THE FOUNDER'S JOURNEY CHAPTER III – FAMILY SUCCESSION

MARCO VILLAS BOAS – Senior Partner at DMS PARTNERS

In previous chapters of The Owner's Journey, we explored the context, dilemmas, and possible paths to successfully and strategically manage the inevitable: succession in company leadership.

Family and business are – and formally need to be – distinct entities, but intimately related. In the Owner's Journey, business succession may seem to follow the same steps and decisions as family succession, but this symbiosis can lead to frustrations.

In this article, Chapter 3 of the Owner's Journey, we will examine family succession, its distinguishing features, and the requirements for a conflict-free and successful process.

Family Governance and Succession: A Guide to Continuity and Legacy

The journey of a family leader and business founder inevitably converges on a critical point: succession, both within the family and the company. This moment, while natural in the life cycle of any family and organization, brings with it fundamental questions that determine the longevity of the business and the harmony of the family. The major issues involve transferring leadership, promoting the foundation for the change in running the company, ensuring the preservation of family ties and a safe path for the transition, and reaping the benefits of structured planning.

Governance Systems

To enable a successful family succession, it is essential to understand the articulation between two distinct, yet interdependent systems: Family Governance and Corporate Governance. Both must be based on solid beliefs and values, acting in a coordinated manner to guarantee the harmony and perpetuity of the assets and the company.

Family Governance focuses on planning the family's future in relation to the business and its assets. It establishes the foundations that guide family strategies and decisions, defines the roles of family members, and focuses on the management and preservation of assets and legacy. Its main enablers include the Family Council, which serves as a forum for alignment; the Family Protocol or Agreement, which regulates the relationships between members and the business; the continuous training of family members for the market; and professionalized asset management, sometimes through an external family business office .

On the other hand, Corporate Governance has the function of directing, guiding, monitoring, and evaluating business management. It manifests itself through practices, processes, structures, and rituals that must be adapted to the origin, maturity, and evolutionary stage of each company. This system ensures that the succession process occurs in an institutionalized manner, protecting the interests of the organization and its shareholders.

The Path to Family Succession: The Five Steps

The family succession process is not an isolated event, but a journey structured in five fundamental stages. Similar stages occur, with their particularities, in family succession and business succession. In family succession:

1. Advance Planning

The first step is recognizing when family succession ceases to be a taboo. The process begins when the current leader identifies personal limitations or the need to pursue new paths. Early planning is what differentiates success from crisis, allowing for structured preparation instead of reacting to emergencies. At this stage, engagement between the successor and the family, possibly with the support of external agents, is vital to making the process harmonious.

2. Analysis of Alternatives

Therefore, the decision to pass the baton requires a clear separation between governance structures. Within the family, it is important that the successor has legitimacy among family members, exercises clear leadership, and has support, which usually converges on the spouse or heir of the next generation. Within the company, however, it is necessary to objectively assess whether the successor will be a family member, an internal professional, or an external talent. It is crucial to understand that a person may be a recognized and respected family member, but not necessarily the ideal leader for the company at that moment. Therefore, the new family leader may not be the recommended choice in business succession, which must consider, among other factors, the leader's age, the successor's maturity, and the business cycle.

3. Objective Selection

Choosing a family successor is not always an obvious path: it must be guided by transparency and criteria such as respect for family values, ability to articulate, resilience, and respectability. Intrafamily communication should be continuous, especially in the case of a less smooth family succession, in order to mitigate any resentment. In this case, an external mediator can be very valuable.

4. Successor Preparation

In many cases, the family successor may still be a person in the process of maturing, so it is advisable to undergo development of human and behavioral skills. Furthermore, they should demonstrate concern for the legacy and the management of the family's strategy and assets. The development plan should be co-created and include mentoring, involving external agents to reduce the successor's emotional dependence.

5. Structured Implementation

In a family setting, it's beneficial for the passing of the baton not to occur abruptly, although this isn't always possible. Therefore, it's advisable for the preceding phases to unfold as the outgoing leader emotionally prepares for their departure. The moment of truth demands a "genuine admission" from the outgoing leader, accepting the handover. At this point, reflections in a business environment recommend clear communication to prepare for imminent changes in governance structures, and for authority to be transferred to a successor (whether the family leader or not) according to a clear timeline.

Objective Results and Gains

A planned family succession, supported by good family governance practices, generates tangible results. Families that adopt these models tend to maintain balance and harmony under the new leadership, minimizing internal and company-wide disruptions. The result is an enlightened family and a founder aligned with their new personal goals. Conflicts are avoided, asset risks are mitigated, and the value of the business is maximized.

If family succession is followed by well-managed business succession, market data reinforces the importance of this process: approximately 40% of leading companies are already under the leadership of the second or third generation when they have planned succession. Furthermore, the perceived value of governance among Brazilian leaders is 53%, and listed companies that adopt these practices can see an increase of over 70% in their net worth. Ultimately, well-structured family succession is not just about replacing a leader, but also about preserving family values and assets for generations, and preparing for proper business succession.

(Data source: PwC 2025 Global Family Business Survey, with 1,325 family businesses from 62 countries. Collaboration: Kellogg School of Management, Northwestern University, USA)

FAQ - Frequently Asked Questions:

1. What is family governance and why is it important in succession planning?

Family governance is the set of rules, structures, and practices that organize the family's relationship with its assets and business. It is important because it reduces conflicts, preserves family values, defines roles, and creates mechanisms for succession to occur in a planned manner, ensuring the continuity of the legacy and the protection of assets across generations.

2. What is the difference between family succession and business succession?

Family succession deals with the transfer of leadership and responsibilities within the family, while business succession involves choosing who will lead the company. Although related, the two successions require different criteria. The family leader is not always the most suitable person to lead the business, making the separation between family governance and corporate governance essential.

3. What are the steps to a successful family succession?

A successful family succession follows five main steps:

• Advance planning;

• Analysis of succession alternatives;

• Objective selection of a successor;

• Preparation and development of the successor;

• Structured implementation of the transition.

This process reduces risks, strengthens trust among family members, and increases the chances of continuity of the family and business legacy.

4. How to choose the right family successor?

The choice of a family successor should be based on objective criteria and not solely on kinship ties. Aspects such as leadership, ability to articulate, alignment with family values, emotional maturity, and respect from other members should be considered. Transparent processes and, when necessary, support from external mediators help to make the decision more legitimate and less conflictual.

5. What are the benefits of planning family succession in advance?

Advance planning for family succession reduces conflicts, protects assets, and strengthens business continuity. In addition to preparing successors and aligning expectations, structured governance contributes to more consistent decisions, preservation of family values, and greater value creation for the business. Family businesses that plan for succession tend to exhibit greater longevity and better results over time.