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Succession: the importance of interim management

This article is about continuity in a family-owned company as it faces the handover from one generation to the next. This springs from the entrepreneur’s intention to pass the management of the enterprise to their offspring. Carrying this out successfully calls for good planning.
Interim management has turned out to be a best practice in such circumstances. Succession is an event that necessarily takes place over a long time. A manager brought in from outside is able to guide the process, providing the company with the tools it needs to go on down its chosen path, and also to improve the quality of management. This is what is referred to as fluid transition.
For the interim management to be able to fulfill this role as an agent for growth in a family-owned company, certain conditions have to be put in place.  They will be the focus of the following paragraphs.

Table of contents

  • Level of involvement and introduction of the interim manager
  • Action plan
  • What obstacles might succession in a family business encounter?
  • Conclusion

Level of involvement and introduction of the interim manager

It hardly takes much effort to recognize that succession is a very delicate moment in the life of a company, a path of evolution in which there is a real chance of losing part of the knowledge, competencies and vision that have been built up over the years. Help from outside allows it to better face the different phases of transition. This is already difficult, but in the case of a family-owned company it is made even more so, given the specific organizational processes and dynamics of such a company.

Interim management provides a solution in many cases in which the new generation is still not experienced enough to ensure a future for the company. However, to take the greatest strategic advantage of this powerful tool, the company needs to recognize the value of involving a manager from outside, and so lays down the foundations upon which they can act.

Unlike an external consultant, an interim manager should be given the powers to act in full autonomy and independence on the basis of a plan of agreed among the different parties and unaffected by any personal considerations.

Their mission is to plan and execute a strategy, the cornerstone of which is to infuse the successor with confidence and authority. The aim is to raise the successor’s legitimacy in the eyes of the parent handing over command. Even more important for the future, to build legitimacy vis-à-vis all the successor’s co-workers.

The role of the outside specialist is to align the aims of different people who often confuse family conflicts with their roles in the company. The specialist must dive into a reality with its own language and needs and so build a bridge between two worlds that are as yet out of step.

Action plan

The interim manager’s intervention usually concerns the resolution of company problems, addressing them through management. The objective is to put in place those conditions that will allow their work to proceed along the path that they have set out. When the main goal is generational change at the helm of the company, what role does the interim manager play? Their task  will be to strengthen the individual capabilities of the person selected as successor.

How this is achieved will depend on many different factors. In some cases the successor will need to spend some time and gain experience outside the family business; in others, on-site coaching will be enough. In all cases, the only way to reach the final goal is to share an action plan that focuses on the management of the enterprise.

The three players in this situation, the entrepreneur, the successor and the temporary management company, initially agree a clear, outlined path, at the end of which the designated daughter or son must have attained their full potential.

What obstacles might succession in a family business encounter?

 It is worth keeping in mind some necessary conditions for the succession process to take place smoothly. In general terms, a non-strategic approach to the hand-over could expose the company’s management to future dangers that should not be underestimated.

There is a general tendency to put off the event as long as possible. This can lead to the risk of a situation arising which requires rushing the process through.

One of the threats to the succession process may be the entrepreneur adopting a rigid approach. This can take several different forms:

  • Autocratic decision, without proper consultation, on who should be the successor;
  • Hasty assessment of the successor’s abilities, competencies and aptitude to lead the company;
  • Trust placed in the successor based on subjective and not emotional factors;
  • Lack of proper communication within the family, which could later lead to conflict.

It takes an interim manager to ensure a calm climate for all, and to allow both the successor and the entrepreneur to have a vision which is commensurate to the importance of the event.

Conclusion

In our country succession is a much hotter issue than it is abroad. This is due to the particular make-up of our entrepreneurial landscape, in which family-owned businesses account for more than 80% of the total. In such companies, the founder is often over 65-70 years old. The new generation is about to take over, ready to provide continued profitable management. At the same time, however, the business has to face new challenges arising from the globalization of markets and from new social behaviors generated by technological change.

Interim management thus stands out as the tool that ensures achievement of both objectives, overcoming all those issues that may derive from conflicting visions. Planning for succession is the key to being ready when its time comes. It is the interim manager’s task to ensure that the successor is adequately prepared and motivated to take over the role long held by their mother or father.

Angelo Vergani
Contract Manager s.r.l.