For despite repeated announcements to the contrary, the senior executive isn’t ready to let go of the reins just yet: Now 77 years old, he intends to continue leading his publicly traded company—which employs more than 17,000 people—for at least another three years. Why isn’t this form of late leadership succession a model for family business owners? We examine the key risks.
There are four key reasons why the Fielmann model is not suitable as a blueprint for family businesses:
1. Increasing risk of an unplanned succession: A 77-year-old entrepreneur cannot escape age-related risks. In the absence of a second tier of leadership, the Fielmann model would threaten the very existence of most family businesses in a crisis.
2. Succession within the family becomes less likely with advancing age: An age difference of 50 years between the senior and junior generations is rare in most entrepreneurial families. After completing their education, many children of entrepreneurs now pursue careers outside the family business and choose not to take on leadership roles within the family-owned company.
3. The transfer of assets has already taken place: According to the annual report, Günther Fielmann still owns six percent of the shares; the majority is held by a family-owned holding company and the children. In contrast, owner-managed small and medium-sized businesses often pool the majority of the family’s assets through the shareholders. A transfer of assets often takes place in parallel with or after the transfer of operational responsibility. Thus, an unregulated transfer of assets can jeopardize the survival of a family business.
4. External management as an alternative: While Fielmann could easily appoint a management team from outside the family, for more than 90% of all family businesses, the use of external managers is likely to be too risky, expensive, or impractical.
But what should be done? Three practical tips can help successfully prepare for intra-family business succession:
1. Put together an emergency kit
About 70% of all business owners have no emergency plan or an inadequate one. A carefully maintained emergency kit addresses the key business and personal succession issues.
2. Set a timeline for leadership and asset succession
In practice, it has proven effective to plan the transition of leadership and the transfer of assets separately. This addresses the three key questions of generational succession: Whatshould be handed over, when, and to whom? In this context, a robust business valuation helps quantify the company’s value within the estate.
Do you know whether your children are interested in taking over your business? Since many children of entrepreneurs now choose not to participate in an internal generational transition, many family-run companies are already facing a shortage of entrepreneurs.
3. Consider Bringing in an Outside Manager
If the company is to remain in family hands, an outside manager is often required. This is particularly true when, as in the case of Fielmann, there are still very young successors within the family. In this scenario, an experienced outside manager could support the junior successor with their expertise and also provide the company with valuable external input. The search for and onboarding of such a non-family CEO requires careful planning and usually takes several months.
When Is Selling the Business Advisable?
If neither a generational transition within the family nor the appointment of an external manager is an option, selling the company is another alternative. Our daily consulting practice and various studies show that the later a company sale is planned, the more difficult a successful leadership transition becomes.
Having the (intra-family) leadership transition supported by specialists with transaction experience is usually an investment with a high return. Thanks to their experience, these specialists manage the process in a goal-oriented manner and identify potential conflicts—both within and outside the family—at an early stage. In doing so, they reduce the time and financial costs of the process and spare the parties involved emotional stress.
