Our positive experience in managing the transition of power between the third and fourth generation of our family, with support from IMD’s Global Family Business Center, offers four valuable lessons for businesses preparing for succession.
Our family business Plus Pack has provided the food industry with innovative and sustainable packaging solutions for more than a century – surviving two World Wars, several financial crises and, now, a pandemic.
As any enterprising family knows, external events are big risks to the longevity and resilience of any business, but it’s the internal dynamics that can often pose the biggest threat to family businesses. At the heart of these dynamics is succession – at best, a path to a bright future; at worst, the beginning of the end.
In 2016, the fourth generation of our family took over the day-to-day running of the company, a Denmark-based firm that is 100% family-owned. It was a moment we had been planning for more than a decade. Through this journey, we came to realise, particularly through our individual and shared learning journeys with IMD, that the big challenges in family businesses – including succession – are the same globally, whether you sell cars in India, run a hotel in Japan or produce packaging for food in Denmark. Every family is alike in terms of the dynamics between the generations.
This means it is possible to follow several principles in crucial areas such as succession to ensure a smooth transition for the firm and the family. These are four key factors that helped us make a successful switch in our business and our lives.
Start early and agree on a plan and process
It is not unusual for succession planning to take at least a decade. Take out time as a family to discuss the elements of the process that lies ahead. In 2005, we embarked on IMD’s Leading Family Business (LFB) program together, an invaluable learning and sharing experience, which formed the starting point and bedrock of our succession planning over the next 15 years. We started regular meetings with LFB learnings as a guiding principle. It’s important to recognize that family discussions about the business can and should be prepared, executed and followed up on in the same way as any other formal or professional meeting. Do not underestimate the power of conversations and regular meetings, involving the entire family as well as external expertise. Lay out roles, responsibilities and milestones as part of your journey towards succession. We also took the important decision to consult with independent executive development partners, both to enhance the way we run Plus Pack together, but also to spend time as a family collaborating with seasoned family business experts and other family businesses to inform our strategy and succession planning with best practice models.
Equip the next generation for the task ahead
What needs to happen to prepare the next generation to take over, and for the current generation to feel comfortable moving on? Development and education are vital in this regard. For us, there were some clear requirements. Having benefitted from IMD’s Personal Executive Development program over a six month period in the 1980s, Steen already understood the power of investing in individual training. With this in mind, Anders, now our CEO, decided on top of a five-year business school degree and six years within finance institutions to pursue IMD’s intimate and diverse MBA program as part of the process of moving from a career in banking to general management and running the family business. After the MBA, Anders took a position in a large global company in Austria. Our collective engagement with LFB program was also an opportunity to step back and work together to learn, co-create and grow as a family. Beyond the classroom, Camilla, now Deputy CEO and member of the board of directors, wanted to improve her business learning and to get to know the business from the inside. Before entering Plus Pack, Camilla held positions within strategic communication and public relations with a MA from the University of London and a Master in Modern Culture and Cultural Dissemination from the University of Copenhagen. Today, Camilla also holds positions outside Plus Pack, having been appointed chair of one of the Danish Government’s Climate Partnerships with the business sector, a member of the Danish government’s Green Business Forum and Chairman of the Board of Danish Design Centre. Do your family members need to gain external professional experience or qualifications – and the confidence that goes with that independent path? How much should they focus on getting to know the family business? How can the next generation gain the confidence in their own ability and the trust of others to lead the business? In the end, it’s helpful to have a holistic approach to ensure that the next generation has a rounded knowledge of the family business, but also diverse expertise and experience that will help fuel the ideas of the future.
Put the fish on the table
This memorable phrase has become something of a motto for us, inspired by our participation in LFB, in which we were encouraged to engage in challenging and honest conversations as part of our learning journey. Raising difficult personal, emotional or business issues and speaking through our differences in an honest and open way can help to avoid bigger problems in the future. This can be a scary experience, but it is vital for family members to listen to each other and occasionally walk in each other’s shoes in order to better understand feelings and expectations, and to navigate areas of conflict more effectively. Family enterprises are more emotionally complex than non-family businesses because of the existing dynamics within family relationships. Expectations also change over time as roles, authority and identities evolve, so regularly engaging in honest discussion requires a strong commitment from everyone to put the effort in and to not get lost in daily business. As part of our development journey as a family, we learned to look for bonding and bridges rather than fear and frustrations.
The older generation must think beyond the business
So much emphasis is put on the next generation, that it is easy to lose sight of what happens next for existing family business leaders. Without a clear plan, older generations can linger and interfere with the new direction of the company or struggle to find meaning beyond the business. It is important to retire “to something” – to have a real challenge ahead, and this needs thought well in advance as part of your overall succession plan. Moving “to something” meaningful could entail writing a book about your experiences in business and taking on a board or chair position with another company where you can share knowledge in an independent way, as in Steen’s case. At present, Steen is chairman of the Danish chapter of Family Business International.