Less than half of family businesses are likely to hand over the reins to a next generation of managers from within the family itself. Many owner families are simply running out of young talent. But even if there are children or grandchildren, this does not mean that they have the aptitude or experience to take over the business.
While the sale of the entire company may be considered by some family businesses without an internal successor, this option is still not desirable for many families. So, if a succession within the family is not possible, or a gap until the next generation is ready has to be bridged, the ‘external management’ option inevitably comes into play.
More and more family companies are deciding to hire managers from outside the family to take on the operational management of their companies. Yet for many there is still uncertainty as to how such a process should be professionally organised and in a way which does not simply rely on “gut feeling”. Mis-hirings of important management functions with external managers are frequent and can be very expensive. They can also lead to a damaged image in the eyes of customers, suppliers and employees. Experience with, or a cultural fit to, SME businesses, and especially family businesses, is crucial. In our consulting practice, we have heard of numerous external managers who did not really understand the values and objectives of the owning family – and were therefore unable to align themselves and perform accordingly.
In order to carefully prepare for the recruitment of an external manager, the shareholder group must first gain clarity about the tasks, distribution of competencies and responsibilities of the top management function. It will be difficult to win over a first-class professional manager for the company if the family is not prepared to cede to the manager significant room for manoeuvre and decision-making authority. The definition of a role profile naturally also includes the question of which “critical competencies” an external manager must bring with him/her. Here it is not only a question of years of experience, but also of the development of certain fields of competence, for example: the ability to develop and implement strategies, to introduce change into the company, or to engender a strong “customer orientation” within the sales team. In order to be able to agree on this competence picture, the family should be guided by what specific results will be expected of the external manager in the coming years, and by how the success of his/her activity will be measured.