Lift Report

Ninety (90) per cent of companies in Germany employ between 1 and 9 staff members and generate an annual turnover of up to 2 million Euro. A further eight (8.2) per cent of companies in Germany employ between 10 and 49 staff members and generate up to 10 million Euro. Or put another way, ninety five (95) per cent of companies are family run firms! Family firms together account for just under forty two (42) per cent of turnover and employ fifty seven (57) per cent ofthe total workforce in Germany. These percentages apply analogously to the lift industry, where the focus is on the big four suppliers operating alongside a large number of smaller fi rms.

The characteristic feature of family firms is the determining influence played by a family or a family group on the development of the company (definition: WIFU). It is this characteristic feature in its various different forms of expression (family/company/ assets) which helps us to understand the success story of many family businesses and at the same time offers concrete indicators of the hurdles which have to be overcome during the period it takes to arrange a future management successorship. Arranging for a successor does not take between 5 and 10 years because family businesses are so complicated, but because of the complexity of the connections involved with all their rational and emotional ramifications – the central facets of all successorship stories !

The existing management generation is contemplating handing over its life’s work to someone else! In many cases, these are entrepreneurs who have survived long hard years struggling to establish a business, and fought through in the face of self-doubt about whether what they were attempting to do was realistic. Step by step, they achieved greater success, struggled to keep pace with the rapid market changes and are now able to finally enjoy the hard-earned fruits of their labours. They often feel – understandably so – that they are at the peak of their powers and experience, and because of their age – actually far too soon – they are now faced with the issue of handing over control of their company.

From the viewpoint of potential successors, what counts are professional perspectives for the future. Some give the issue little thought on the assumption that they will in any case step in to take over the family business. Others, having completed an apprenticeship or higher education, perhaps studied at a foreign university or worked in a company abroad, see themselves as sitting in a waiting loop. Yet another variant, in which the children do not envisage themselves taking over the company, is becoming ever more widespread. This attitude, although often accompanied by the underlying security that “if need be” there is always the company successorship to fall back on, lends a dimension of “supposed freedom” to the decision which should not be underestimated.

Back to the perspective of the older generation . In smaller sized businesses in particular, the issue of old-age security frequently exerts a considerable influence on the time chosen for retirement. As an alternative to an early departure, a monthly withdrawal arrangement from the company is a conceivable option. This generally requires a handover strategy to have been agreed unanimously with the involved family members and their partners, as the central issue here is the future viability of the company (economy). Consequently, the family must focus on resolving a realistic way forward in the future, both for the good of the company and also the family (such as a fixed periods without a drain of capital from the company). Where no unanimous agreement is resolved or where there is a lack of clarity in the long term regarding successorship within the family, another option exists: that of a future outside of the family as the result of a management buy-out or a management buy-in. Sale of the company can also be a good solution for all those involved. These options may appear a long way off for many older generation business owners, but they are not by any means unrealistic – given a suitable planning horizon.

But before resorting to an external solution, the aim must first be to explore other dimensions for handover of the business within the family – in the form of subjective viewpoints. Original comments registered during consultation include for instance: “He still won’t trust me to do anything.”/“It’s time you stood on your own two feet!”/“The young generation today have a much better education … but sometimes I wonder how much of it they actually use!?”/“My father won’t give up until they carry him out in a box … and even then he will still probably be telling me what to do from beyond the grave.”/“If he would only just ask me...!”/“If I don’t stand in as successor I would feel as though I had destroyed everything my ancestors had achieved!”

To ensure that the process of chewing over concerns and doubts between the generations is constructively managed, a development process is called for on both sides. The up-and-coming generation is called on to review what qualifies them to become entrepreneurs, to “brush up” any grey areas and to proactively represent the wish to succeed to the business (irrespective of the fact that they are sons and daughters!). The role of the retiring generation is to come to terms with their own view of themselves as indispensable and to discover the benefit of lightening the burden in their own personal perspective planning.

