Recruitment of a new CEO for the owner-managed company

Finding the right person to the CEO’s seat is in many ways the most important and strategically critical task in family-owned and owner-managed businesses. It takes dedication, competence and professionalism, but also the ability of self-reflection is central in the search for a new CEO.

The Danish business environment’s family- and owner-managed companies’ importance for the Danish economy cannot be over exaggerated. We can find owner-management in some of the country’s largest corporations as well as in the growth segment in the small and medium-sized enterprises (SMEs). These companies create export, jobs, growth, knowledge and contribute to putting Denmark on the global business map.

The Danish family- and owner-managed companies are among the world’s best when it comes to creating growth. This is evident in several analyses in 2018 where Danish family- and owner-managed companies are compared to similar ones in 53 countries. When looking at the global comparisons, the data draws a picture that emphasises that it is a substantial larger part of Danish companies which experiences two-digit growth rates and increase in revenue.

The economic growth contributes to the creation of new jobs and business opportunities which at the same presents new and bigger opportunities for the family- and owner-managed companies along with new challenges.

External powers in the management team

The opportunities and challenges that derive from the economic growth can have very different characteristics. These can for instance be ambitions of additional growth, increase in investments for product development and internationalization. Or it might be that the family-owner or owner-manager is at a point where the goal is a shift in generation or selling the business within a short period of time.

Depending on the context and the goal, it can be necessary to investigate how one as an owner-manager can strengthen and develop the company’s management structure to accommodate the new opportunities and challenges. And based on the previously mentioned analyses, there is an indication that Danish family-owned and manager-owned companies are more successful in this regard when comparing to their foreign counterparts.

This can among other things be seen in that the Danish companies have a higher tendency of assigning the daily management task to external CEOs and managers. The analyses also show that it is only one out of ten Danish family-owned businesses which plans to hand over the ownership and management tasks to the next generation in the family.

However, it can be hard to loosen your grip on the steering wheel and let a new, external CEO take the responsibility. As an owner-manager, you are deeply involved and engaged in your company while being accustomed to taking the responsibility in both up-swings and down-turns.

Identifying the right CEO

A prerequisite that naturally has to be secured with a new, external CEO is that the person in question has the experience and professional qualifications to fulfil the role, take on the tasks and to realize the goals of the company. If the external CEO is to succeed in bringing in his/her competencies into play, it is just as important that he/she has a well-functioning personal interplay with the owners. This is stated by Kim Bisgaard, managing director and industrial psychologist in BISGAARD+, who has many years of experience in recruitment of CEOs and managers in private as well as public organizations:

“The new, external CEO and the owners’ social compatibility and interplay is defining of the future collaboration. The appropriate match approaches the task with ambitions, humbleness and a healthy respect for what the owner(s) has built while also having confidence in his/her own competencies, skills and ideas. The match has to be thoroughly analysed, developed and secured in the recruitment process.”

At the same time, it is important that the new CEO can trough unity establish workplace to unfold the potential:

“A new CEO must be able to provide to, in a free and honest manner, challenge the owner and contribute with new input in the pursuit of the company’s goals. The CEO must be able to make and execute decisions. By doing so, it secures a constructive collaboration with mutual respect between the CEO and the owner.” Kim explains.

An overall perspective embracing the details

Fundamentally speaking, it is safe to say that a new CEO must contribute with something new and valuable.

Something that the company lacks and has a demand for. The demand varies and depends on which phase the company finds itself in along with which ambitions there may be for further development.

For instance, if you have plans of expanding to Germany, there may be a demand for a CEO with insights and knowledge about this market. If parts of the value chain have to be restructured, you need to have competencies in that area. If the company is to be sold, it may be necessary with a CEO who has experience in developing and executing an exit strategy.

In relation to this, Kim Bisgaard points towards that it is important for the company to be at terms with who you are, where you want to go, and what it takes to get there:

“The process of finding a new, external CEO can with advantage be viewed upon as an opportunity to simultaneously follow through on a strategic development process for the owner-management. When we recruit a new CEO, we create a frame in which new directions and new opportunities are part of the dialogues and the processes that we contribute with” he explains and then elaborates:

“It always includes a preliminary, in-depth and qualifying dialogue with the owners and perhaps other parts of the current management. This is the foundation of a qualitative and thorough recruitment that creates value in the long term. We incorporate the business-related, culture-related and the human-related as a starting point in the process.”

Published by Christian Meklenborg, BISGAARD+. Translated by Mikkel Kjærum.

Sources:
PwC Family Business Survey 2018
PwC: ’Ejerlederanalysen 2018
Morten Bennedsen og Kasper Meisner Nielsen: Familievirksomheder i Danmark (2014)
Dansk Industri Analyse (2018)