Selecting the right leadership is a critical decision for family businesses, one that can significantly impact their future. They often face the dilemma of choosing between an external CEO, who can bring fresh perspectives and expertise, or a hereditary successor, who is believed to deeply understand the company’s values and traditions.
Is choosing a generational successor, someone who grew up in the company environment, really the easiest path? What if such a candidate isn’t available or lacks interest in leading the company? In the case of an external CEO, how can we be sure they will truly meet the necessary criteria? Will they lead the company with the same value system that has guided it so far?
We explored these questions in more detail with Erika Matwij, President of the Institute of Family Business and an expert in family enterprises. The Institute of Family Business offers comprehensive support to family businesses in managing succession. Their assistance focuses on selecting the most appropriate strategy based on the specific needs of the business family and ensuring the continuity of the company. The institute provides a wide range of services, including expert consultancy, successor education, and strategic planning, facilitating a smooth and successful leadership transition to the next generation.
What is the most challenging aspect of the mentioned “generational transition”?
A generational transition in a family business is a complex process that involves not only passing leadership to the next generation but also preserving family values and ensuring the continuity of the family enterprise.
THE MOST CHALLENGING ASPECT OF A GENERATIONAL TRANSITION IN FAMILY BUSINESSES IS THE EMOTIONAL SIDE OF THE PROCESS.
Founders, who have dedicated their entire lives to building the company, often find it difficult to relinquish control. They may fear whether the new generation will be able to uphold and advance their vision and values. This sense of loss can be exacerbated by a lack of trust in the successors’ abilities, leading to tension and conflict within the family.
Another significant obstacle is the lack of communication and transparency. Family members may have different visions for the company’s future, which can lead to conflict if these expectations are not clearly communicated.
Additionally, there is the challenge of adapting to changes in corporate culture. The new generation may introduce innovative approaches and ideas that differ from the founder’s traditional methods. If these differences are not properly managed, they can create further tension among family members.
The International Family Business Congress
What should be considered during such a transition?
First and foremost, preparing successors is crucial. This preparation should include not only professional education but also practical experience and personal development to ensure they are capable of successfully leading the company. It is equally important that successors learn from the older generation, who can pass down their experience and know-how. However, this often presents a challenge as founders may not dedicate sufficient time to mentoring the next generation.
Additionally, defining a long-term strategy and vision that reflects the company’s core values is essential. Lastly, establishing a family council is important, as it helps prevent conflicts and ensures clear rules are in place. This includes managing asset distribution, decision-making processes, and conflict resolution methods.
Can such a transition strain family relationships?
One of the main sources of tension is differing views on the future of the company. The older generation may adhere to traditional methods of management, while the younger generation might favor modernization and innovative approaches. If these differences are not resolved through open communication, they can indeed lead to long-term conflicts and significantly strain family relationships.
A GENERATIONAL TRANSITION SHOULD ALSO BE SEEN AS A GREAT OPPORTUNITY.
This process can serve as a platform for open dialogue, allowing family members to clarify their expectations, resolve misunderstandings, and address any past conflicts. If managed correctly, the transition can strengthen not only the company but also the relationships between family members. It creates a clearer, more unified vision for the company’s future, accepted by all involved.
Erika Matwij
What if there is no next generation in the family to take over the business?
If there is no capable or willing next generation in the family to assume leadership, several alternative succession solutions are available. One option is to appoint an external professional manager to run the company. This approach allows the business to remain under family ownership while ensuring its future growth and stability.
If the family is not interested in continuing the business, another option is to sell the company. While this can be an emotionally challenging decision, it can provide financial security and allow the family to focus on other ventures or investments.
We will be discussing this and many other topics at the International Family Business Congress, taking place on September 19-20, 2024, in the enchanting setting of Château Belá Hotel.
The International Family Business Congress
What can we look forward to at the congress?
The International Family Business Congress is a unique event for owners and members of family businesses. It offers new perspectives and inspiration each year for Slovak family enterprises. This year, we can anticipate a diverse lineup of both international and local experts and speakers. They will focus on key topics such as sudden succession, external management, family legacy across generations, and many more.
In addition to inspiring success stories, the congress will provide practical advice and concrete strategies through 11 specialized workshops designed to address the challenges faced by family businesses.
The congress will also feature an evening program with a musical performance by Peter Lipa and his son. On the second day, there will be additional activities. Including individual consultations with family business experts, test drives of Tesla vehicles, and other accompanying events.
For more information about the International Family Business Congress, visit: International Family Business Congress
Learn more about the Institute of Family Business here: All about the Institute
The International Family Business Congress
