Heir Apparent

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Strong leadership is essential for the growth of any business, but in a family business it’s the glue that binds the branches of the family tree together.

As those branches grow upwards and outwards with each new generation, having a unifying leader becomes ever more crucial to preventing conflicts—and surviving past the tricky third generation.

So, how have Europe’s most enduring family businesses managed to find the leaders they need to thrive?

We partnered with Bocconi University to carry out in-depth interviews with dozens of leaders at some of Europe’s most-successful family businesses to find out more about how they manage succession.

Here are the top three key insights we gleaned from our research.

Look inside and outside the gene pool

Founders of family businesses often have visions of their grandchildren and great-grandchildren running the business one day. It never occurs to them that their grandchildren and great-grandchildren may have dreams of their own—or may not have a head for business, or the right leadership skills.

It may sound obvious, but the best next CEO for your family business might not be a family member at all. In fact, you might be surprised to know that eight out of 10 of our families had a non-family CEO by the third generation.

To some people, the thought of handing the reins to someone from outside the family may seem like an act of betrayal, or kind of admission of failure—especially for anyone still living in the shadow of the founder and their legacy.

But it could be the best way to ensure a healthy future for the business (and consequently, the family) for generations to come. Forcing family members to take on responsibilities they don’t want—or aren’t qualified to do well—will inevitably take a toll on the business, and eventually on family harmony.

Instead, leaving the day-to-day running of the business to people outside the family—just as Porsche decided to—can help draw a line between the family and the business, preventing family conflicts from getting in the way of sound business decisions. And a non-family leader may also be more open to taking the business in new directions and into uncharted territories, rather than just doing things the way the family has always done them.

Hiring in top talent from outside the family has one other advantage: it gives those family members who want to take an active role in the business an incentive to work hard and earn their position, rather than simply expect to be anointed. And it lets them know that if they want to land the top job, they have to be able to compete with best in the industry – not just the best in the family.

Look for this specific trait

What does it mean to be a strong leader? The word ‘strong’ might imply someone who rules with a cool head and a firm hand. But in a family business, the leader needs to be someone with the dexterity to get the family to look beyond their personal differences to focus on the business at hand. In fact, the leaders of our 10 family businesses have very often been warm, caring and generous characters, who were on good terms with everyone in the extended family (even the difficult ones).

What they show us is that leaders of family businesses—whether or not they’re actually part of the family themselves—cannot be emotionally cold. They need to be highly emotionally intelligent and discrete, with the knack for diplomacy. In the words of one, “a family leader is someone who must know everything, but act as if he or she knows nothing.” They’re also careful never to speak ill of other family members in public, or behind their backs. When they need to have difficult or sensitive discussions, they always do it one-on-one, behind closed doors.

At the same time, they can be tough with family members when they need to be, unafraid to challenge someone if they’re in the wrong or selfishly put their own personal interests before what’s best for the business. They can do this because everyone understands that they’re only trying to do what’s best for the business, not trying to impose their own will or flex their ego.

The same goes for non-family leaders of family businesses too. When our 10 families hire top talent from outside the family, one of the things they look for is an ability to get along with (or at least, command the respect of) most of the family. They evaluate their managers, directors, and consultants not just on their business performance, but also on how well they understand the family dynamics.

Finding the right leader doesn't happen by chance

Like any business, family businesses need a constant, continuous pipeline of leaders at every level, to ensure that as one generation moves on the next is ready to step up and take their place—and the next behind them, and the next. Just like a relay race, one generation passes the baton to the next seamlessly, with barely a pause.

All 10 of our families know that achieving this constant talent flow doesn’t happen by chance. So, while they keep an eye on the external talent market, they also seek to continuously develop potential future leaders within the family too.

Crucially, they engage family members with strong potential early on, staying open to their ideas, and giving them the platforms and tools they need to make them a reality. For example, a next-generation member of the Sella family was given the chance to progress their ideas on business-model innovation, allowing him to distinguish himself and progress in a career that eventually led to a leadership position.

And at Groupe SEB, a team of next-generation leaders suggested creating a financial vehicle that was later used by the family to buy shares of the family’s public company. In doing so, they shored up family control of the business that had been weakened over time when some family members had sold their shares.  

By engaging these future leaders early, these family businesses ensure that if they decide in the future that it’s the next generation’s turn to steer the ship, these individuals have already developed the first-hand experience, knowledge, and leadership skills to do the job justice.

Yet our family businesses also recognize that not everyone is interested or skilled in business. So, they also create room for family members to take on roles on the family council, family foundation, or spearheading issues like sustainability and wellbeing that may be close to their hearts.

The job of aligning family members to different leadership roles often falls to a “Leadership Orchestrator,” who often emerges during the second or third generation. But it also falls to the chairperson or CEO to also spread the message that the top job is not the only one that counts—that a wide variety of leadership roles are available to give everyone in the family the chance to play an active role in the business, in their own way.