
succession phases in order to be able to advance the process (see Figure 5). Only when
these phases of dissatisfaction are overcome can the succession process advance. Besides
those similarities, we also detected several differences. Specifically, we detected
substantial differences in the degree to which the advisor was able to fully adjust the role,
in particular in the last phase of the succession processes. The comparison across
 75

succession cases suggests that only when the advisor was able to fully adjust his or her
role, also incumbent and successor were able to fully adjust their roles, and thus achieve
continuous high levels of satisfaction with the succession process.

Figure 4Model of Role Adjustment

Figure 5General Model of the Advisors Challenge to Achieve Incumbents and

Successors Satisfaction in Each Phase
 76

A process model of roles and satisfaction. More specifically, we suggest that in the
trigger phase, the advisor acts as an initializer by supporting the incumbent and successor
in coping with strong emotional challenges inherent to this phase (Kaye, 1998). The
discussion of succession issues can lead to a low level of satisfaction, mostly on the
behalf of the incumbents, associated with feelings such as fear, uncertainty, or even anger
(see Figure 5, A -), if the involved parties are not yet psychologically prepared for
succession. The advisors emphasis on the necessity of succession, which is based on his
or her external perspective (Lane et al., 2006; Swartz, 1989), and activities to initialize the
process in the near future might even reinforce the low level of satisfaction during the
trigger phase (see Figure 5, B -). However, an active confrontation with these negative
reactions is a challenging but yet necessary task of the advisor to be able to successfully
continue the succession process. By showing empathy, discussing the fears of the
involved parties, and revealing prior success stories, the advisor can help the involved
parties become willing to start the process and thereby overcome the initial dissatisfaction
(see Figure 5, B +) (Hilburt-Davis & Senturia, 1995). At the end of the trigger phase,
when the incumbent and successor have become willing to start the project and have
learned from the advisors prior cases, the level of satisfaction is rather high (see Figure 5,
C +).
During the preparation phase, the advisor adjusts his or her role to that of a process
planner who lays out the succession process (Le Breton-Miller et al., 2004) and provides
experience in succession process management and task-related knowledge to all
stakeholders. Becoming aware of the high number of tasks to be completed might scare
the incumbent and successor and thus leads to reluctances and low levels of satisfaction
(see Figure 5, A -). By outlining at once all the different tasks to be completed, the
advisor can even reinforce such negative feelings (see Figure 5, B -). By establishing a
joint vision, common goals, and clear rules and, again, by engaging in empathetic
discussions about how the parties should handle their feelings of uncertainty, the advisor
can manage this challenge and can subsequently help the involved parties overcome their
dissatisfaction (see Figure 5, B +) (Barbera & Hasso, 2013; Chrisman, Chua, Sharma &
Yoder, 2009; Le Breton-Miller et al., 2004). As a substantial part of the succession
process can be considered as settled after the successful completion of the preparation
 77

phase, the incumbent and successor experience high satisfaction at the end of this phase
(see Figure 5, C +).
Following the preparation phase, the selection phase, in which the succession is
finally communicated to both internal and external stakeholders, takes place (Chittoor &
Das, 2007; Chua, Chrisman & Sharma, 1999; Harveston, Davis & Lyden, 1997). In this
phase the advisors role adjusts to that of a task supporter who moderates important
discussions about the details of the business transfer, including aspects related to timing,
financials, and strategy (Le Breton-Miller et al., 2004). A lack of agreement on these
topics can lead to dissatisfaction at the beginning of this phase (see Figure 5, A -), which
can, again, be exacerbated by the advisors emphasis that tasks such as communication
may not be deferred but need to be planned and executed (see Figure 5, B -) (e.g., Le
Breton-Miller et al., 2004). On the other hand, the advisor should also be able to alleviate
these concerns, that again cause fears, and achieve goal alignment through his or her
intervention (see Figure 5, B +), which ultimately raises the level of satisfaction of all the
involved parties (see Figure 5, C +).
The final phase that we examined in this study is the training phase (Le Breton-
Miller et al., 2004), in which the advisor takes the role of a coach who helps the successor
fully understanding the business (Brockhaus, 2004; Goldberg, 1996). Disagreement about
the right extent, timing, and content of the successors training or a lack of motivation on
behalf of the successor often diminishes the incumbents and successors satisfaction at
the beginning of this phase (see Figure 5, A -). By setting up a specific training plan, the
advisor might even temporarily exacerbate those conflicts (see Figure 5, B -). However,
discussions about the training plan and thorough assessments about the successors
current abilities and his or her knowledge about how to lead the family firm (Boyd, Upton
& Wircenski, 1999) might also increase the trust of the incumbent and other stakeholders
in the successor (see Figure 5, B +) and thereby lead to overall high satisfaction, when all
the parties find themselves well prepared at the end of this final phase (see Figure 5, C +).
Variance among the cases the importance of full role adjustment. In sum, in all
five cases, we observed that all three actors of the triadic relationship the incumbent,
successor, and advisor adjusted their roles from phase to phase to some extent.
Nevertheless, not in every case all three parties reached the final roles. In the first three
 78

phases, all actors fully adjusted their roles.10 However, the extent to which the actors
changed their roles in the final phase, the training phase, varied among the five cases. In
two cases (Alpha and Zeta), we observed that all three actors, despite some challenges
throughout the process, managed to ultimately change their roles to that of a coach
(advisor), consultant (incumbent), and new leader (successor). By contrast, in the other
three cases (Beta, Gamma, and Delta) the actors did not fully adjust their roles.
Moreover, we observed that in the cases in which the role adjustment was
completed by all three actors, the level of satisfaction of the incumbent and successor
tended to be higher than that in cases in which the role adjustment was not fully
completed. In addition the level of satisfaction remained high over time in the former
cases. We thus propose that the complete role adjustment of the advisor might be
beneficial so that both the incumbent and the successor are able to complete their own
role adjustment, which eventually leads to a high level of satisfaction. Figure 6 provides
an overview of how the differences in role adjustment affect the level of satisfaction of
the incumbent and successor.

Figure 6Variance among the Cases

10
One could speculate that without this role adjustment, the succession process would not have moved to
the next phase. Future research could aim to investigate whether succession processes that ended early
without a transfer of management might have suffered from a lack of role adjustment in these early
phases.
 79

4.6 Discussion, Limitations, and Future Research

4.6.1 Contributions to Theory

This paper contributes to the literature on family firm succession and advisor
involvement in various ways. First, we advance prior research by providing a nuanced
depiction of the challenges that an advisor faces in each phase of the succession process
as well as what roles he or she assumes and what activities he or she engages in during the
process in order to overcome these challenges. Thereby, we systematically integrate
advisors into each process step of the succession process. More specifically, we describe
and label the different roles that the advisor fulfills in each phase in order to manage the
various challenges. We argue that not only incumbents and successors (Handler, 1994)
but also advisors need to adjust their roles during the succession process. Extending prior
research on the role of advisors in the family business succession process (e.g., Reay et
al., 2013; Strike, 2012; 2013), we propose that the advisor needs to change from an
initializer who closely works with the incumbent to a process planner, a task supporter,
and finally a coach of the successor. Such role adjustment by the advisor can be regarded
as a necessary extension of Handlers (1994) model of mutual role adjustment by the
incumbent and successor. Studying the advisors role adjustment appears to be
particularly important because Handlers (1994) model of mutual role adjustment has
been shown to be valuable in many other studies on succession (e.g., Cabrera-Suarez, De
Saa-Perez & Garcia-Almeida, 2001; Cadieux, Lorrain & Hugron, 2002; Dyck et al., 2002;
Goldberg, 1996; Matthews, Moore & Fialko, 1999; Morris, Williams & Nel, 1996; Morris
et al., 1997). Moreover, the proposed role adjustment model of all three actors of the
triadic relationship resonates well with prior research indicating that roles generally need
to change over time (Howorth, Westhead, & Wright, 2004; Michel & Kammerlander,
2015).
Second, by further analyzing how exactly an advisor in each of his or her different
roles adds an outside perspective and contributes to making the succession process more
smoothly, we extend the recent work of Strike and Rerup (2015), who found that the
advisor possesses a function of mediated sense-making by providing an outside
perspective and engendering a constant rethinking process concerning certain issues
among family business members (e.g., incumbent and successor). More specifically, our
 80

paper extends the findings of Strike and Rerup (2015) in two important ways: (1) This
paper shows not only that a trusted advisor must assume different tasks during the
succession process but also that the advisor him- or herself must adjust his or her role to
cope with the various needs of the incumbent and successor in each phase of the process.
(2) Going beyond Strike and Rerup (2015), who focus on the positive aspects that a
trusted advisor adds to the process, this paper shows that the advisor might also
temporarily trigger negative feelings, leading to a decrease in satisfaction among family
members. We propose that such intermediate phases of dissatisfaction and frustration are
required for a successful progress of the succession process. While most prior research on
family firm advisors emphasizes the advantages of advisor involvement, our study also
highlights that various challenges that an advisor needs to overcome.
Third, we contribute to the literature by studying the level of satisfaction of the
incumbent and successor with the succession process (e.g., Cabrera-Suarez et al., 2001;
Sharma et al., 2003a; Venter et al., 2005). In particular, we investigate how the
satisfaction of the incumbent and successor is affected by the various activities conducted
by the advisor as a response to the challenges of each phase. Thereby, we show that in
helping the actors overcome their negative feelings and thereby increasing satisfaction,
the advisor helps them fulfill their own role adjustment in each phase and eventually
engenders a positive outcome of the succession process. By conducting a nuanced
investigation of satisfaction levels over the course of the succession process and by
studying how they are influenced by the activities of the advisor, we also further extend
the work of Sharma and colleagues (2003a), who studied factors that increase the
incumbents and successors satisfaction with the outcome of the succession process.
Additionally, apart from proposing a process model on how an advisor affects the
incumbents and successors satisfaction during the succession process, we adopt a
qualitative case study design that allows us to study heterogeneity among the five cases.
We find that in cases in which role adjustment is completed by all three involved parties,
the level of satisfaction of the incumbent and successor tend to be very high during and
after the succession process. However, in those cases with incomplete role adjustment by
all three actors, the level of satisfaction of the incumbent and/or the successor is rather
low.
 81

