In many medium-sized family businesses, succession is on the horizon. Usually, the goal is for the company to remain in family hands. However, not all daughters and sons are talented entrepreneurs, or perhaps none of them want to take over. In such cases, an external managing director can be appointed.
When an external manager takes over the leadership of a family business, there are many challenges for both sides. At the same time, this collaboration offers many opportunities: experienced external managers can professionalize the company and bring fresh momentum to the business. To ensure the collaboration is successful, a systematic approach is advisable—starting from the onboarding phase.
A smooth transition requires a clear roadmap
The starting situation for an external management appointment can vary: either there is no one in the owner family suitable for succession, and the role is filled permanently, or it is used as an interim solution to bridge the gap between two generations of the owner family. In both scenarios, a clear division of tasks and the collaboration between the management and the shareholders must be defined. This is the only way the "one in, one out" equation can work well in practice. To ensure the external management is accepted from the start, it is important to involve stakeholders early on.
Close cooperation with clear rules
To make the collaboration between the owner family and external management efficient and effective, it must be organized intelligently. Powers of attorney, authorities, and responsibilities must be carefully clarified. Who has which task? How does the leadership team work together? Roles should be clearly delineated and competencies regulated. A catalog can be used to define transactions requiring approval or important decisions and to establish procedures. There should also be absolute clarity at the micro-level regarding which decisions require the consent of the shareholders and which the external management should make independently. The most important factor is good communication. Discrepancies in information levels can quickly lead to uncertainty and conflict. The necessary transparency in all areas creates a solid foundation for successful collaboration.
Keeping your own in someone else's hands
Especially during a transition, both sides are challenged in their entrepreneurial spirit: building something is one thing; handing over a life's work to an outsider is another. The owner must be prepared to let go and handle the change as confidently as possible; otherwise, there is a risk that the external manager will withdraw. For the external manager, it is important to familiarize themselves with the owner's strategy and identify with the company's values to be accepted by stakeholders as a successor. At the same time, they will contribute to developing both. They should always keep in mind that it is not their company, even if it may feel like it after a short time. External management needs the freedom to think differently and innovatively to successfully lead the company into the future.
For a good working relationship, it is naturally important that the external manager and the owner family "get along" well. Trust and a good dose of pragmatism facilitate both professional and personal interaction. Expectations on both sides should be communicated transparently. Clarity and structure in coordination and processes are key success factors and create the basis for a successful partnership.
THE MAK'ED TEAM has developed succession solutions for a wide variety of scenarios in medium-sized family businesses. We have many years of experience in successfully shaping corporate successions and support companies through the phases of generational change using professional methods and our interdisciplinary team.
You can find more on succession & emergencies here.
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