Field note
Why purchase approvals balloon in second-generation firms
14 November 2025 · Margaret Chen
When the founder handled purchasing personally, approval was simple: they saw the invoice and signed. As the business grew, well-meaning controls were added — a warehouse manager check here, a finance review there — but rarely removed when no longer needed.
By the time a second-generation leader steps into a procurement role, three or four people may touch every order above a threshold nobody remembers setting. Staff learn to route around the slowest approver. Urgent purchases happen on personal cards. The formal process exists on paper but not in practice.
What we look for
During an Operational Health Review, we trace a sample of recent purchase orders from request to payment. We ask each approver what they are actually checking for. Often the answers overlap: two people verifying stock levels, or a sign-off that made sense when the founder was overseas but persists years later.
A practical fix
Delegation limits tied to role — not person — give incoming leaders authority without dismantling oversight. A daughter taking over procurement might approve orders to $5,000 immediately, with a single escalation path above that, documented in one page everyone can reference.
The conversation owners avoid
Naming who approves what can feel like distrust, especially when a parent still holds informal veto power. Facilitated sessions help separate the emotional question (“Do you trust me?”) from the operational one (“Who signs at each dollar threshold?”). The second question has a written answer; the first does not need to block the business.
If your approval chain has grown without a deliberate design, a short mapping exercise often reveals quick wins before any system change is considered.