4.6.2 Limitations and Future Research

Within our theorizing, we identified an advisors role adjustment along the

individual phases of the succession process as effective way to address the challenges in
each phase. We strongly recommend that researchers build on these initial insights and
empirically test whether and under what conditions the advisor is able to fully adjust his
or her role during the process. In our cases, we have seen that time constraints constitute
one important factor that might impede role adjustment; however, it is important for both
research and practice to gain more insights into other factors that may lead to incomplete
role adjustment by the advisor as well as the incumbent and successor. When planning
such a study, it seems crucial to differentiate between the individual sub-steps of the
succession process, as our analyses show that the advisors ability to adjust his or her role
might depend on the specific phase of the process.
In a similar vein, future studies are encouraged to illuminate whether our findings
depend on the number of advisors involved in the succession process and whether the
advisor is hired on a short- or long-term base. In this context, two important aspects need
to be further investigated: first, whether the way in which the advisor enters the company
(e.g., hired by the firm, the family, or the incumbent) influences the degree of role
adjustment during the process and, second, whether the type of advisor (e.g., accountant
vs. lawyer) affects the degree of role adjustment owing to differences in experience. In
four of the five cases of this study, the advisor was already the advisor of the firm before
starting the succession process together with the family. Therefore, further research on the
entry mode and type of advisor is needed, as well as research focusing on differences in
the emotional intelligence of the advisor. Additionally, in all the cases that we studied, the
advisor was involved in all the sub-steps of the succession process, though with varying
intensity. Future empirical research should investigate cases in which the advisor is only
hired for selected phases or selected tasks. It would also be interesting to examine
whether role adjustment is beneficial under such circumstances.
As noted in our methodology section, we studied five cases with diverging
outcomes that all involved the same advisor. While this approach is advantageous in
terms of ruling out alternative explanations with regard to the effect of the experience,
personal skills, or personality of the advisor on the incumbents and successors
 82

satisfaction, it also comes with certain shortcomings relating to the generalizability of our
findings. Thus, future empirical studies might help to determine whether the role
adjustment of other advisors follows the pattern described in this study and whether and
how the roles differ.
Finally, our model does not account for contextual and institutional factors. As
such, it remains unclear whether our findings hold true across different sectors and
economies or whether they depend, for instance, on the cultural context and on economic
welfare. Further research should scrutinize our findings in different countries, as cultural
factors may influence the satisfaction of the involved actors. The level of satisfaction
might vary between cultures, and cross-cultural research can provide answers to such
issues.

4.6.3 Conclusion

Many family firms employ at least one advisor to support their succession process.
The advisor might benefit from role adjustment throughout the succession process, as an
adaptation of roles might help him or her to overcome the various challenges in the
succession process and to ultimately achieve high levels of satisfaction among the
incumbent and the successor.
 83

5. THE ADVISORS INFLUENCE ON POST-SUCCESSION

PERFORMANCE
Alexandra Michel

5.1 Abstract
This quantitative study combines survey data and objective performance data of
Swiss small- and medium-sized family businesses that recently completed succession in
order to investigate the relationship between a formally hired advisors presence and
objective post-succession firm performance as well as subjective post-succession
satisfaction of incumbent and successor. Our data confirm a strong positive influence of a
formal advisor first on the firm performance, and second on the level of satisfaction.
Third, we further show that not only the presence but also the way the advisor behaves
during the process affects performance as well as satisfaction either positively or
negatively.
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5.2 Introduction
Performance and the family businessthis is an often addressed topic in the
family business literature because eventually every firm has to perform in order to survive
(e.g., Chrisman, Chua & Litz, 2003; Dyer, 2006; Habbershon, Williams & MacMillan,
2003; Lee, 2006; Miller & Le Breton-Miller, 2006; Naldi, Nordqvist, Sjberg & Wiklund,
2007; Rutherford, Kuratko & Holt, 2008). While family businesses often also pursue
goals related to non-financial performance such as emotional values (Astrachan, &
Jaskiewicz; 2008), socioemotional wealth (Perry, Ring & Broberg, 2015) or altruism
(Corbetta & Salvato, 2004), achieving financial performance is still essential as it
eventually ensures the continuity of the family business.
One of the most crucial and therefore also most frequently addressed events, that
also has in many cases a major impact on future firm performance, is succession (Miller,
Steier & Le Breton-Miller, 2003; Molly, Laveren & Deloof, 2010), which means the
transfer of leadership and ownership from one generation, also called the incumbent, to a
next generation called successor (De Massis, Chua & Chrisman, 2008; Handler, 1994).
However, often family businesses struggle to master the process to successfully transfer
their business to a younger generation member as especially in this intense period
different capabilities such as process management or specialist knowledge concerning
finance or tax are required (Lansberg, 1999; Morris, Williams, Allen & Avila, 1997). This
is particularly salient for the family businesses due to the following reasons: first, sooner
or later every family business is confronted with the topic of succession as they are often
operated by one sole leader (e.g., Handler, 1994), second, especially family businesses
face the problem of having limited resources because of relying on a small management
team (Gedajlovic, Cao & Zhang, 2012), and third, there is a higher probability for an
increased conflict potential among family members during the transition process because
of a higher emotional attachment to the firm on behalf of the incumbent (Davis &
Harveston, 1999; Zellweger & Astrachan, 2008). Particularly, differences among family
members often cause negative feelings that result in a poor outcome of the succession
process (Eddleston, Otondo & Kellermanns, 2008). Hence, a poorly guided succession
process can have a huge negative impact on future firm performance which is why it is
crucial that relationship issues are actively managed in order to make the process
 85

smoother (Morris et al., 1997) and to increase the satisfaction of the involved parties
(Sharma, Chrisman & Chua, 2003a; Sharma, Chrisman, Pablo & Chua, 2001).
In this connection, the presence of an external, formally hired advisor who actively
manages these relationships within the succession process got recently an increasing
attention of a number of researchers (e.g., Reay, Pearson & Dyer, 2013; Strike,
2012:2013). Several studies showed that a family firm advisor might enhance the decision
quality, the family dynamic, the learning orientation, the innovativeness, the strategic
planning process, and as a consequence the firm performance through providing high-
quality feedback (Davis, Dibrell, Craig & Green, 2013; Reay et al., 2013; Strike 2012).
Moreover, through mediation activities the advisor is able to improve the development of
the successor (Salvato & Corbetta, 2013), to enhance the commitment of and relationships
between the actors involved (Distelberg & Schwarz, 2015), and to allow new perspectives
on the process (Strike & Rerup, 2015). Therefore, the quality of advice is supposed to
positively affect firm performance and survival (Barbera & Hasso, 2013; Sirmon & Hitt,
2003).
However, whereas many studies either on family firm performance or on the
advantages of having advisors in the family business succession process exist, there are
hardly any empirical studies that investigate first if, second how, and third under what
conditions advisors have either a positive or a negative influence on the performance of
the family business after having completed the succession process. This is rather
surprising since on the one hand family firm performance and its influencing factors are
acknowledged to be a crucial topic (Chrisman et al., 2003; Dyer, 2006; Habbershon et al.,
2003; Lee, 2006; Zellweger & Nason, 2008) and on the other hand advisors were shown
in several studies to be an important and influential factor for the family firm during
succession as well as for the process outcome itself (e.g., Barbera & Hasso, 2013; Naldi,
Chirico, Kellermanns & Campopiano, 2015; Reay et al., 2013; Salvato & Corbetta, 2013;
Strike, 2012). Thus, the authors of these studies pointed out that more research is needed
on the role of an advisor in general, his or her influence on firm performance as well as on
the factors of the advisors behavior that impacts post-succession performance. This is
important as it allows theory to provide a more nuanced and empirically validated
discussion of the advisors role and impact on the crucial factor firm performance. This
 86

