The illusion of readiness: Why good law isn't enough for successful succession

Poland's private sector, now 35 years old, is entering a new phase as its founding generation begins to pass businesses onto their heirs. This process is unprecedented in the country's economic history, occurring without the benefit of long-standing traditions or multi-generational business models common in Western economies.

Legislators have introduced modern legal instruments, including family foundations and updated commercial codes, supported by a growing advisory market for succession services. However, this legal framework risks creating a "false sense of readiness." The primary obstacle to successful succession lies not in formal regulations but in the informal, deeply ingrained family culture surrounding decision-making and leadership.

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Formal institutions, such as legal regulations and statutes, can be established and changed within a few months. Informal institutions, encompassing norms, customs, and decision-making culture, evolve slowly, over generations, resisting top-down imposed changes.

Drawing on institutional theory, particularly the work of Douglass North, the article highlights the difference between formal institutions (laws, statutes) and informal ones (norms, customs, culture). While formal rules can be changed quickly, informal institutions evolve slowly over generations and resist top-down changes. Even with a meticulously drafted family foundation document, an unwritten family axiom that the founder always has the final say can undermine the new structure.

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Path dependence: families that have functioned in a specific power model for 30 years will resist it even when new regulations formally change this model.

This resistance, termed "path dependence" by North, means families accustomed to autocratic leadership for decades will struggle to adapt even when new laws permit it. The challenges faced by Polish entrepreneurs stem from this structural mechanism rather than a lack of knowledge or ill will. A company built on a founder's autocratic style cannot simply change its DNA by signing a new statute; breaking this ingrained model requires an external catalyst with the legitimacy to overcome internal resistance.

The article also touches upon the "dark side of altruism," as described by William Schulze. When unconditional family love is applied to business management, it can distort objective assessments of managerial competence. Parents may struggle to evaluate their children's business performance objectively, blurring the lines between familial affection and professional judgment, further complicating the succession process.

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The dark side of altruism: transferring unconditional love, the foundation of family life, to the realm of company management triggers a mechanism that distorts the objective assessment of managerial competence of one's own children.