Who Will Be The Next CEO?
So who do you think will be your next CEO? Have you chosen on capability or blood lines?
The choice of the next CEO for the family business is often the source of great anguish in family businesses. And it can be the catalyst for division and family break-ups. It must be approached carefully so as to select the right candidate and to place the appropriate support structure around them. The arms-length, non-emotive response to the question of ‘Who should the next CEO?’ is to select the best-qualified person for the job and if they are not a family member then so be it. Reality and practically, however, is quite different and it’s not just a matter of the best-qualified person but their ability to win the support of the shareholders of the business. Today that may be you but tomorrow it will be the next generation.
Can you think of any business where a CEO can survive and do their job without the support of the majority of the shareholders? Even a minority shareholder can make a CEO’s position untenable.
Again, this becomes a discussion to be led by the current leaders that engages the next generation. And it considers not only the role of CEO but also the governance structure in which they will work. The governance structure may involve the establishment of a family council separate from the business board so that family matters and the interest of shareholders can be addressed without directly impacting business discussions. I think the largest number of family members I have seen sitting in on a business board meeting was around 30 family members. Clearly not a workable approach. You may also appoint an advisory board to support the new CEO. This board would consist of independent experienced advisors relevant to the business, usually without any voting power, whose sole task is to advise and support. Also, the delegated authority vested in the CEO may be limited by dollars or nature of decision, so that they require board approval to act, and perhaps even family council approval.
So now has the context of choosing the next CEO changed for you?
In choosing the right person, consider who:
1. Will have the support of the next generation of shareholders.
2. Can work with those shareholders, potentially through a family council, to grow the business.
3. Will be able to work well with the members of an independent advisory board that will sit beside them to bridge any experience or knowledge gap they may have.
4. Is willing to work within the delegated authority they are granted.
5. Has the right character to be a worthy leader of the family business.
6. Is willing to commit themselves 110% to this task.
#familybusinesssuccession #familybusiness
An Invaluable Resource — ‘Transition — Orienteering The Lands of Succession’
