Date posted: August 5, 2016

76% of family businesses expect to appoint a new CEO within the next 5 years

According to the 2015 KPMG/FBA Family Business Survey, the performance of family businesses peaks when the CEO is between 51 and 60. It then declines as the CEO approaches the age of 70 or older. This is most likely because, as we age, our personal goals, cognitive ability and risk profile also goes through change.

Which means that, like all businesses, family businesses need to prepare themselves for new leadership and figure out ahead of time how to transition smoothly to new ownership. To begin with, family businesses should build and support an entrepreneurial culture. Start building diversity in your management teams using the resources available in the next generation coupled with your current resource base. Promote more women into managerial positions. Leverage the diversity characteristics of your workforce such as culture, age and gender to foster high performance, entrepreneurial spirit and thinking.

Know when to pass the baton
Long-term perspective is the competitive advantage these companies hold over many organisations in the corporate sector. This means decisions are generally made with the future in mind, rather than for short-term stakeholder gain. In addition, family managers and CEOs of a family business are likely to have a longer tenure than CEOs of non-family-run businesses. There are both advantages and disadvantages to this.

Irrespective of your age, if you’re a leader you need to continually assess your own performance and evaluate whether or not you possess the skills and cognitive ability to adapt to the fast-moving pace at which your company should be operating. Do you need to adapt your leadership style to address upcoming business, ownership and/or family lifecycle transitions?
At what point you hand over the business can directly reflect on its performance. Your hand-over timeline can be the tipping point for success or failure of the business. Other things to consider are:

  • What alternative roles can you offer retirees? It’s important to harness their experience for the good of both the family and the business.
  • Do you have the right policies and practices in place to make sure your business can support both your young and ageing human resources to ensure they achieve their potential?

Here are some of the options you can explore:

  • Vary the work time
  • Put teams together strategically
  • Consider opportunities for renewal
  • Offer continuous training and upskilling

And what about the outgoing CEO? Ensure that he or she continues to have a meaningful role and purpose in his or her retirement. In other words, it’s important that the family-member CEO retires to something, rather than from something. Family businesses with documented retirement plans for the current CEO are less likely to experience conflict. In fact, high-performing family businesses were found to have a succession plan that documented a unifying strategy for the future of the family business.

A key component of any form of documentation is to first consult with fellow business members and allow them to air their views. Plans can then address the expectations of a range of stakeholders and reduce the likelihood of future conflict.

Identify the next steps in the journey of your business by asking:

  • What does our business need?
  • What does our business have to meet that need?
  • What do we still need to do to meet that need?
  • What resources do we need to put in place?

Know the pluses and minuses of the human resources in your business and then plan for their needs as well.

Future leadership plans
In the survey, 60% of the respondents said they intended to pass on the role of CEO to a family member; 30% said they intended to pass on the CEO role to a non-family member; and 10% said they intended to sell the family business within the next 5 years.

CEOs believe their potential successor should work on the following:

  • Financial management
  • Strategic planning
  • Leading/managing people

Worth noting is that younger CEOs are more open to working on the family business. They are major contributors to the business’s professionalism and have a more forward consideration of business needs and are equally more adept at developing formal plans to address these needs. They are more likely to be attuned to what is going on globally and are able to keep pace on an international level. They are also more likely to be frequently revisiting your family business vision to ensure that the business is still on track. So, when it comes to handing over the reins of the business, you should look to the next generation and put your efforts into making sure that they are ready to receive the baton.

This article has been supplied by KPMG and the advice is designed to be general in nature

KPMG Enterprise has been working with family businesses for over 100 years, and have been the proud gold sponsor of FBA for over 10 years. To discuss this article or your business challenges and opportunities further, please contact Bill Noye, Dominic Pelligana or one of KPMG’s national team of family business advisers. Alternatively, visit their website at