It is not unusual for the senior generation to play the “prankster” (and this includes women), and fail to pass on all the skills associated with the job. What does this mean? They are experienced, they are conscious of their own competences, have evolved a certain air of shrewdness (particularly in evidence in specialist forums ), and radiate a winning aura of competence (usually minus any kind of arrogance). Their strategy of “only partially letting go” becomes evident for example in the fact that while they have transferred the reins of management at the right time, they still (to be on the safe side) have the say in supervisory bodies (the supervisory board, advisory committee etc.). Berthold Leibinger (77) of Trumpf AG, for instance, withdrew from the management of the company in good time, transferring the chief executive role to his daughter, while still chairing the supervisory board to this day. Heinz Dürr (75) of Dürr AG also remains to the day as chair of the company’s supervisory board. Hans Peter Stihl still heads up the advisory committee, his son is Chief Executive of the Stihl subsidiary, while successor to the Chief Executive role is Bertram Kandziora, an outsider (StZ 6. 8. 2008).

What do these examples show us? They point towards the necessity for early clarification processes in terms of the expectations of those involved (older and younger generations) and in terms of the technical conditions needed to evolve a clear strategy for the future of the company in good time. Studies carried out on the progress of company handovers testify to the fact that investment is put back on average by up to five years where succession arrangements still remain in limbo (IfM). This delay makes for difficult starting conditions for a newly established successor due to lack of liquidity.

As every company has its own individual history, the people involved have different careers, the markets served by the relevant products and services are different, the core competences are perceived to a greater or lesser degree and finally the aspect of liquidity is the decisive factor in determining the speed at which strategic considerations can be implemented in operational practice, specific solutions are called for in every company. It takes time to sound out the best possible solution: a well thought-through successorship arrangement takes between 5 and 10 years to complete!

Children, no matter how excellent their education, are not yet entrepreneurs, and successful entrepreneurs do not necessarily make good teachers! What do both sides need to learn? We are talking here about two columns: 1. The system which is the “company” in the area of conflict between the organization and the persons involved, and 2. The professionalization of the successor to entrepreneurship (together with others in a comparable phase of orientation). It is about the discovery of whether the newcomer is in essence entrepreneurship material. It is also about finding out whether he or she is not entrepreneurship material. Because even those who discover that they are not entrepreneurship material are not necessary any less successful. Clarity is the key to success here. Entrepreneurship is characterized by the capacity for leadership, willingness to take risks with economic competence, the ability to assume clear sighted overall responsibility and to cope with crisis situations. Entrepreneurship calls for passion! The earlier those responsible (owner family / co-shareholders) set out on the path that leads to this process of recognition, the earlier it will be to establish clarity about the future successorship arrangements (internal/ external). Both generations are the winners , and the family which owns the company remains united despite widely varying individual perspectives.

In order to develop the best company successorship solution for the future, what is needed is time – for all the reasons outlined above. It is quite common for there to be several handover variants to be examined (internal and external variants). The paradox – that the older generation generally wants its life’s work to be continued within the family, while continuously voicing reasons to postpone the moment – is a contradiction which in human terms is easy to understand. Finding a professional answer to this contradiction is the core purpose of providing consultancy and support for family businesses as we understand it: Consultancy skills combined with quality and expertise from a single source (architectural blueprints setting out corporate strategy and its concrete implementation in the business). If this strategic approach to a solution is successful, all those involved bear joint responsibility for the determined successorship arrangement in the long term. The fiscal framework conditions, testamentary arrangements and notarially authenticated agreements only come into play in the time frame when the strategy of the entrepreneur and the interests of the entrepreneur’s family have been clearly set out – in both rational and emotional terms!

This type of clarification process does not necessarily succeed using only the company’s own resources, but how many companies nowadays are capable of producing everything themselves?

There is only one answer to the question ”How does the lift move forward to the next generation?”: With entrepreneurs who are passionate about their company, and a team capable of successfully coping both technically and mentally with unplanned situations!