CEO Succession in Family Enterprises: Don’t Wait for the Night Before Noon

01

Start the process of succession planning now

That’s because CEO succession is a long-term undertaking. To find (and prepare) the right person to lead your family enterprise into the future, it’s important to lay the right foundations, including gaining alignment on your needs, guidelines, and processes. For this, the board needs to be aligned on a forward-looking leadership profile which will inform the selection and development of candidates.

02

Cast your net 

The goal of your succession planning process is to highlight a pipeline of high-performing internal talent that will be able to sustain your company for years to come. But you shouldn’t rule out external candidates completely. While internal candidates tend to be stronger in terms of cultural fit and values, external candidates can offer different skill sets and a fresh perspective. The key is to assess (and benchmark) the best leader for your business—both at its particular stage and for the future.

03

Don’t shy away from addressing sensitivities

Nobody wants to think about the person who will inevitably replace them—particularly in a family enterprise. But, for the wellbeing of your business, the question has to be asked. The best succession plans are ones where boards and sitting CEOs are able to come together constructively to plan, measure performance, set projections for the future, and mentor future leadership candidates.

04

Set your CEO succession process up for success

Define your core culture and values
Start by clearly articulating what makes your family business unique. Document your founding principles, family values, and the cultural elements that have driven your success. Understanding your cultural DNA helps ensure that succession planning preserves what matters most while allowing for necessary evolution. Involve multiple generations in this process to create shared ownership of the company's future identity. 

Set clear criteria that match your company’s current—and future—needs 
Ensure there is alignment between all key stakeholders and decision-makers on what your next leader should look like. While family ties are important, you will need to establish clear merit-based criteria. This will help you create a Success Profile: a blueprint of the skills and traits your next CEO will need. Then, look inside your organization and ask yourself: “Does anyone have the potential to develop into our next CEO?” Aligning stakeholders can be particularly complex in family enterprises. Independent advisors can help you facilitate difficult conversations and resolve conflicts.  

Establish clear timeframes, with short-term milestones and long-term goals 
You should expect to invest five years on average to train internal candidates. Add in search time and onboarding, and each CEO succession process cycle could take anywhere from 7 to 10 years, from beginning to onboarding.  

Devise a thorough assessment process that identifies leadership potential and development needs 
A good process will help determine which candidates have the potential to be strong future leaders. It’s important to test all candidates equally against the same criteria, covering temperament, mindset, knowledge, and other relevant areas. Generally, we recommend focusing more on skills and traits rather than existing C-level experience. Our approach to assessment and development begins with a Leadership Portrait, which describes who your leaders are today—and what their potential is for becoming great leaders tomorrow.  

Invest in ongoing development for internal candidates  
This might include formal education, external work experience, and structured rotation through different business areas. Consider implementing a mentoring program where internal or external leaders can share knowledge and experience with potential successors. Encourage next-generation leaders to develop their own vision for the company's future while respecting its core values—this balance of innovation and tradition can be a powerful driver of growth. 

Create development plans for candidates not chosen for the CEO path 
Not everyone who you consider for the CEO role will be successful. But that doesn’t mean that they aren’t valuable talent that deserves to be developed and given solid progression opportunities, nonetheless. So, ensure you build parallel development paths for the candidates not chosen for the CEO succession path, so that they feel supported, appreciated, and like they have clear opportunities for success. And even if they’re not ready for immediate succession, they may still turn into strong candidates for future succession cycles. 

Safeguard the business with a crisis plan for emergency situations
Succession plans are often developed with a specific timeline in mind; but sometimes emergency situations occur, and a CEO needs to be replaced ahead of schedule. As an ongoing, living effort, the succession planning process is invaluable for having materials ready and candidates identified in those situations, and for having a common language and mindset about what matters most for your company's next leader. 

Continuously monitor and improve 
Even after the new CEO is selected and onboarded, there’s still work to be done. The board will need to work out what success looks like in the CEO’s first year (which isn't necessarily financial metrics). They will also need to conduct a thorough post-mortem of the succession process to note what went well, what could be improved, and whether anything in the Success Profile needs to be amended or updated going forward. 

05

Partner with an experienced leadership and search advisory firm

CEO succession isn’t an everyday occurrence. Even the most experienced of board members will only have gone through two or three CEO successions over the course of their careers. At the same time, appointing a CEO is probably the most pivotal decision you face—and it has lasting implications for your company’s performance and its place in the world. 

Engaging advisors who can provide inside and outside perspectives and wise counsel to guide you through the process can set you up for success and ensure you not only find the best fit for now—but that your company is ready for the future. Backed by 50 years of experience, we truly understand the nuances of succession planning in family enterprises, with advice that reflects your current stage of growth (e.g. founder-led, multi-generation, or externally run). And once you’ve made your selection, we can also ready your candidates for the top job, with tailored mentoring and transition support. 

Shawn Cooper

Sanjay Kapoor

Justus O’Brien