paper aims to contribute to this gap in literature. More specific, we aim to answer the
following research questions: (1) How does a) the level of performance and b) the level of
satisfaction of a family business after succession differ depending on whether a formal
advisor has been engaged during the succession process or not? And (2) how does the
tertius iungens behavior11 of the formal advisor influence a) the level of performance as
well as b) the level of satisfaction.
We answer those questions by conducting a quantitative study on 180 family
businesses that completed the succession process within the last five years. In particular,
we investigated whether a formally and externally hired advisor has been present during
the process or not and if such an advisor was present how he or she influenced the post-
succession performance as well as on the level of satisfaction among incumbent and
successor. Thereby, post-succession performance was measured with objective
performance data from the balance sheets and income statements of the investigated
businesses. In a second step, we further investigated if not only the advisors presence but
also the advisors tertius iungens behavior while intervening into the process had an
influence on post-succession performance and the level of satisfaction.
This study aims to advance theory by empirically showing how the presence of a
formally hired advisor in the family business succession process influences the firm
performance and the level of satisfaction after succession. First, this is important for
theory, as so far a common weakness of previous empirical studies is that performance
was measured mostly by asking the participants for subjective performance evaluations
such as for example how they assess the performance of their business in comparison to
their most important competitor. While we also assess such subjective performance
levels, this study has unique access to secondary data of the performance of firms through
the rating system of a well-known Swiss bank. Thus, this study is able to overcome this
weakness and also work with objective performance data, which are based on internal
documents (annual statement reports of the firms) and a validated rating system
developed by the Swiss bank which evaluates these documents with a mathematical
11
The tertius iungens behavior is defined as the behavior of the third who joins in an existing group
(here for example incumbent and successor). In contrast to the tertius gaudens, where the third party takes
advantages from disconnections among group members, the tertius iungens aims to connect group
members with each other in order to increase the whole networks advantages and not just the thirds
advantage (Obstfeld, 2005).
 87

system. Second, this study shows how the tertius iungens behavior of the advisor, if
present, affects the level of firm performance and the level of satisfaction. Thus, it
advances theory by empirically scrutinizing how differences in the behavior of the advisor
influence the outcomes of succession in terms of objective performance and satisfaction.
Third, besides filling these research gaps, this study is also important for practice, since
our findings might guide family business owners in their decision about whether and what
kind of advisor to engage for upcoming succession.

5.3 Theoretical Background

5.3.1 Advisors and the Family Business Succession Process

Literature on advisors in family businesses mainly distinguishes between three

types of advisors: external (formal) advisors, internal (informal) advisors and advising
boards (Strike, 2012). External advisors are in many cases professionals with expert
knowledge in areas such as law, finance, products, process management or
socioemotional wealth and work for the family firm on the basis of a work contract
(Hilburt-Davis & Senturia, 1995). Contrary, internal advisors are not officially hired by
the business. They are often key employees, close friends, mentors, wives or business
partners that know the firm and its owners since many years and may support them with
their external perspective, support and empathy (Strike, 2013). As a third type of advisors
family firm boards or also called advisory boards are mentioned in literature (Strike,
2012). In order to gain trust all types advisors should be honest, integer, loyal, human,
predictable, strong chartered and emphatic (Reay et al., 2013). The subsequent study
focusses on formal advisors who are hired externally, as the family often does not have
enough own resources to cope with an event such as succession (Jaffe & Lane, 2004) and
therefore needs a close mentor who guides them (Distelberg & Schwarz, 2015). Advisors
have to apply methods in order to capture in a first step the attention of the family
members to certain issues and in a second step to facilitate collective action towards a
defined goal (Strike, 2013). Advisors are most effective if they consist of independent
professionals who share knowledge and follow a strict teamwork approach (Su & Dou,
2013). In the following, this paper focuses on formal advisors who are hired externally,
 88

because we aim to show benefits and costs that can be added to a family business form
outside.
The reviewed literature on advising family firms during succession mentions
several aspects of how an advisor influences the succession process. Thereby succession
in family business is widely seen as the process which transfers ownership and
management from one incumbent generation to a younger successor generation and most
scholars agree that it is one of the most crucial events for a family firm (Handler, 1994).
Within the succession process an adviser supports the family by defining ownership and
management goals, organizing a succession task group, defining together with the whole
succession team successor selection criteria, developing the successor and at the same
time preparing the incumbent for the time after succession and lastly setting a time plan
for the succession to take place (Chrisman, Chua, Sharma & Yoder, 2009). After a clear
successor is defined he/she has to be trained and prepared for the new role. It was found
that the development process does not depend on the company size as also very small
companies do the training. However, whereas the training approaches in family firms is
more personal and relationship oriented than in non-family firms that prefer a more
formalized and task oriented approach (Fiegener, Brown, Prince & File, 1994). Thereby,
advisors can enable successors to gain outside experience before entering the family
business as well as learn and make mistakes during a first phase (Thomas, 2002). This is
supported by the studies which found that during the transition phase it often becomes
clear that a successors leadership abilities have not yet reached clarity and acceptance,
despite having had formal training in skills and knowledge and therefore needs more time
to gain acceptance and credibility (Barach, Gantisky, Carson & Doochin, 1988; Salvato &
Corbetta, 2013). Another approach states that an advisor might even temporarily take over
the leadership during the transitional phase and supports the successor in managing the
company, modeling his or her own role and endorsing leadership. After this phase the
advisor withdraw the task and the successor fully takes over (Salvato & Corbetta, 2013).
5.3.2 Advisors, Family Business Performance and Satisfaction

Family business literature widely agrees that financial performance is also for
family firms essential in order to ensure their survival (e.g., Habbershon et al., 2003;
Westhead & Howorth, 2006). However, in particular family businesses often also have to
 89

pursue personal goals of the family members and therefore face the challenge to fulfill the
difficult task of balancing financial and non-financial goals against each other (Sharma,
2004). Surprisingly, existing literature found that family businesses perform in many
cases even better than public listed companies due to making fewer shortsighted decisions
(Miller & Le Breton-Miller, 2006) as a consequence of having a founding family member
involved in management tasks (Lee, 2006). Additionally, a further crucial factor in
achieving firm performance is the presence of a formal advisor by adding an external
perspective and providing additional insights (e.g., Strike, 2012; Strike & Rerup, 2015).
However, up to date, according to the authors knowledge, there exist only very
few empirical studies examining the relationship between a specific type of family
business advisors and perceptual firm performance (e.g., Barbera & Hasso, 2013; Naldi et
al., 2015). The first study focusses on accountants and finds that their presence has a
positive influence on firm growth and firm survival (Barbera & Hasso, 2013). The second
study focusses on a specific type of internal advisorsthe family member advisorand
thereby shows a positive effect of these advisors on the performance of family businesses
in general (Naldi et al., 2015). Whereas these two studies first, focused on specific types
of advisorsthe study by Naldi and Collegues (2015) was not even about a formally
hired advisor but an internal family member advisorsecond, worked with perceptual
performance data and third, did not investigate the advisors work in the crucial event of
succession, we extend with this study prior research by focusing on formal advisors in
general and their influence on objective post-succession performance as well as on the
level of satisfaction. Studying satisfaction is particularly important as satisfaction has
been found to be a crucial predictor of performance (e.g., Mahto, Davis, Pearce, John &
Robinson, 2010). Already more than a decade ago Sharma and colleagues (2003a)
stressed the strong relationship between a high level of satisfaction and a successful
outcome of the succession process. Thereby, they examined how several factors influence
the level of satisfaction with the succession process. They found that the level of
satisfaction among the incumbent and successor is positively influenced by first, the
propensity of the incumbent to step aside, second, the successors willingness to take
over, third, the general agreement among family members to continue the business,
fourth, the acceptance of individual roles, and fifth, the extent of succession planning.
 90

5.4 Development of Hypotheses

5.4.1 Advisors Presence and its Influence on the Outcomes of the Succession
Process
Family businesses face certain phases in their life-cycle which are challenging and
endanger the future value creation. Such an event is family business succession (e.g.,
Miller et al., 2003; Molly et al., 2010) and in this connection, recent studies pointed out to
the crucial role an advisor plays within the family business succession process (e.g.,
Strike, 2012). A formally hired advisor is likely to increase the planning activities within
the succession process among incumbent and successor through providing support to
them, pointing out to necessary aspects or defining a timeline (Le Breton-Miller, Miller &
Steier, 2004; Morris et al., 1997; Strike, 2012). Thus, prior literature suggests that an
increased planning makes the whole transition process smoother (Chittoor & Das, 2007;
Sharma, Chrisman & Chua, 1997). Based on this, we argue that a smother succession
process, due to the presence of a formal advisor, allows the family firm to concentrate
earlier again on their business, thus be able to work with their full resources which lead to
an overall increased post-succession performance. Additionally, the extent of succession
planning has been shown to be positively related with satisfaction regarding the
succession process as insecurities among the involved parties are reduced (Lumpkin &
Brigham, 2011). This also reduces delays in the hand-over of the management
responsibility which again leads to a shorter transition process and a higher post-
succession performance.
Moreover, the advisor ensures that the process is well-structured and that clearly
defined milestones are achieved within a certain timeline (Le Breton-Miller et al., 2004;
Strike, 2012). A clearly structured process along the various process steps is further
perceived to increase the mutual role adjustment of incumbent and successor. In this case,
where the incumbent fully adjusts his or her role from a sole operator at the beginning of
the process to a consultant of the firm in the end and consequently clearly withdraw from
the operating business after the transfer, also the successor is able to fully adjust his role
and eventually become the new leader of the family firm (Handler, 1994). Through this
full role adjustment, the successor is highly motivated since he or she truly is the new
leader but still can rely on the consulting of the incumbent. Subsequently, we hypothesize
 91

that the advisor in achieving this combination, of a very motivated, hard-working

successor and an experienced incumbent still providing advice from the background, has
a positive influence on the post-succession firm performance as well as on the level of
satisfaction among incumbent and successor, because first, both parties focus sooner
again on the business itself, and second, due to their full role adjustment they are more
satisfied than if they were still stuck somewhere in the succession process:

H1a: Firms with a formal advisor have the higher post-succession performance
than those without a formal advisor.

