Through many years in (family) businesses, managing partner private equity firm investing in family owned companies and now already 18 yearrs in executive search I know from experience that CEO succession is never simple, but in family-owned businesses, it often comes with an extra layer of complexity. These companies are typically built on deep emotional foundations, long-standing traditions, and personal relationships, all of which can make leadership transitions particularly sensitive. If handled poorly, succession can create rifts within the family, disrupt business continuity, and even threaten the company’s future.
One of the biggest challenges is emotional attachment. Founders and long-serving CEOs often struggle to step aside, especially when the business represents a lifetime of hard work or carries the family name. This reluctance can delay succession planning or make it difficult to hand over control. Similarly, the desire to pass leadership on to a family member can sometimes lead to decisions based on loyalty rather than qualifications, increasing the risk of underperformance at the top.
Another common issue is the absence of a clear, formal succession plan. Many family businesses postpone the conversation until a crisis forces their hand. Without a plan, companies are left scrambling, which can create confusion, power struggles, and even harm the business.
There’s also the challenge of generational change. The next generation often has different ideas about how the business should be run, from digital strategies to company culture. These shifts can create tension if not managed properly. Without careful planning, the company risks losing the trust of employees and other stakeholders during the transition.
So how can these challenges be addressed? The most important step is to start planning early—ideally, years before a transition is needed. A good plan lays out the process clearly, with timelines, performance benchmarks, and development goals. It should be inclusive, involving both family and key non-family executives, and possibly outside advisors to bring objectivity.
Strong governance is also key. Creating a professional board with independent members can help guide the process and keep decisions focused on what’s best for the business. A family council or charter can help clarify the roles of family members, set boundaries, and ensure transparency in decision-making.
Preparing the next generation is another essential element. Whether the successor is a family member or an outsider, they need thorough exposure to the business, mentorship from current leaders, and leadership training. This not only prepares them for the job but helps them build credibility.
In some cases, it may be wiser to appoint an external CEO—either temporarily or permanently—especially when no suitable family candidate is ready. While this can be a tough call emotionally, it often brings much-needed experience and fresh perspective to the company.
Ultimately, successful succession in a family business is about balancing the legacy and values of the past with the demands of the future. It takes foresight, honesty, and a willingness to put the long-term health of the business above personal or family preferences.
