A Critical Analysis of CEO Succession Planning in Family Businesses: The Case of the Hotel Sector in Southeast Nigeria

Abstract

One of the mythologies of Ndigbo in southeast Nigeria reveres the spider’s extraordinary ability in spinning intricate webs. The spider is said to be at its best when it is motivated to keep spinning intricate and amazing webs. Moreover, the spider hates dismantling its webs. Spiders use their webs as traps for the provision of food and to wade off predators. The creative spinning of webs is the hallmark of the spider’s valuable, rare, inimitable and non-substitutable resource. The Ndigbo spider mythology captures and underpins the essence of this thesis.
Family firms collectively comprise the backbone of the global economy, accounting for at least 60% of all businesses in every country, employing around half the global workforce and contributing between 40%-60% of global GDP. However, only about one third of family firms survive into the second generation, and 13% into the third; on average, a family firm exists for just 24 years. Hence, understanding the relationship between families as complex systems (like the spider’s web) and business in general is crucial, as is Chief Executive Officer (CEO) succession planning in particular. Yet in this context, relatively few studies have focused on the family, as opposed to business governance. Moreover, no studies have focused on family influence in family business succession planning in Nigeria, where family firms comprise around 90% of entrepreneurial activity. Hence, based on a case study of the hospitality sector in south-east Nigeria, this thesis seeks to address this gap in the literature.
A sequential explanatory mixed methods research design involving 258 respondents was used in this study. This study’s population comprised the three-star and above hotel segment in southeast (SE) Nigeria which are owned, managed and controlled (OMC) by SE Nigeria’s indigenous family entrepreneurs. The research method involved the formulation of hypotheses based on an extensive literature review. The results were analysed using PLS-SEM and SPSS. The findings formed the basis for the focused semi-structured interviews using two case illustrations and analysed thematically. The case illustration findings were used to deepen the explanations of the quantitative results phase. The findings of the thesis are in-tandem with the substantial number of studies reviewed in the literature. These reveal that the constructs of family influence – or of overall ‘familiness’ – such as family transgeneration orientation (TGO), the quest for the preservation of both the identity of the family and of the business (business family identity – BFI; the family business identity – FBI), and effective family governance mechanisms (FGMs) promote CEO succession planning required for the family firm’s transgenerational sustainability. Also, other distinctive contributions include: first, the findings reveal that a rich blend of socio-emotional wealth theory (SEW) and social identitymtheory (SIT) with family influence familiness (FIF) framework support family influence in CEO succession planning. Second, the thesis makes contextual contributions to literature, given the fact that most studies on SE Nigeria entrepreneurship are skewed towards Igbo traditional business school known as ‘Igba-boi’ which is a special apprenticeship programme that incubates entrepreneurial development and provision of venture capital, as little attention has been paid to family business transgenerational sustainability. Third, the findings revealed that in developing countries like Nigeria, without public funded social welfare, the family trust’s stock of SEW alleviates the direct pressure of welfare need of family members on family firms and promotes family members altruism. The generation-skipping family trusts were found to be appropriate and ‘fit’ for purpose. Fourth, the thesis findings reveal that the combined positive effects of familiness altruism, higher percentile of family involvement in ownership, management and control (OMC), the proficiency level of active family members (PAF) and inclusive and effective FGMs support CEO succession and transgenerational sustainability. Overall, then, the thesis makes an original contribution to the literature on CEO succession planning in family firms, particularly in the context of developing countries with complex family systems.