H1b: Firms with a formal advisor have the higher post-succession level of
satisfaction with the outcome of the process than those without a formal advisor.

5.4.2 Advisors Behavior and its Influence on the Outcomes of the Succession
Process
Moreover, through the integration of a third party such as an externally hired
advisor into the succession process, a third element is added to the dyadic relationship
between incumbent and successor (Handler, 1994; Strike, 2012). However, we expect not
all advisors to behave equally in the way they provide advice. Some of them (tertius
gaudens) are perceived to primarily strive for personal advantages, whereas others (tertius
iungens) aim for an overall improvement of the situation within a whole group (Obstfeld,
2005). We assume that according to the specific behavior of an advisor also the outcome
in terms of performance as well as the level of satisfaction differ and that the tertius
iungens behavior overall leads to better outcomes. Therefore, we adapted the six-elements
of the tertius iungens construct by Obstfeld (2005) into the following elements:
introduction, communication, collaboration, moderation, network and coordination.
Thus, if a formal advisor provides external information about the process to the
incumbent as well as the successor and thereby increases the general exchange of
information within the network in ensuring that meetings become more frequent, have a
formal structure and are followed by protocols (De Massis et al., 2008; Lane, Astrachan,
Keyt & McMillan, 2006), we expect that the advisor also improves the overall
communication as well as the coordination within the process. Moreover, if the advisor is
able to provide the view of an independent outsider, this results in a more objective
 92

judgment of the situation (Lane et al., 2006) what facilitates doubt and other perspectives
(Strike & Rerup, 2015). In doing so the advisor on the one hand ensures that different
opinions and solutions are considered (Le Breton-Miller et al., 2004; Morris et al., 1997)
but on the other hand, he or she also increases the collaboration between incumbent and
successor (Obstfeld, 2005; Strike, 2013). A high collaboration is particularly salient as it
was shown that the perceptions about the roles of the incumbent and successor within the
succession process often differ. On the one hand, incumbents very often perceived
themselves to be ready to step aside, whereas the successor did not agree on that. On the
other hand, successors perceived themselves to be ready to take over, whereas the
incumbent often did not feel the same (Sharma et al. 2001). If the advisor is able to
effectively moderate potential conflicts like these, for example, through increasing the
understanding among them (Jaffe & Lane, 2004; Strike, 2013), we assume that this will
also strengthen the whole network of this triadic relationship.
Subsequently, we argue that in improving the communication between incumbent
and successor and increasing the collaboration and coordination among them, the advisor
achieves that both parties of the network are equally integrated into the process and
eventually work in a better and more efficient way together (Michel & Kammerlander,
2015). The resulting improved communication, higher collaboration and the advisors
general moderation of the relationship between incumbent and successor, that reduces
interpersonal conflicts, is perceived to lead to smoother process which will positively
affect the overall productivity as well as the post-succession level of satisfaction. Thus,
we assume that a higher tertius iungens behavior of the advisor within the family business
succession process, first, has a positive influence on the objective firm performance and,
second, also has a positive influence on the level of satisfaction among incumbent and
successor:

H2a: A stronger tertius iungens behavior of the formal advisor within the
succession process has a positive influence on the post-succession performance.

H2b: A stronger tertius iungens behavior of the formal advisor within the
succession process has a positive influence on the post-succession level of
satisfaction with the formal advisor.
 93

5.5 Methodology

5.5.1 Sample and Data Collection

In order to test our hypotheses we conducted a survey and amended it by objective

financial data provided by a large Swiss bank. With the support of the bank, we were able
to get access to 180 family businesses as well as their objective performance data. All
family businesses are located in Switzerland and had completed succession within the last
five years. According to the definition of Sharma (2004), family businesses can be either
defined through ownership or management. In the remainder of this paper, I will only
address to firms as family businesses if they are privately owned by a family and are also
managed by at least one family member. The questionnaire was in German as the family
businesses in our sample are all located in the German speaking part of Switzerland. It
covered in a first part questions concerning whether the family firm had been advised in
the succession process or not and if so what kind of advisors (e.g., lawyer, controller,
bank advisor) it had as well as which advisor was the most important one. In line with
Strike (2012) we will label the most important advisor in the remainder of this paper as
the trusted advisor. In a second step we asked whether the two parties, incumbent and
successor, already knew the advisor before succession, how frequent the advisor was
involved into the various phases of the succession process and which attributes described
the behavior of the most important advisor best. In a third step we evaluated the level of
satisfaction of the family business by asking the interviewees how satisfied they were
with the process itself as well as with the work of the trusted advisor.
In summer 2015 we sent the questionnaire to the 180 family businesses. Thereby in
around 30 % of the cases we were able to send the questionnaire to both parties
incumbent and successor. In the other 70 % of the cases we only had access to the
successor as the incumbent either completely withdrew to private life, left the country or
was even no longer alive. This means we sent out roughly 240 questionnaires. The
majority of the questionnaires were sent out by e-mail the rest as letters because no e-mail
address was available. Four weeks later a follow-up reminder was sent out by letter to
each firm. In a next step, every missing family business was contacted by telephone by
the author and kindly asked to return the questionnaire. After a 13-week data-collection
 94

period, the final sample consisted of 103 completed questionnaires, which refers to a
response rate of 44 %.
In order to overcome common source biases that are frequent in many prior
survey-based studies on family firm performance, we matched those survey responses
with the respective firms objective performance data according to their balance sheets
and income statements in the first full business year after succession. Those files were
provided by a Swiss bank. We then included these objective data to our analysis in order
to test the hypotheses. Another advantage of this method is that it allows us to use the
precise performance date one year after the succession took place.
Representativeness
In order to evaluate the representativeness we compared our sample to the data on
the entire Swiss firm population provided by the Swiss Federal Statistical Office
(Kammerlander, Burger, Fust & Fueglistaller, 2015). In our sample the small sized firms
(0-9 employees) were represented with 16 % of firms compared to 92 % of the whole firm
population within Switzerland. In contrary, medium sized firms (10-49 employees) were
in our sample represented with 51 % compared to 6.7 % of the Swiss firm population and
the larger sized firms (50-249 employees) were represented with 33 % compared to 1.3 %
of the Swiss firm population, thus the bigger firms were overrepresented what we
consider in this case as a strength of the sample as often the results of larger firms have
more significance than those of smaller firms who for example often not even start a
succession process but simply close down the business. Additionally, concerning the
industry in our final sample the industries construction and manufacturing were with 15
% and 22 % a little bit less frequent than in average in Switzerland, where the values in
2013 were 28 % and 46 % (Kammerlander et al., 2015). This fact can be explained by the
geographical concentration of some industries and the fact that the questionnaire was only
distributed within the German speaking part of Switzerland.
Key informant approach and retrospective bias
In our study incumbents and successors are key informants. This is also often
applied in other studies on succession as the two members of this dyadic relationship can
be considered as key actors within the process. Therefore, they have as a consequence the
deepest insights of the process as they are personally affected by it. Concerning
 95

retrospective bias we added objective data as a dependent variable to the design in order
to reduce this bias. Due to having access to the performance measurement system of the
respective Swiss bank we were able to triangulate the answers concerning performance
with the rating system of the bank and overcome typical problems such as common
method variance. Furthermore, most questions such as did you have and advisor, what
type of advisor or in which phases you had the advisor were fact-based and thus are
unlikely to be biased through retrospective.
Non-response bias
In order to check for possible reasons for non-response in our data set, we first
checked whether there is a balance between the number of incumbents and the number of
successors. Since 39 % of the answers came from incumbents and 61 % from successors
this corresponds fairly good to the percentage of sent-out questionnaires, so we did not
have an excess of responses of one group. Second, we compared the firms that responded
to those that did not respond in terms of industry and number of years since the
succession took place. However, also here we did not found a significant difference.
Third, since we had also access to the objective performance data of the firms that did not
respond, we compared them to those that responded. Also here we did not find a
significant correlation as we first suspected that firms with better performance data are
more willing to answer than those with lower performance data.

