The surprise announcement that Rupert Murdoch will step away from his corporate leadership roles at his media empire underscores some key lessons for business leaders about the importance—and potential consequences—of succession planning.
Indeed, the appointment of his son Lachlan to succeed the senior Murdoch in November raises issues that can provide essential insights about potential pitfalls when transitioning to a new generation of leaders.
Transitions between leaders — and especially a new generation of leaders—can create a crisis for companies and organizations and should be accounted for in corporate crisis management plans.
Legacy Issues
Lachlan Murdoch “will face the crucial task of ensuring that the companies under his leadership rigorously uphold journalistic standards, rigorously adhere to fact-checking protocols, and consistently maintain ethical reporting practices,” according to Laurie R. Barkman, an adjunct professor of entrepreneurship at Carnegie Mellon University Tepper School of Business said via email. She’s the author of The Business Transition Handbook: How to Avoid Succession Pitfalls and Create Valuable Exit Options.
“The manner in which these legal matters are handled will undoubtedly have a profound impact on the credibility and public perception of media outlets owned by the Murdoch family,” she predicted.
No Guarantees
It is not standard practice for sons or daughters to automatically take over a family-owned business, as Lachlan Murdoch will do.
And their success is not a sure thing.
According to the Family Business Institute, only 30% of family businesses last into the second generation, 12% remain viable into the third, and 3% operate into the fourth generation or beyond.
“Those that do continue often see their value decline significantly as a result of mismanaged succession,” the Harvard Business Review wrote about the study.
Making Their Mark
“In any succession, next-generation leaders want to evolve the business and make their mark. Especially in a family-led business, they are often told, “Here are the keys. Now, don’t mess it up,” Barkman observed.
“Whereas with the other adult [Murdoch] children who are no longer in the business – James, Elizabeth, and Prudence – there could be a fear they would move the company in a dramatically different direction. With Lachlan being groomed as Rupert’s successor for a long period of time, the expectation may be that Lachlan will stay the course and not change what has been built,” she concluded.
Sending A Message
The appointment of a successor can also send a message about the future of an organization.
Paddy Manning, author of “The Successor,” a biography of Lachland Murdoch, “said he had been ‘firmly in charge’ at Fox Corporation for some time now, and had some proven successes, including the purchase of the successful streaming service Tubi,” the New York Times reported.
“Rupert’s retirement and handover to Lachlan is a clear signal to the rest of his family, the directors and shareholders of both companies, as well as the wider world,” Mr. Manning said, “that Lachlan is the chosen successor and he has complete confidence in his leadership.”
The Importance of Planning
Only 34% of surveyed companies had a “robust, documented and communicated succession plan in place,” according to PWC’s 2021 Family Business Survey.
In my 2021 story about the corporate transition lessons to be learned from HBO’s Succession about the fictional Roy family, Tom C.W. Lin, a business law professor at Temple University, said “The travails of the Roy family and Waystar Royco highlight the importance of succession planning as a critical part of good corporate governance.”
“A lack of a clear succession plan can lead to corporate instability that cause[s] serious harm to shareholder value and corporate operations.”
“While it might be hard for many boards and executives to openly plan for the ouster or incapacitation of a CEO or key executive, it is undeniably one of the most important decisions of a board, and it should be one that is regularly and thoroughly reviewed in board meetings,” he concluded.
“Having a well-defined succession plan is crucial for the stability and future of any business,” Marshal Davis, president of marketing agency Ascendly Marketing and who has advised clients on legacy planning matters, said via email.
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