Jan: Assessments are a useful tool in large companies for mapping out the potential of employees and future development. Why are family businesses less inclined to use this tool?
Hans: “While seeking external advice is often useful, assessments sometimes also miss the mark. For family businesses, an assessment is essential when the next generation is ready to take over at the helm. It helps to objectify that process and make an evaluation.”
Pursey: “Despite the fact that I think poor-quality assessments are rife, an external perspective can take the sting out of the succession process. Especially if you combine this tool with other ones so that the process takes place smoothly.”
Jan: The heirs – or ‘NextGen’ – often seem insufficiently prepared to follow in the footsteps of their parents or family. And yet, such a preparation is crucial if you want to avoid problems, isn’t it?
Pursey: “Start the succession process as early as you can and ask yourself two questions as a family business: who manages the business? And who maintains the relationships with shareholders and family members? To secure your long-term survival, you must dare to tackle these dynamics simultaneously instead of having one CEO do everything at the same time.”
Jan: The last few years and months have been turbulent in macroeconomic and geopolitical terms. The war in Ukraine, the energy crisis, delays in the global supply of raw materials and resources, and so on. What assets do family businesses have to remain resilient? Why do family businesses recover more quickly after crises?
Pursey: “In the short term, every company will struggle in a crisis. Family businesses are no different in this respect. In the long term, many family businesses tend to be slower when it comes to reducing their R&D and they are also less likely to dismiss key employees. This allows them to swing into action more quickly when the recession wanes and economic growth resumes.”
Hans: “Family businesses have a kind of speed, flexibility, and creativity which is less prevalent in large corporates. Thanks to informal management practices, employees are more engaged and family businesses come up with creative solutions that you don’t find so often at corporates.”
“Timely preparation and external guidance for the transition to the next generation are crucial in a family business.”
Jan Oosterlinck, Partner Family Business Advisory BDO Belgium
Jan: Finally, family businesses are often accused of being overcapitalised. Will their more conservative financing structure prove to be the right decision given the current economic turbulence?
Pursey: “While this is true to a certain extent, it’s not a universal recipe. When money was scarce during the credit crisis, many conservatively financed companies benefited. During the COVID-19 pandemic, money was cheap and turned out to play a less important role. Family businesses do have the advantage of being able to pay more attention to their internal management in times of crisis, whereas CEOs of large companies must focus primarily on keeping the company’s shareholders happy.”