Passing The Baton In Family Run Manufacturing Firms
Jonathan Burke, partner and head of the industrial manufacturing leadership practice at executive search specialist, Berwick Partners, explores the skills and characteristics required by the next generation of family-run manufacturing business leaders.
The post-pandemic era has seen a spike in the number of outgoing managing directors (MDs) and CEOs in family-run manufacturing and engineering businesses. The surge was fuelled by a combination of pandemic-induced burnout and reflection, as well as naturally timed succession.
However, potential successors from within the family sometimes lack the capability, or the desire, to assume the mantle – assuming there is someone in the next generation to hand the role to. Despite this challenge, it presents an opportunity for family-run businesses to redefine their leadership and find individuals who can steer the organisation towards long-term success.
What Does The Future Family Business Leader Need To Succeed?
Family-owned and run manufacturing businesses often look for a custodian; someone in the image of the original founder, or current CEO, who can ensure the business continues to succeed. However, in today's dynamic business environment, marked by geopolitical shifts, rapid digital transformation, and the relentless pace of industry 4.0, this traditional approach carries inherent risks.
To ride the wave of disruption, the future leader should embody three characteristics; the ability to embrace and effect change; experience of global markets; and a technology-oriented mindset.
Specifically, they should be capable of fostering a culture of modern technology creativity within the leadership team. This type of individual is not only adept at nurturing innovative ideas, but also possesses a unique blend of technical engineering expertise, product development experience, and a deep understanding of the dynamics of family businesses.
They can navigate the delicate balance between embracing the family-owned culture and cultivating a positive leadership environment that encourages entrepreneurship and the sharing of ideas.
To effectively lead in a technology-driven landscape, the ideal candidate should ideally possess a solid technical engineering background. This foundation enables them to comprehend complex technological advancements and make informed decisions regarding their integration into business operations. Additionally, experience in product development and design equips them with the knowledge to align technological innovation with market demands, ensuring the development of innovative products that resonate with new and existing customers.
Adaptability and exposure to diverse environments is also critical. Leaders with previous experience in large corporate environments often bring valuable exposure to diverse technologies, cultures, and markets. This equips them with the ability to navigate the intricacies of a rapidly transforming global business landscape and adapt to evolving industry trends.
All of this must combine with the agility to work within the hierarchical structures often found in family-run businesses, ensuring a seamless integration of top-down decision-making with technology-driven entrepreneurial initiatives.
How Can Family Businesses Find These Leaders?
Traditionally, a family-run manufacturer would expect its CEO or MD to work within a commutable distance from its head office. But expectations among the next generation of leaders can often include a hybrid working arrangement, with the likelihood of declining an offer if these expectations are not met. Attracting these individuals therefore requires family-run businesses to consider broadening their previous recruitment parameters.
Hybrid working may look like three or four days in the office, with the MD or CEO living near the site, working from home, and travelling, for the rest of the week. This expands the pool of potential candidates beyond the geographic location of the business and improves the chances of finding the most suitable leader, while also increasing the diversity of the shortlist.
While flexible working will broaden the talent pool, offering development programmes will tap into a generation of ambitious and initiative-taking leaders. During the pandemic, most manufacturing markets saw a steep decline, with many careers, particularly at the director-level, stagnating. There is now a large cohort of driven young leaders, often from large corporate backgrounds, who are prepared to make riskier career moves and work in environments outside of their comfort zones, to broaden their experience and accelerate their career development.
We are seeing increasing numbers of family-run business offering succession management opportunities, such as an extended on-boarding period to become familiar with the business, while shadowing the outgoing CEO, for up-to 12 months in some instances. This progressive strategy encourages successful candidates from outside of the organisation to make the step up, while the rest of the business accommodates the new leadership era.
While succession may be a challenge for those businesses without a suitable candidate from within the family, it also provides an excellent opportunity to assess and appoint a high calibre leader from outside of the family who can successfully evolve the organisation.
A large cohort of ambitious young leaders exists to fill these roles – attracting and harnessing their potential means embracing and adapting to the evolving dynamics of the new world of work. By doing so, family-run businesses can position themselves for a successful and sustainable future.