CEO succession planning in small and medium enterprises – Guidelines for an internal handing over of the CEO-position and a change from an owner-managed company to employed managers

Abstract

The German "Mittelstand" and its –mostly family-owned- businesses are characteristic of the country's economic power. Those small and medium enterprises, often mentioned as “hidden champions” are the backbone of the German economy, not just because they are an essential factor in the country's employment, but also the main driver growth and innovation. At some point in time, every SME will face the question of CEO-succession, and no matter who the successor will be, this process represents a major challenge for all parties involved. The aim of the paper is to develop a "roadmap" on how to pass through the process of CEO succession, handing over the "reigns" of the operative company management to one or several managers. The focus will be on the handing over to third party managers. To accomplish this mission, conclusions of qualitative research on literature will be drawn In order to provide a practical example of a company facing such a succession process, a broad overview of the Norbert Schaub GmbH, and the change the company is about to go through will be given. Results derived from the literature research will be implied in a systematic analysis of the company and its situation. For this reason, internal well as external data and information has been analyzed, and strategy tools have been applied to define the company's status quo as well as the outlook into the future. Subsequently, derived from this situation, the strategies and solutions that could be applied to handle the situation will be presented, and general guidelines shall be created to support other companies in similar situations. Semi-guided expert interviews will provide empirical data to complete the picture. The key findings consist of the fact that the most common cause for failure of succession processes is inadequate preparation and the insight hat the complexity of the process itself, as well as the influence of psychological factors, should never be underestimated. On the other hand, a properly planned CEO succession process offers improvement possibilities. Since each company and the resulting legal situation are different and since the given scope and extent of the paper did not allow an analysis of numerous corporations to find out differences compared to Norbert Schaub GmbH, an individual inspection of every company by experts should be done. This paper may not replace this individual examination, but it may give significant hints on the topic in a holistic view and which details should be considered. For reasons of the legibility, the singular male form was chosen in the text; the information refers nevertheless to members of both genders and is –unless otherwise stated- also applicable in case several managing directors are appointed.