5.5.2 Measures

Depended Variables
The first and most important dependent variable is performance. We were able to
have access to objective performance data of a Swiss bank. This bank collects every year
the annual reports including balance sheets and earning statements of the investigated
family businesses. We then compared for each business the performance by using ROA
after succession (full first reported year of the successor = n) as dependent variable
because ROA is a frequent used performance measure for family firms (e.g., Naldi et al.,
2015). Additionally, we also did a robustness test on performance by adding a question
concerning the participants evaluation of the five items sales, market share, profits, jobs,
and profitability in the questionnaire. Those items had been prior used for example by
 96

Sieger, Zellweger & Aquino, 2013, and proved to be reliable. In the questionnaire we
measured them in a five item scale ranging from 1 (much worse) up to 5 (much better).
The second dependent variable is satisfaction. We measured this variable through two
questions in the questionnaire. First, we asked how satisfied the respondent is with the
outcome of the succession in general, and second, how satisfied the actor is with the
performance of the trusted advisor. We measured these two dependent variables on
satisfaction again with a five item scale from 1 (not at all satisfied) up to 5 (very much
satisfied).
Independent Variable for Hypothesis 1
The independent variable is the presence of a formal (hired) advisor during the
succession process. We measured this in three steps. First, we asked the participants
whether an advisor was present during the succession process or not. Thereby, 99 %
answered that they had an advisor. Then, we asked them what kind of advisor they had by
providing a set of answers that includes the following types: family, friends, employees,
board, bank advisor, accountant, lawyer, psychologist and other. We defined the four
types, bank advisor, accountant, lawyer, and psychologist as formally hired advisors and
the remaining types as informal or firm internal advisors. Subsequently, we coded the
independent variable as dummy variable with the values 0 and 1. 0 means that no formal
advisor was present whereas 1 means that at least one of the previously defined formal
advisors was present during the succession process. Hence, if for example a respondent
said he or she was advised by the family and/or a friend the independent variable was
coded with 0. Contrary, if a respondent had for example two formal advisors (e.g., a
lawyer and an accountant) the independent variable was 1. This study focuses on the
formally hired advisors.
Independent Variable for Hypothesis 2
In order to operationalize the attributes describing the behavior of the trusted
advisor we used and adapted the six-elements of the tertius iungens construct by Obstfeld
(2005), which measures the strategic behavioral orientation where the trusted advisor, as
the third party who joins, connects incumbent and successor for collaboration, introduces
them to others, facilitates stronger ties between them and coordinates when different
opinions occur. Table 7 shows how we adapted the construct by Obstfeld (2005) in our
 97

questionnaire on the triadic relationship between incumbent, successor and trusted advisor
(Michel & Kammerlander, 2015). We named the six elements as follows: introduction,
communication, collaboration, moderation, network and coordination and asked
participants to choose how much these attributes were applicable to their advisor. Again
we measured this with a five item scale from 1 (not at all applicable) up to 5 (very much
applicable).

5.5.3 Control Variables

As control variables we added three categories of variables to the questionnaire.

First, we added firm related variables such as firm size, firm age, and industry. Firm size
was measured with the two variables sales and number of employees. In the remainder of
this paper, we then focused on the later in order to measure firm size and we worked here
with absolute values. Firm age was measured with the date of incorporation. We then
subtracted this from the present year (2015) in order to get an absolute value for the firm
age. Second, we added the ROA in the period before the succession took place (n 1) as
control in order to explain the variance in our dependent variable.
Third, for Hypotheses 2a and 2b we also added three advisor related variables,
namely gender of the advisor, age of the advisor and number of years of experience in
advising. Gender of the advisor we measured by dummy coding whether the advisor was
male (code 0) or female (code 1). For age as well as number of years of experience we
used also a dummy coding with five categories. The variable age was coded in ranges of
10 years from 1 (younger than 29) to 5 (more than 60). Experience we coded according to
the years of the advisor in the business in ranges of five years from 1 (0 5 years) to 5
(more than 25 years). We thereby did not ask for absolute numbers since we could not
expect the respondents to have such precise Information on the advisor's characteristics.
Moreover, we added the number of years the respondent knew the advisor before the
succession as a further control variable which was measured as an absolute value.

Table 7Adaption of the ASQ Obstfeld Construct
ASQ: Obstfeld Construct
I introduce people to each
other who might have a common strategic
work interest
I will try to describe an issue in a way that
will appeal to a
diverse set of interests
I see opportunities for collaboration
between people
I point out the common ground shared by
people who have different perspectives on an
issue
I introduce two people when I think they
might benefit from becoming acquainted
I forge connections between different people
dealing with a particular issue
Obstfeld, 2005, ASQ, pp. 111
Adaption to Advisors in the
succession process
Introduction
The advisor introduced incumbent and
successor to each other.
Communication
The advisor tried to describe an issue in a
way that appealed to incumbents and
successors interests
Collaboration
The advisor enforced collaboration between
incumbent and successor
Moderation
The advisor was able to point out the
common ground shared by incumbent and
successor if they had different perspectives
on an issue
Network
The advisor introduced incumbent and
successor with people from whom they could
benefit
Coordination
The advisor forged connections between
incumbent, successor and specialists within
the succession process
98
Adaption into the German questionnaire
Der Berater stellte den Kontakt zwischen
dem bergeber und bernehmer her.
Der Berater kommunizierte sowohl im Sinne
des bergebers wie auch des bernehmers.
Der Berater frderte die Zusammenarbeit
zwischen bergeber und bernehmer.
Der Berater konnte bei verschiedenen
Meinungen zwischen bergeber und
bernehmer ein gemeinsames Ziel
herausarbeiten.
Der Berater brachte mich mit Leuten
zusammen, von denen ich profitieren konnte.
Der Berater frderte die Beziehungen
zwischen bergeber, bernehmer und
Spezialisten im Nachfolgeprozess.
 99

5.6 Results

5.6.1 Results for Hypothesis 1

In order to analyze our data, in a first step we calculated the descriptive statistics.
Table 8 shows the mean values, standard deviations as well as the Pearson correlation
matrix of the variables used in our study. In general the effects were low to correlate.
However, we already found some strong positive correlations between first, the ROA in
the period before succession and the ROA in the year after succession, and second, the
presence of a formal advisor and satisfaction with the outcome.
Among the controls, we considered especially the number of employees as an
important control since one might assume that bigger firms are more inclined to be
managed professionally and therefore perform better. However, we did not find any
significant effect for this assumption and the correlation table indicated to our surprise
that even the contrary is the case: that the bigger a firm is, the less successful they are in
terms of performance as well as in achieving satisfaction. The same was true for the
control industry that also showed a negative but not significant effect on performance as
well as on satisfaction. In contrary, firm age was positively, however not significantly,
related to performance and satisfaction which is in line with our initial assumption that
older and more experienced firms perform better than unexperienced ones.
 100

Table 8Descriptive Statistics for H1Means, Standard Deviations and Pearson Correlations

Variables Mean SD 1 2 3 4 5 6

1 ROA in period n 8.50 11.65 1.000

2 Satisfaction with the outcome 4.07 .88 -.136 1.000

3 Industry n.a. n.a. -.315 .159 1.000

4 Number of employees 69.07 108.6 -.057 .094 .304 1.000

5 Firm age 58.20 37.00 .039 -.023 -.062 -.059 1.000

6 ROA in period n 1 8.47 8.78 .509 -.004 .094 .310 -.083 1.000

7 Presence of a formal advisor .69 .46 .103 .293 -.049 -.157 -.123 -.140

All correlations with an absolute value of .293 or more are significant at p < .01**.
 101

Before starting with the test of our four hypotheses we centered and standardized
our variables presence of a formal advisor as well as the tertius iungens elements in order
to mitigate potential problems of multicollinearity. After the standardization the values of
the variance inflation factors (VIFs) were quite low as follows: VIF of 1.056 for the
models of H1a and H1b, VIF of 1.126 for the model of H2a and VIF of 1.108 for the
model of H2b, which mitigate the concern of multicollinearity. We then tested all four
hypotheses using linear regression analysis. In order to test Hypothesis 1a, that
hypothesized a positive relationship between the presence of a formal advisor and
objective post-succession performance data, we first entered in Model 1 only the control
variables firm size (here measured through the number of employees), industry, firm age
and ROA in the year before succession. In this model, the two controls industry (-.324)
and ROA in the year before succession (.605) were both positively and significantly (p <
.001) related to our first dependent variable ROA in the year after succession. Then in
Model 2 we added our independent variable presence of a formal advisor. The results in
Table 9 show that the independent variable is positively (.163) and significantly (p < .040)
related to our dependent variable which confirms H1a, and has a high explaining factor
with a value of R2 of .408.

