The on-again, off-again, on-again saga of Rupert Murdoch’s selection of his eldest son, Lachlan, to head News Corp and 21st Century Fox highlights the challenges and importance of succession planning in family-controlled businesses, which make up as much as 90 percent of all businesses.

While most similar episodes aren’t played out so publicly, the themes of conflict and confrontation as younger leaders tussle for control with older generations who aren’t ready to give it up are virtually universal. And these situations are hard to manage, even for business titans like Rupert Murdoch.

“Succession is incredibly difficult,” notes James Olan Hutcheson, founder of Dallas family business consulting firm ReGeneration Partners. Only about one in three family-owned businesses survive into a second generation after the founder leaves the business, according to numerous research studies. Just about one in eight last to a third generation, while a little more than one in 30 go until the fourth generation.

Facing Your Fears

One factor that makes transition hard is an entrepreneur's fear of confronting his or her own death—handing over control is often tied to a reluctance to acknowledge their own mortality, Hutcheson says. Even founders of considerable years, like Murdoch, who recently turned 83, seem to keep finding ways to put off installing a successor. Founders also often resist relinquishing the limelight and control that comes with holding the top job. “The entrepreneur is accustomed to being in charge and having things go his way, and the fear that he may not have that is very difficult,” Hutcheson says.

A founder's financial security can be an issue as well, says Paul Karofsky, who with his son, David, heads Transition Consulting Group, a family business consulting firm with offices in Palm Beach Gardens, Florida, and Framingham, Massachusetts. Unlike the multibillionaire Murdoch, who has resources to sustain him, patriarchs of smaller family businesses may strongly rely on their salaries and fear financial troubles if they stop working.

Another common obstacle is the lack of a successor with the skills, education, experience and passion the current leadership deems necessary to run the family business. “The senior generation doesn’t perceive that the younger generation is ready to take hold," Paul Karofsky says, "and until the younger generation is ready, the senior generation won’t let go.”

Along with the question of how willing founders are to step aside, there's the question of how hard up-and-comers are willing to push. “Is it the job of the senior generation to let go or the job of the younger generation to take hold?” David Karofsky says. “That’s where so much of the dance begins.”

The fact that it took nine years for Lachlan Murdoch, who unexpectedly left News Corp in 2005 when he had been heir apparent, to agree to return to work with his father highlights the importance of endurance as part of a successful transition. “It’s a long process and requires patience and understanding and accepting that it’s not a linear straight line,” Hutcheson says. “And it’s filled with volatility along the way when you have a strong entrepreneur.”

A Smooth Transition

Successful transitions frequently take care to portray the heir’s selection as based on merit, as opposed to last name. Typically, this involves having the founder—in News Corp's case, Rupert—remain in the background when a promotion like Lachlan’s is revealed, Hutcheson says. “It’s best practice to let the board announce that it has decided to put Lachlan in as the new leader of the company,” he adds.

This is more than a symbolic move, because the new leader will have to work with that board as well as with other members of management. Having the board lead the transition reassures the new leader as well as employees, customers and vendors, that the heir is worthy. “It gives the impression that the family member withstood the scrutiny,” Hutcheson says.

Founders’ needs should also be met. Paul Karofsky notes that a good transition plan addresses the founders' concerns about personal finances, future job titles, office space, functional roles and responsibilities. And it should acknowledge the sacrifice that prior generations made to create the opportunity. “If the senior generation feels the younger generation has a sense of entitlement," he says, "it’s going to make that transition harder.”

Of course, an ideal successor has already demonstrated competency, a passion for the business, education adequate to the role and successful experience working outside the family business. Lachlan Murdoch exemplifies all these traits, Hutcheson notes, but there's more to a successful next-generation leader than a resume. Successors also have to be able to gain the respect of the employees of the family business who may have known them since childhood. And while skills like finance and management can be taught relatively easily, the ability to win hearts and minds is harder to come by.

Although a transition involves a lot of moving parts, the most important is usually the person currently at the top. David Karofsky wonders what's different at News Corp and 21st Century Fox since Lachlan’s last stint there and why he wants to come back. “What’s changed with Rupert or his son?” he asks. “And how open to change is Rupert Murdoch?”

Given that the senior Murdoch took front and center on the official corporate announcement—and made sure the younger Murdoch’s title as non-executive chairman was second fiddle to his own as executive chairman—it’s not clear that much has changed. Based on published accounts and his own consulting experience, Hutcheson isn’t too optimistic that the move heralds a silken handover of power.

As Hutcheson puts it, “His father will likely get in the way.”

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