As Rupert Murdoch steps down, here are some family business succession tips from the SmartCompany archives

Rupert Murdoch has announced his intention to step down as chairman of News Corp and Fox Corporation, formally ending his tenure at the top of the titanic media empire and clearing the way for his eldest son, Lachlan Murdoch, to step into the sole chairman position at both companies.

In a letter shared with staff overnight, the elder Murdoch declared he will transition into the role of chairman emeritus at both firms, saying “the time is right” to vacate the top job at one of the world’s most influential media organisations.

The announcement comes after years of heated speculation over the future leadership of News Corp and Fox Corporation, and heralds a new era for Lachlan, who has presided over Fox Corporation as executive chair and chief executive officer since 2019.

As the world tracks one of the highest-profile corporate successions in living memory, here are some tips for smaller Australian businesses contemplating their own family member handovers, drawn from the SmartCompany archives.

Aim for a gradual, structured transition

Business leaders who want to keep leadership in the hands of family ought to see the transition not as a one-and-done ordeal, but as a lengthy and orderly process.

David Harland, executive chairman of FINH, a consultancy dedicated to guiding family businesses through succession, writes that “too many families treat succession like it is a long-off, lofty goal.

“They think ‘Someday, the children will have to take over,’ or ‘Ideally, the business will operate smoothly enough for my son/daughter to grab the wheel’.”

Leaving that kind of uncertainty, particularly as incumbent leaders grow towards retirement, can create internal turmoil and unsettle external business relationships.

A structured succession plan should consider whether younger generations want to take over in the first place, with modern ties to family businesses now looser than they once were.

If younger family members do express interest in taking over, it is important to map out timelines, the handover of responsibilities, and, crucially, what new skills the fresh leaders might need before stepping up.

Allow younger generations to experiment

Beyond simply allowing the younger generation to shadow existing leaders, allowing them to experiment can benefit both the family members next in line and the business itself.

Allan Discua-Cruz and Bingbing Ge, leadership experts based at Lancaster University, advocate for allowing the successors to explore new business opportunities before securing the top job.

“A family business portfolio could also offer younger generations a ‘sandbox'” model, the pair write.

“This is an environment in which they can explore and experiment with new ideas or best practices, fail and try again. They can use this time to prove they are apt stewards of existing family assets, as well as entrepreneurially savvy enough to continue building them.”

Family ties are a challenge

Handling the nitty-gritty legal and administrative work of handing over a business is obviously paramount, but Harland warns the best technical plans can be waylaid by unchecked tensions within the family.

“Too many family business owners (and professional advisors) focus their attention on technical components, such as family trusts, wealth management, tax mitigation, or asset distribution,” Harland writes.

“While the business components are necessary and important, the real test will be how a family manages expectations and interpersonal dynamics.”

… And an opportunity

At the same time, family values can be used as a North Star. Convincing the next generation that their new roles will ultimately help the family continue its legacy can be immensely powerful.

“Your family values are more than a slogan,” Harland continues.

“During times of conflict or struggle, your leadership and family employees will rally around your family values, using them as a guidepost for making tough decisions.

“Do family unity and collective agreement matter more than generating extra revenue? Should younger family members be forced to work outside the business before they can assume control?”

Successfully nurturing, adhering to, and championing those values can have extra benefits, too: buy-in among non-family employees can solve further headaches down the line.

Manage relationships with other workers and customers

Finally, before any formal handover takes place, it’s vital to ensure those outside of the family, and even outside of the business, are prepared to work with the incoming leadership.

Gavin Debono, partner and executive director at Pitcher Partners Melbourne, asks: “How are critical relationships being shared and transferred? What plan is in place to preserve corporate knowledge and sector experience if senior personnel leave?”

Businesses that don’t achieve that buy-in can force incumbent leaders to linger, create a power void when the leader steps down anyway, or expedite the promotion of new leaders who are not the right fit for the role.

“If this leads to the souring of key relationships that have been crafted over years, it can damage market share and reputation,” Debono writes.

“In turn, makes it exceptionally difficult for an organisation to retain other key talent.”