Table 9Regression for ROA in period n

Model 1 Model 2 VIF
(Model 2)
Industry -.326*** -.324*** 1.105
Number of employees .059 .082 1.031
Firm age -.136 -.115 1.227
ROA in period n 1 .587*** .605*** 1.125

Presence of a formal advisor .163* 1.056

R2 .387 .408
F test 17.116 15.031
Sig. .000*** .000***
 102

In a next step, we aimed to test Hypothesis 1b, that suggested a positive

relationship between the presence of a formal advisor and the level of satisfaction with the
process outcome among incumbent and successors. Similar to the test of H1a, Model 1
includes only the control variables which were the same four that we used for H1a in
order to ensure comparability of the two tests. Here none of the controls was significantly
related to our dependent variable satisfaction with the outcome. In Model 2 we again
added our independent variable presence of a formal advisor. Thereby, Table 10 shows
that also the second independent variable is positively (.319) and significantly (p < .001)
related to our dependent variable thus also H1b can be confirmed however its explaining
factor is with a value of R2 of .080 remarkably lower than for the dependent variable firm
performance.

Table 10Regression for Satisfaction with the outcome of the succession

Model 1 Model 2 VIF
(Model 2)
Industry .143 .146 1.105
Number of employees -.013 .032 1.031
Firm age .062 .103 1.227
ROA in period n 1 -.038 -.002 1.125

Presence of a formal advisor .319** 1.056

R2 -.011 .080
F test .731 2.784
Sig. .573 .022*
 103

5.6.2 Results for Hypothesis 2

In order to test H2 in a first step we again calculated the descriptive statistics.

Table 11 shows the mean values, standard deviations and the Pearson correlation matrix
of the variables used for H2a and H2b. First, we controlled for gender and experience of
the advisor and our initial assumptions whether a female, more senior and/or more
experienced advisor has a different influence on the dependent variables than a male,
younger and/or less experienced one. However, these variables showed negative but not
significant effects to the firm performance and slightly positive but also not significant
effects on satisfaction. The third advisor related control age of the advisor showed a
significant negative effect (-.437) on firm performance. This was surprising that the older
a formal advisor is the worse his or her influence on firm performance is. Moreover, age
of the advisor was also negatively related to satisfaction however not significantly. For
number of year known the advisor we initially suspected that this might influence
especially the level of satisfaction in a positive way. However, also for this control
variable no significant effect was shown, even though the correlation matrix suggested a
positive influence on performance as well as on satisfaction. This leads to the conclusion,
that in general the gender and experience of the advisor do not influence the outcome in
terms of performance and satisfaction whereas the older the advisor is the less positive his
or her influence on firm performance is.
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Table 11Descriptive Statistics for H2Means, Standard Deviations and Pearson Correlations

Variables Mean SD 1 2 3 4 5 6 7 8 9 10

1 ROA in period n 9.43 11.85 1.000

Satisfaction with the

2 4.47 .812 .163 1.000
outcome

3 Industry n.a. n.a. -.136 -.187 1.000

4 Number of employees 51.75 69.70 -.022 -.030 -.026 1.000

5 Firm age 61.23 32.63 .100 .001 -.082 .075 1.000

6 ROA in period n 1 7,82 9.09 .910 .065 -.070 -.157 .002 1.000

7 Gender of the advisor 0.03 .18 -.141 .008 .111 .085 -.062 -.161 1.000

8 Age of the advisor 47.60 .83 -.437 -.047 -.046 .216 -.125 -.434 .210 1.000

9 Experience of the advisor 20.82 1.00 -.048 .003 .013 .236 -.039 -.073 .034 .372 1.000

No. of years known the

10 15.33 10.32 .043 .145 -.026 -.038 .204 -.002 .296 .058 -.003 1.000
advisor
Tertius iungens behavior of
11 17.95 5.05 -.016 .345 -.143 -.058 .059 -.127 -.147 -.025 -.234 -.108
the advisor

All correlations with an absolute value of .296 or more are significant at p < .05*.
 105

The two Hypotheses H2a and H2b assume an influence of the advisors tertius
iungens behavior on first firm performance (H2a), and second on the level of
satisfaction (H2b). In order to test these hypotheses, we draw on a subsample of only
those firms that had a formal advisor during their succession process, which was 69 %
of all firms in our sample (n = 70). We measured the advisors tertius iungens
behavior through the six Obstfeld elements introduction, communication,
collaboration, moderation, network and coordination. Then, we again applied linear
regression analysis to test the hypotheses. Similar to the calculations with the whole
sample, in order to test H1a we first added only the control variables to Model 1. We
now used the more advisor related controls gender, age and experience of the advisor
as prior mentioned besides the already previously used elements industry, number of
employees, firm age and ROA in the previous period. Additionally, we also added the
number of years the respondents did the advisor know before succession as a further
control variable. Thereby, the only control that was highly significant (p < .001) was
the ROA in the previous period (.915) to our first dependent variable ROA in the year
after succession.
In Model 2 we added the standardized Obstfeld mean as the independent
variable. However, the standardized Obstfeld mean including all six elements was not
significantly related to our dependent variable. We ran several tests where we
combined the six elements in different ways with the sample. Thereby, we found that
the first Obstfeld element introduction was much weaker than the other five:
communication, collaboration, moderation, network and coordination. We suspect that
the reason for this was that in the majority of the cases of our sample incumbent and
successor already knew each other when the trusted advisor was involved. Therefore,
the element introduction got a very poor score. As a consequence we excluded this
from the Obstfeld construct and worked only with the remaining five elements for H2a
and H2b. In our analysis we called this independent variable Obstfeld 1. The results
in Table 12 show that our independent variable is positively (.120) and significantly (p
< .050) related to our dependent variable. Consequently, H2a is confirmed and its
explaining factor is rather high with a value of the R2 of .850.
 106

Table 12Regression for ROA in period n

Model 1 Model 2 VIF
(Model 2)
Industry -.068 -.056 1.111
Number of employees .063 .064 1.219
Firm age .016 .018 1.266
ROA in period n 1 .899*** .915*** 1.408
Gender of the advisor .021 .038 1.241
Age of the advisor -.069 -.074 1.529
Experience of the advisor .012 .042 1.254
No. of years known the advisor .029 .037 1.191

Tertius iungens behavior of the .120* 1.126

advisor

R2 .838 .850
F test 32.084 31.190
Sig. .000*** .000***

Finally, we aimed to test the influence of the advisors behavioral orientation on

the satisfaction level. Again we used the advisor related controls gender, age and
experience of the advisor as well as the number of years the respondents knew the
advisor before succession took place. We did not include anymore the control
variables firm size and firm age because they were in our opinion not relevant in order
to explain the relationship between the advisors tertius iungens behavior and
satisfaction. In Model 1, that only included the controls, no significance for any
control was found. However, Model 2 was positively significant (p < .035) and the
influence of the advisors behavior on the dependent variable is very strong positively
(.465) and significantly (p < .002) correlated with our dependent variable. Thus, Table
13 shows that also H2b is confirmed, however with a much lower R2 value of .160
than the one for the dependent variable performance. Thus, again the dependent
variable of satisfaction is much weaker to explain the independent variable than the
dependent variable of performance.
 107

Table 13Regression for Satisfaction with the formal advisor

Model 1 Model 2 VIF
(Model 2)
Industry -.208 -.163 1.042
Gender of the advisor .028 .089 1.210
Age of the advisor -.103 -.152 1.231
Experience of the advisor .012 .131 1.219
No. of years known the advisor .137 .174 1.109

Tertius iungens behavior of the .465** 1.108

advisor

R2 -.038 .160
F test .647 2.524
Sig. .666 .035*

5.7 Discussion, Limitations, and Future Research

5.7.1 Contributions to Theory, Limitations and Future Research

Family firms are acknowledged to be the creators of objective performance

such as profits which create wealth for its employees and its owners (Habbershon et
al., 2003). Additionally, family businesses not only create economic wealth but are
also the creators of higher achievements such as non-economic values (Chrisman,
Chua & Litz, 2003) like emotional values (Astrachan, & Jaskiewicz, 2008) or
socioemotional wealth (Perry et al., 2015). Previous studies have shown, that in
managing this trade-off between achieving objective firm performance in order to
survive and at the same time also pursuing more subjective goals, family businesses
often even outperform non-family businesses (Miller & Le Breton-Miller, 2006;
Sharma, 2004).
Especially, crucial events for family firms such as the family business
succession, often determine the cornerstone for future firm performance (Miller et al.,
2003). Due to a lack of resources and knowledge family businesses thereby often draw
on the support of a trusted advisor in this period (e.g., Strike, 2012). Two recent
studies showed a positive relationship between a specific advisors involvements in
family firms in general and firm performance (Barbera & Hasso, 2013; Naldi et al.,
2015).
 108

