How interim management supports company succession in SMEs

Bertelsmann, Otto, Rossmann and Trigema are just a few of the many family-run companies that shape the German economy. A new era has recently dawned for all of them: The company owners have passed the baton to their children and completed a generational change. They are not isolated cases: Because in view of demographic change, it is becoming increasingly relevant to manage company succession in the SME sector. But this is anything but an easy task. Planning and preparing for company succession in family businesses involves a whole range of complex challenges and difficult decisions. Our article sheds light on why it is worth relying on interim managers when it comes to company succession in SMEs and how they can specifically support family businesses with their many years of experience and comprehensive expertise, for example as specialist consultants for company succession.
 

A German family business made a name for itself at the beginning of January 2024: After more than half a century, Wolfgang Grupp, also known as "Mr. Trigema", retired from operational business and handed the company over to the next generation, his son Wolfgang and daughter Bonita. The fact that this was carefully considered and planned well in advance is demonstrated not only by the holistic communication, but also by the seamless transition. In addition, the children have previously held management positions at Trigema and are therefore very familiar with the company. Yes, it has to be acknowledged without envy: Trigema has done a great deal right in terms of succession planning and company handover and is in the process of successfully continuing the continuity for the Trigema business family, customers and suppliers - with all its firmly anchored values.
 

Company succession in SMEs - a tricky task

However, things rarely go as smoothly as they did for the Grupp family. More and more frequently, company succession in family businesses triggers a crisis situation. There are many reasons for this: the management team leaves earlier than planned, the successor is not available at the right time or is not sufficiently prepared. In the worst case, there is no successor yet. Or the company is to be sold and no buyer can be found - or only much later than expected.
 

38,000 company successions in SMEs expected per year

The figures from the Institut für Mittelstandforschung (IfM) Bonn clearly underline the fact that family businesses urgently need to address the issue of company succession in SMEs. For the five-year period from 2022 to 2026, 190,000 company handovers are expected in Germany, i.e. an average of 38,000 in one year. This is 40,000 more than the last estimate (2018-2022). This trend will not only continue in the coming years, but - driven by demographic change - will intensify further: This is because the baby boomer generation - and therefore the owners of many family businesses - will retire from the business due to their increasing age, leaving a large gap.
 

A case for interim professionals: company succession in SMEs and family businesses

Instead of letting valuable time pass until the day of the company handover - which, according to IfM Bonn, will be a reality for many family businesses in the foreseeable future - it is important to plan company succession in SMEs at an early stage. This is because a delayed or even unresolved succession not only paralyzes the economic success of the company, but also creates uncertainty among employees and jeopardizes the preservation of family assets. This is where interim managers can provide optimal support for the succession of family businesses on an ad hoc basis, as a short-term bridge, or in the long term, as a strategic resource and specialist consultant.

The following wide-ranging possible uses are conceivable:

• Possible use 1: Paving the way for a successor
• Possibility 2: Mediate between the generations
• Possibility 3: Form a leadership tandem
• Possibility 4: Develop leadership and corporate culture
• Option 5: Initiate transformation processes
• Option 6: Supporting the sale of the company
   

Employment option 1: Paving the way for the successor

A company handover cannot always be planned as perfectly as would be desirable and necessary. It is not uncommon for companies to have to bring forward the handover of staff because the owner suddenly falls seriously ill or is otherwise unavailable. The crux of the matter is that if the successor is not yet ready to take over, this can lead to turbulence in the management team. Such a management vacuum has fatal consequences for the family business, such as a faltering transformation, declining employee satisfaction or blocked investments. This makes it all the more advisable to rely on interim managers for precisely this transitional period. Thanks to their adaptability, implementation skills and wealth of experience, it is easy for them to take over the management until the successor takes over and thus ensure the necessary continuity in the company. Interim managers can also help to develop a "roadmap" for managing succession in the family business. This includes personnel responsibilities, rules and values, strategies and goals. Important: There is of course no holy grail. Every company needs an individual, tailor-made strategic roadmap for company succession in SMEs. On the one hand, this should pursue a stringent implementation of the handover. On the other hand, the roadmap must be flexible enough to be adapted to a wide range of events and deviations as required. In this way, the use of interim managers can pave the way for the next generation and thus significantly simplify company succession in the family business.
 

