How to pass on the company? What are the options for generational change to ensure the smooth operation of the business? What fears, and doubts can a leader have when releasing the control of the company and whom should it be passed on?
“Family businesses of the 1990’s will soon have to cope with the change of generations, as the executives slowly reach the retirement age. However, the transfer of control does not seem to be easy, 3 out of 2 companies do not survive the first generation”– said Rajmund Virágh, generational change expert at Hammel & Hochreiter, referring to a survey.
Few owners think about selling a business
When the time comes for the company to be handed over, 74 percent of the owners want to transfer it with retaining the ownership. 47 percent would pass it to a family member, 17 percent would like to find a successor within the company, and 10 percent prefer somebody from outside. Only 18 percent would consider selling the company in a timely manner with appropriate terms and conditions – understood from the joint SME survey of BDO Hungary and Opten.
According to Rajmund Virágh, it is not easy to decide who is the most appropriate replacement, because the greatest value and at the same time the greatest risk to a family business is the charismatic person who established the company.
As children often grow up in family businesses, it’s no surprise that almost half of the owners think about giving their children the control over the company. However, since children are often completely different personalities, in most cases they are unable to manage the company as well as their predecessors. The organization, the partners and the clients should be prepared for a possible change in management style, culture and organizational structure.
Interim managers can also help
’For a safe generation change, when the manager is in retirement age, it is worth separating the ownership and operational responsibilities. If company succession and selling the business are not the preferred ways, choosing a new executive is the only viable solution in the long run. According to the participants of the survey, the most important factor in the selection process is the relevant business experience of the candidate and the fact that he is from the company. The age of the ideal executive should be about 33-49 years old which means that the person has at least 10 years of work experience. In case it is not possible to find the right successor on time, it is worth involving interim managers to survive that period.’ – says Virágh.
In preparation for the generation change, half of the 200 family business leaders surveyed, consider it advisable for an external consultant to support the company.