Additionally, despite the importance of achieving objective firm performance,

in family business literature focusing on private small- and medium-sized companies,
so far many studies only draw on subjective performance data by for example asking
the respondents if they consider their performance better or worse compared to their
biggest competitor. This quantitative study aims to overcome these weaknesses and
contribute to these gaps in literature as follows: first, it draws on objective
performance data, to which we had access through the internal data base of a Swiss
bank, and it thereby combines primary survey data with secondary objective
performance data (annual reports including balance sheets and earning statements).
Second, it investigates the relationship between the presence of a formal
advisor during succession and objective post-succession performance as well as
subjective post-succession satisfaction. Thereby, our data confirms a positive
influence of a formal advisors presence to the firm performance as well as to the level
of satisfaction among incumbent and successor. Interestingly, the effect between the
presence of a formal advisor during succession on objective firm performance was
much stronger than the effect on the level of satisfaction. This is rather surprising
because we initially suspected exactly the contrary by assuming that the advisor can
influence soft facts like moods more than the hard facts that eventually lead to
performance. Here more research is needed on how and why the advisor influences
hard and soft factors within a family business.
Third, this study further contributes to literature by investigating if not only the
pure presence of an advisor but also the advisors tertius iungens behavior has an
influence on performance and satisfaction. In order to analyze the tertius iungens
behavior of the advisor we draw on the six-element tertius iungens construct by
Obstfeld (2005) which measures the strategic behavioral orientation of a third party.
We adapted this construct to our questionnaire and asked for the advisors behavior in
terms of the following elements: introduction, communication, collaboration,
moderation, network and coordination. We then excluded the element introduction
from the original construct because in our sample in all the cases an advisor was only
involved after incumbent and successor already found each other, so we wanted to
reduce the probability that this biased our results concerning the advisors tertius
iungens behavior. Nevertheless, in this context, future research should also investigate
how, at what stage of the process and by whom the advisor exactly gets involved into
the succession process as this study did not investigate these aspects.
 109

For the elements communication, collaboration, moderation, network and

coordination we found a positive relationship between them and post-succession
performance as well as the level of satisfaction what shows that with a certain behavior
like for example a more extensive communication or a more intense collaboration the
advisor can even more positively influence the outcome of succession. This finding is
supported by existing literature that found that advisors who are well integrated into
the succession process and able to closely mentor incumbent and successor also ensure
that these both parties are equally involved into the process which leads to a better
outcome and an increased satisfaction among the two parties (Michel &
Kammerlander, 2015). However, our study advances these findings by a highly
interesting outcome. In both of our hypotheses H1 and H2 the effect on the
performance variable was much stronger than on satisfaction. This is interesting, as
especially in connection with the advisors tertius iungens behavior we initially
expected a stronger effect on satisfaction than on objective performance, because the
tertius iungens elements are in our view more related to soft than to hard factors.
Hence, we suggest future research to investigate more clearly the exact influence of
the advisors presence as well as his or her tertius iungens behavior on the outcome of
succession.
Along with the clear strength of the study of having access to objective
performance data comes also a weakness of the study: the database was quite limited
with a sample of 180 firms with eventually 103 respondents. Moreover, the study does
also not account for contextual and institutional factors as all the firms were based in
the German speaking part of Switzerland.
Finally, by evaluating the three variables presence of advisors, post-succession
performance and level of satisfaction we did not account for the fact that not only the
presence of an advisor but also the post-succession performance itself might have a
positive effect on the satisfaction of incumbent and successor. This assumption is in
line with the work of Zellweger & Nason (2008), who proposed in their model how
various generators of a positive performance were able to increase the stakeholders
satisfaction. However, our data did not indicate such an effect since the correlations
between performance and satisfaction were not significant. Interestingly, in our whole
sample (including family businesses with and without an advisor) a negative
relationship between performance and satisfaction is suggested by the value of -.136,
whereas in our sub-sample of only those firms with a formal advisor a positive
 110

relationship is suggested by the value of .163. These results are more in line with
another study that states that common performance measures like financial success are
not sufficient measures for family firm performance and proposes to measure
performance through the satisfaction of family firm members (Mahto et al., 2010). We
suggest that future research might account for this by testing the influence of
performance itself on satisfaction. Additionally, further variables such as identification
with or commitment of the advisor should be considered.

5.7.2 Conclusion

During succession family businesses often hire at least one external advisor in
order to support them with the several challenges of the process. By combining survey
data with objective secondary performance data, this study shows that the presence of
such a formally hired advisor has first a strong positive influence on the firm
performance, and second, also on the level of satisfaction among incumbent and
successor. Moreover, this study also investigates the influence of the advisors tertius
iungens behavior. Also here a positive relationship between a higher tertius iungens
behavior on behalf of the advisor and firm performance as well as satisfaction could be
established.
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6. CONCLUDING CHAPTER

6.1 Summary of Contributions

This dissertation contributes to the literature in several ways. First, in chapter 3, it
advances the research on trusted advisors in family businesses by systematically outlining
the advantages and disadvantages that go along with trusted advisors involvement into
the family business succession process. Thereby, the findings rely on the well-established
theory of agency costs as most extant studies on family firm advisors are characterized by
a focus on anecdotal evidence and lack of theoretical rigor (see critique by Jaffe & Lane,
2004; Strike, 2012; Swartz, 1989; Upton, Vinton, Seaman & Moore, 1993). By providing
a conceptual framework on the role of the trusted advisors in each sub-step of the process
and its impact on agency costs, I further extend the literature on family business
succession. Instead of the dyadic relationship between an incumbent and a successor
(Handler, 1994), I thereby move to the triadic relationship between incumbents,
successors, and trusted advisors, which reduces several agency costs but also gives rise to
other agency costs. Thus, I particularly focus on agency costs in form of goal divergence
and information asymmetry and outline in detail how trusted advisors on one hand
mitigate and on the other hand increase those costs.
Moreover, in chapter 3, I discuss several constellations of trusted advisor
involvement commonly observed in practicesuch as relying on advice from several
consultants or engaging a close accountant to manage the succession processand
identify their related agency costs. After the identification and an extensive discussion of
the positive and negative effects of trusted advisors on agency costs, I synthesize a
proposition of a balanced and efficient model that reduces those costs. Finally, I also
advance research on agency theory. Although there is a large body of research on agency
costs in family businesses, most of this research focuses on classical owner-manager
relations. In chapter 3 I extend this predominant view by including the trusted advisor as a
further actor that, being neither owner nor manager of the firm, can affect the level of
agency conflicts in the firm. Doing so provides a more nuanced picture of agency costs in
 112

family firms that is not restricted to dyadic relationships but considers a triadic
relationship.
Second, with chapter 4, I advance prior research by identifying on a nuanced base
which roles the advisor fulfills in each phase of the succession process. Hence, I extend
the role model of Handler (1994) and systematically integrate the advisor in his specific
roles into each process step. Such role adjustment of the advisor can be regarded as a
necessary extension of Handlers (1994) model of mutual role adjustment of the
incumbent and successor. Additionally, these findings extend the recent work of Strike &
Rerup (2015), who found that the advisor inherent a function of mediated sense-making
through providing an outside perspective and achieving a rethinking concerning certain
issues among family business members (e.g., incumbent and successor), by further
analyzing how exactly the advisor in each of his different roles adds an outside
perspectives to the process.
Additionally, I also contribute to the literature by studying the level of satisfaction
of the incumbent and the successor during the succession process what extends the work
of Sharma and colleagues (2003a) who already more than a decade ago stressed the
importance of the relationship between a high level of satisfaction and a successful
outcome of the succession process. In particular, I investigate how the satisfaction is
affected by the various activities conducted by the advisor. Thereby, I state that in
influencing the feelings of incumbent and successor in a positive way the advisor helps
them also to fulfill their own role adjustment in each phase. In addition to the integration
of these findings into a process model on how the advisor affects in his different roles the
incumbents and successors satisfaction, the multi-case study design also allowed me to
study heterogeneity among the five cases. I find that in those cases, in which the role
adjustment had been completed by all three involved parties, the level of satisfaction of
incumbent and successor tend to be much higher during but also after the succession had
taken place.
Finally, chapter four also contributes to the general management literature stream
on the relationship between clients and consultants as well as on change management
situations (e.g., Fincham, 1999; Werr & Stjernberg, 2003; Werr & Styhre, 2002). With the
presented model of role adjustment I thereby provide a solution to the often asked
 113

question of how a consultant should best intervene into a process (e.g., Buono, Nurick &
Hoffman, 1995) by stating, that the advisors role depends on the stage of the process and
needs to undertake an adjustment from time to time. Thus, I further stress the important
role of consultants during critical periods such as change processes (of which succession
is one). With these findings I am in line with the work of Werr, Stjernberg & Docherty
(1997), who found that not just the consultants methods but also the consultants
personal skills and experience are important for a successful outcome.
Third, in chapter 5, I contribute to the so far under investigated relationship
between the presence of an advisor during succession and the outcome of the process
within family business research. I thereby measured the outcome of the process with two
variables: first the post-succession firm performance and second the level of post-
succession satisfaction among incumbent and successor. In doing so, I contribute to the
nascent literature stream on the advisors influence on firm performance (e.g., Naldi et al.,
2015). Hence, a common weakness of previous studies was so far that performance was
measured with perceptual data obtained by asking the participants for subjective
performance evaluations such as for example how they assess the performance of their
business in comparison to their most important competitor. Due to my unique access to
family business data (balance sheets and income statements) through a Swiss bank I was
able to overcome this weakness and base my studies on objective performance data.
Moreover, my findings presented in chapter 5 advance prior literatures by
empirically showing that the presence of a trusted advisor during succession has a
significant positive influence on post-succession firm performance on the one hand as
well as on the post-succession level of satisfaction on the other hand. Surprisingly, I
further found, that the influence of the advisor was much stronger on the objective
performance than on the subjective level of satisfaction.
Finally, the study in chapter 5 not only investigated whether the pure presence of
an advisor had an influence on succession outcomes but also if the tertius iunges behavior
of the advisor, defined as the ability to connect two parties with each other in order that
all parties can benefit, has an influence on succession outcomes. Thereby, I was able to
show also a significant positive relationship, between a strong tertius iunges behavior on
 114

behalf of the advisor and the output variables objective firm performance and subjective
level of satisfaction.

