Rainer Kirchdörfer has been advising small- and medium-sized companies for 30 years. Nevertheless, he doesn’t subscribe to the motto “SMEs are the backbone of the German economy”. “The term ‘family business’ is more appropriate,” says the lawyer and chairman of ‘Stiftung Familienunternehmen’. Owner-operated companies, after all, are more resistant to crises, more inventive and more successful in the long term than anonymously run businesses. Provided, of course, that everything goes off without a hitch when a company is transferred from one generation of entrepreneurs to the next – Kirchdörfer’s specialty.

Despite all his experience, there is no magic formula for a smooth succession in Kirchdörfer’s desk drawer. “In the context of company succession, best practice does not reflect a straightforward approach; it always depends on the individual case,” he says. Ultimately, a business handover is a balancing act between the expectations of the older generation and the visions of the younger generation, between permanence and change, and between family and business concerns. If done well, it can be a source of creative renewal that only reinforces the company’s foundations. But there are many potential pitfalls along the way.

Rainer Kirchdörfer in front of a bookshelf is an expert in generational change in a family business
The lawyer Rainer Kirchdörfer has been consulting family businesses for 30 years.

The biggest pitfall is a disorderly handover due to unforeseen events. Kirchdörfer’s golden rule for avoiding this: Plan early and start the generational change at the right time. This is just what happened at LAPP. First and foremost, the family gave itself plenty of time during the handover. For the younger generation, this meant the opportunity to prepare in every respect for their future role as managers and partners in a long-established entrepreneurial tradition. For the older generation, it meant the chance to carefully plan their retirement and to develop new interests that would make letting go a little easier.

“Succession works best when the energy and the willingness to take risks of the younger generation can be brought into alignment with the experience and the long-term thinking of the ones handing over the business,” explains Kirchdörfer. This is why, for the older generation, leaving does not necessarily mean saying goodbye. A successful succession strategy can include allowing the outgoing generation to sit alongside their successors on the supervisory board. But both generations need to be able to establish a professional relationship on the level of the business. In other words: one group has to be willing to let go of the reins of management, the other needs to be willing to take advice. This is easier in general if both sides precisely define their new roles beforehand and if the successors are given clear expectations,” says Kirchdörfer. While these expectations are a guideline for the next generation, they shouldn’t prevent the latter from realizing their own ideas and visions. Otherwise, the opportunity for creative renewal can be lost. This also means that with every succession, the entire structure of the company should be examined within the family, and discussed and adapted to the needs of the next generation – on an individual and case-by-case basis. For this, too, there is no magic formula.

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