Good transitions are those that are well-prepared and gradual
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Good transitions are those that are well-prepared and gradual

At the crossroads of legal, social, organizational and governance dimensions, the topic of business transmission raises fundamental challenges. A critical observation stands out: the best transitions are those that are carefully prepared and executed progressively.

 

Introductory words by Jean-Michel Laveu, Associate Director at Initiative & Finance PME

 

 

At Initiative & Finance, we have had the opportunity to support a large number of SME transitions (over 340!) in various contexts. One of the pitfalls we often observe is the lack of anticipation, particularly noticeable as business leaders approach retirement. According to BPCE L’Observatoire, the proportion of SME leaders over 60 years old increased by 10% from 2005 to 2020 (reaching 25%). However, this increase has not led to more frequent or numerous business handovers. The lack of correlation between these figures indicates that managerial transitions are often and increasingly carried out too late.

To ensure business continuity and sustainability, it is essential to start preparing for the transition several years before the planned departure of the current leader. A timeframe of about five years is generally recommended. Practically, we begin with a diagnosis assessment of the company, especially its managerial organization, and then evaluate different transmission options (internal or external). Each approach has its advantages and requires a tailored strategy. Regardless of the chosen method, the primary goal remains the same: to facilitate a smooth and effective transition to preserve the company’s value.

Selecting the future leader is a crucial step that requires special attention and time. It is vital to ensure that the chosen candidate has the necessary skills to meet future challenges and shares the fundamental values of the company. While it may seem wise to offer the leadership to someone within the company, it is important to avoid “forcing” vocations without genuine entrepreneurial ambition, as this is often counterproductive. In the absence of potential successors within the company, our role is to support the process of finding and selecting a suitable leader in collaboration with recruitment experts specializing in SMEs.

Developing a target organizational chart for a five-year horizon is advisable to support this transition and thus reconcile transmission with value creation. Practically, this involves planning for a strong executive team on which the new leader can rely during the initial years. Because a successful managerial transition is not a one-man show but a collective success. Among the best practices, involving the executive team in value creation or establishing a mentorship program where the current leader coaches the future leader are key success factors.

Finally, a successful transition also involves preserving the company culture and establishing clear governance that is explicitly communicated. This aspect is crucial for the managerial transition to be seen as a positive evolution rather than a revolution. For this, it is essential to communicate the new directions necessary for future development while perpetuating the company’s values. When an SME is growing and its teams are expanding, it is natural for intermediate layers to form in the organizational chart, which can create a distance between employees and management, thus generating frustration among teams. Anticipating solutions to potential resistance to change is therefore critical. This requires strong and transparent internal communication to prevent potential conflicts or misunderstandings and ensure that employees remain connected to the company’s objectives.

 

[1] Agefi – url : https://www.agefi.fr/news/economie-marches/cession-transmission-avant-quil-ne-soit-vraiment-trop-tard

 

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