6.2 Limitations and Future Research

In the first paper my co-author and I identified several benefits and costs of trusted
advisors during the individual phases of the succession-planning process. In the second
paper, we then also looked at the challenges an advisor faces within the succession
process by analyzing five cases of family businesses that recently completed succession.
In comparing the two papers, we found in the case studies evidence for our prior
theorizing for an increase of agency costs due to the advisors involvement. In the
analyzed cases we had goal divergence as well as also information asymmetries among
incumbent, successor and advisor. Moreover, we found that the moderating influence of
the advisor also can reduce these agency costs again. However, we only analyzed this
conceptually and qualitatively with a small sample consisting of 5 family firms and the
easiest possible case where an incumbent (or incumbent married couple) transferred their
business to a maximum of two successors. Here I recommend future research to
investigate more complex cases such as for example the case where a CEO team takes
over the firm (Miller et al., 2014). Further, I also recommend scholars to critically analyze
the findings presented here for instance in using a bigger sample or investigating the
shown relationships also quantitatively. Only then we will have a complete answer to the
questions if and how an advisor can best moderate agency costs and conflicts within the
triadic relationship of the succession process.
Moreover, we implicitly assumed that due to their experience and education trusted
advisors possess crucial knowledge that incumbents and successors lack and that can lead
to a reduction of agency costs and an increase of process outcomes such as performance.
For subsequent research, however, it might be beneficial to conduct additional studies
about the effect of prior experience and education on the trusted advisors effectiveness.
Especially the qualitative study of chapter 4 relied on one single advisor and his sole
knowledge in order to fully focus on the differences among the cases. Besides the
advantages of this method, it also goes along with some shortcomings relating to the
 115

generalizability of our findings. Thus, I suggest future research to investigate whether the
findings in chapter 4 are also generalizable if various advisors or even boards of advisors
are considered.
A further implicit assumption of our study was that the incumbent and successor
have a certain amount of trust in the advisor which was even more emphasized by the
term trusted advisors prior used by Strike (2012). Hence, in prior literature, in our data
from the case studies as well as the survey data, the element of trust was present. In line
with my research questions I did not fully cover the aspect of trust in this thesis which is
why I strongly recommend future research to focus on the influence trust has within the
triadic relationship between incumbent, successor and advisor.
Additionally, this thesis does not focus on attributes of the advisor. Therefore, it
takes not into account whether the advisor is hired on a short- or long-term base, what the
advisors education was, how the advisor enters the company (e.g., hired by the firm, the
family, or the incumbent) or what type of advisor (e.g., accountant vs. lawyer) is most
efficient in terms of role adjustment and its outcomes performance and satisfaction.
In the study presented in chapter five I compared the presence of the advisor with
succession outcomes such as performance and satisfaction. Despite the advantage of
having had access to objective performance data a disadvantage is that the sample is quite
small. Thus, I recommend future research to validate whether my findings also hold true
in a bigger sample.
Finally, in all studies, I did not account for contextual, cultural or institutional
factors. The two data driven studies were both conducted in Switzerland within one more
or less similar economic state. But how does the economic state or other environmental
factors of an economy influence the ability and need for family businesses to seek for
external advice? How are the external influences, for example of different legal systems,
on advisors? Do cultures with strong family ties also seek as much for external advice as
Western cultures? These are crucial questions to be answered, thus, I suggest that future
research should investigate whether my findings also hold true within other countries with
different cultures, economic states and legal systems.
 116

6.3 Conclusion
During succession family businesses often rely on an external advisor in order to
support them with the several challenges of the process. However, besides the clear
benefits of involving a trusted advisor into the succession process, this also goes along
with some drawbacks mainly connected to divergent goals and information asymmetries.
By combining a conceptual literature analysis with qualitative and quantitative survey
data, this thesis aims to increase the understanding of scholars as well as of practitioners
for the chances and risks that go along with the advisors involvement.
Thus, this thesis profoundly investigates the roles of advisors in the family
business succession process and shows that role adjustment throughout the succession
process might help the advisor to overcome the various challenges in the succession
process what positively influences succession outcomes such as performance and
satisfaction. Thereby, a strong positive relationship between the presence of a formal
advisor and performance as well as the level of satisfaction among incumbent and
successor could be shown. This is important for theory as it allows for a more nuanced
and empirically validated discussion of the advisors challenges, roles, and influences on
outcomes. Besides, filling this research gap this is also important for practice, since our
findings might guide family business owners in their decision about whether and what
kind of advisor to engage for upcoming succession processes.
 117

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CURRICULUM VITAE

PERSONAL DETAILS

Name Michel
First Name Alexandra
Date of Birth 26 July 1985
Affiliation University of St. Gallen
Country Switzerland
E-Mail a.michel1985@gmail.com

LANGUAGES

German Mother Tongue

English Fluent (Level C2, CPE-Diploma)
French Good knowledge (Level B1)

PUBLICATIONS / CONFERENCE
PRESENTATIONS

March 2016 Acceptance Full Paper Presentation at the Academy of

Management 2016 Conference in Anaheim, CA, USA
Since November 2015 Second Paper invited for revise and resubmit at the
Journal Family Business Review
August 2015 Academy of Management 2015 Conference in
Vancouver, BC, Canada, Full Paper Presentation
June 2015 IFERA 2015 Annual Conference in Hamburg,
Germany, Full Paper Presentation
March 2015 First Journal Publication in Journal for Family Business
Strategy, Title: Trusted Advisors in a Family Business's
Succession-Planning ProcessAn Agency Perspective
 129

June 2014 IFERA 2014 Annual Conference in Lappeenranta,

Finland, Full Paper Presentation

PRIZES

March 2016 Best Paper Award der Konferenz der deutschsprachigen

Forschungszentren und Institute fr
Familienunternehmen 2016
June 2015 IFERA 2015 Annual Conference Best Paper
Contribution to Practice Award 2015 (International
Family Enterprise Research Academy)
May 2015 Transeo Best Academic Paper Award 2015 (SME
Research Conference)

EDUCATION / DIPLOMA

August 2015 Academy of Management 2015 Conference in

Vancouver, Canada, Participation at the ENT Division
Doctoral Consortium
April 2015 Acceptance of PhD Research Proposal at the Center for
Family Business, University of St. Gallen, Prof. Dr.
Thomas Zellweger and Prof. Dr. Nadine Kammerlander
April 2013: Start of PhD Program at the Center for Family
Business, University of St. Gallen, Prof. Dr. Thomas
Zellweger and Prof. Dr. Nadine Kammerlander
November 2012 Credit Suisse: Train to Advisor Program (Corporate and
Institutional Clients with focus on Small and Medium
Sized Companies)
March 2012 Credit Suisse: Train to Assistant Program (Corporate
and Institutional Clients with focus on Small and
Medium Sized Companies)
December 2009 Certificate of Proficiency in English (CPE)
 130

April 2009 Master of Science in Business Administration (insigne

cum laude), University of Berne
October 2008 SAP-Diploma (Logistic-Systems of SAP)
October 2007 Bachelor of Science in Business Administration,
University of Berne
June 2005 Excel-Diploma
June 2004 Matura (High School Graduation) in Business
Administration and Law, Gymnasium Alpenstrasse
Biel/Bienne

PROFESSIONAL EXPERTICE

Since 2013 Corporate Client Advisor at Credit Suisse, Small and

Medium Sized Companies including Family Businesses
2011 2013: Assistant Corporate Client Advisor at Credit Suisse,
Small and Medium Sized Companies including Family
Businesses
2009 2010: Trainee Program at Credit Suisse
2007 2009: Administrator (30 %) at BEKB|BCBE AG, Management
and Education
2006: Project-Assistant (30 %) at the Institute of Marketing
and Management, University of Berne
2004 2006: Administrator (20 %) at BEKB|BCBE AG,
Management and Education

PERSONAL INTERESTS

Family Businesses, Small and Medium Sized

Businesses, Succession, Financing, Literature,
Travelling, Sports (Jogging, Skiing, Pilates, Swimming)