Expert Insights: How do I decide whether my family business is ready to be transferred to the next generation? When is bringing in leadership from outside the family an appropriate option?

June 11, 2018

Question:

How do I decide whether my family business is ready to be transferred to the next generation?

Answer:

There is no absolute right time to transfer a family business from one generation to the next. In an ideal scenario next generation members have been following a formalized development plan and are well on their way to being ready to assume additional responsibility. Next Gen members have actively participated in setting strategy and have developed the competencies and attributes needed to take the business successfully into the future. Often, timing isn’t perfect. The current leadership is ready to move on to the next phase of their life and the Next Gen is not quite ready. Consider bringing in an Interim Executive who professionally manages the business for the family and has as a key component of their role the further development of the Next Gen members. Establishing defined timelines and deliverables for the Interim role are critical in ensuring an effective transition for the family and the business from the Interim Executive to the Next Gen leaders.

Question:

When is bringing in leadership from outside the family an appropriate option?

Answer:

Bringing in a leader from outside the family is a very significant decision both for the family and the business. The decision to do so should be predicated on the strategy for the business moving forward and the competencies and attributes needed to execute on this strategy. If such competencies/attributes do not exist or cannot be timely developed by those within the family and business it is likely the right time to bring in leadership from outside the family. This may occur for a variety of reasons: rapidly evolving markets, new sectors to be explored, growth through acquisition to name just a few. It is also critically important to identify the right external leader not only based on competencies but from a chemistry, passion, trustworthiness and insights into the dynamics of a family business perspective and worthy of the special trust this role requires.  Prepare the exiting leader for their future role and the family as well for such a significant change through effective communication and governance.