Possibility 2: Mediating between the generations

Another extremely sensible option is for interim managers to actively accompany the transition from owner to successor and act as a coach or specialist advisor for company succession in both directions during this time. In their role as mentors, they can professionally prepare the successor step by step for the tasks ahead during the initial phase. Interim managers act as trustworthy helpers and reliable sources of advice and support during the succession process in the family business. At the same time, they can raise the new management's awareness of hidden problems in the company that may have crept in quietly and secretly over the years.

However, the whole situation is not just new for the successor: although the business handover is decided and planned well in advance, many owners find it difficult to let go. This is not surprising. After all, they are handing over the family business and thus their life's work into other hands as part of the business succession. Here, too, interim managers can use their fine intuition to make the handover easier for the senior.
 

Possibility 3: Form a management tandem

Even if the transition is seamless and everything is perfectly prepared, it can be advantageous to bring an interim manager on board for the initial phase. Especially during this time of upheaval, a leadership tandem of successor and interim manager is worth its weight in gold. This type of co-leadership not only has a harmonizing effect, as traditional structures and different interests can be better balanced. A management tandem also opens up the opportunity to provide new impetus. If family businesses take advantage of the synergies that arise from the complementary strengths of interim managers and traditional executives, they can significantly increase their adaptability and resilience when it comes to the succession of the family business. Collaboration between traditional and interim management is therefore an effective tool for leading the company into a successful future.
 

Option 4: Developing leadership and corporate culture

Transferring a family business to the younger generation also means that the new management must position itself. The expectations of managers and employees are usually very high. It is anything but good if the successor merely appears and acts as a "daughter or son of". After all, company succession in SMEs and family businesses is a great opportunity to question existing structures and business processes and bring a breath of fresh air into the company. Interim managers act as the ideal support and specialist advisor for company succession in order to further develop the management and corporate culture. Together with internal management, they help to initiate a rethink among managers and employees and moderate it accordingly. When it comes to company succession in family businesses, it happens time and again that long-standing trust deficits become apparent. These must then be overcome by setting a real example of a new management and corporate culture and making the company fit for the future in this area.
 

Option 5: Setting transformation processes in motion

If you have successfully managed a company for 20, 30 or more years, it is understandably difficult to question the past. After all, this means taking a critical look at your own business model and therefore at yourself. The fact is that the pressure on companies to change is greater than ever and will become even greater in the future. A company succession in the SME sector is the ideal opportunity to drive change and break new ground. Interim managers have extensive specialist and methodological expertise to initiate transformation processes. The special position they occupy within the corporate structure helps them to do this - including in the case of company succession in family businesses: Interim managers act as external neutrals. This puts them in a position not only to recognize problems differently, but also to address and solve them differently. At the same time, they know that change in the course of company succession in family businesses can only succeed together with the family. This knowledge and their ability to implement change enable them to tackle major changes that benefit the company in the long term.
 

Possibility 6: Supporting the sale of the company

Even in the best families, there are times when there is simply no successor. According to IfM Bonn, more than a quarter of family-run companies are considering selling their business as part of company succession in the SME sector (29 percent). Interim managers can effectively support the sale of a company in several ways and thus relieve the burden on the owner. They provide valuable support to "make the bride pretty". This means, for example, carrying out restructuring through to realignment - with the aim of making the company more attractive and thus increasing its sales value. Interim managers can also help to identify potential buyers and, if necessary, investors for the succession of family businesses. Once a successor has been found, the interim manager leads the negotiations on the purchase price and the transfer modalities. The entire process is usually very lengthy and requires the full concentration of everyone involved. After all, it's not just about a lot of money, but also about the employees and all other stakeholders in the business. This makes it all the more important for family businesses to have an expert or specialist advisor for business succession at their side for this challenging undertaking.
 

💡Our recommendation
Find out more in our free brochure Connected Workforce: With Interim Management to a Connected Workforce to find out what the Connected Workforce is all about and why the concept is also a promising solution for family businesses.

Challenging the status quo, retaining the tried and tested, driving forward the new

Whether the company is to be sold to external parties, passed on within the family, junior or senior managers need coaching or there is a lack of both time and specific expertise: Interim managers can support company succession in SMEs and family businesses in a variety of ways. By questioning the status quo, retaining the tried and tested and driving forward new ideas, they make a valuable contribution to the successful continuation and further development of the company. They set the successor on a sustainable course so that the departing owners can enjoy a well-deserved retirement without any worries and meet the new generation with pride.

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Are you planning a generational change? Or is the succession of your family business just around the corner? We will be happy to support you with this challenging project!