In many mid sized family businesses a succession is coming in the foreseeable future. In most cases the company is meant to stay in family ownership. But not all daughters and sons are talented entrepreneurs. Or simply nobody wants to do it. An external managing director can then 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 the collaboration holds many opportunities: with their experience, external managers can professionalise the company and bring fresh momentum to the business. For the collaboration to succeed, a systematic approach is advisable, starting with the onboarding phase.
A good transition needs a clear roadmap
The starting situation for external management comes in different constellations: either there is nobody in the entrepreneurial family who could take over, in which case it is installed permanently, or it is appointed temporarily to bridge two generations of the family. In both constellations the clear division of tasks and the collaboration between management and the group of shareholders have to be defined. That is the only way the equation of one arriving and one leaving can work well in practice. So that the external management is accepted from the outset, it is important to involve the stakeholders early.
Close interplay with clear rules
For the collaboration between owner family and external management to be efficient and effective, it has to be organised intelligently. Powers, authorities and responsibilities have to be clarified carefully. Who has which task? How does the leadership team work together? The roles should be clearly delineated and the competences regulated. A catalogue can set out transactions requiring approval or important decisions and define how they are processed. There should be absolute clarity, right down to the micro level, about which decisions the external management needs the shareholders' consent for and which it should take without approval. The most important thing is good communication. An imbalance in the level of information can quickly lead to uncertainty and conflict. The necessary transparency in all areas creates a solid basis for successful collaboration.
Your own in someone else's hands
In the transition situation especially, entrepreneurial spirit is demanded of both sides: building something up is one thing. Handing your life's work over to someone from outside is another. The managing director has to be ready to let go and to handle the change as confidently as possible. Otherwise there is a risk that the external managing director will withdraw. For the external managing director it is important to become familiar with the owner strategy and to identify with the values of the company, in order to be accepted as the successor by the stakeholders. At the same time they will contribute to developing both further. In doing so they should always keep in mind that it is not their company, even if it may feel that way after a short time. External management needs the freedom to think about things differently and anew in order to lead the company successfully into the future.
For good collaboration it is of course important that the external managing director and the owner family get on well. Trust and a good measure of pragmatism make working and personal relations easier. The expectations on both sides should be communicated transparently. Clarity and structure in coordination and in the processes are important success factors and create the basis for a working partnership.
THE MAK'ED TEAM has already developed succession solutions for very different constellations in mid sized family businesses. We have many years of experience in shaping business successions successfully and accompany companies through the phases of generational change with professional methods and our interdisciplinary team.
You can find more on succession and emergency planning here.
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