Studies show that on average, over half of businesses do not have a formal succession plan in place. Succession planning can have many benefits and can serve as an exercise of opportunity to gain a better understanding of existing talent and to identify areas in need of development.
Forbes reported that only 30% of family-run businesses survive into the second generation, 12% survive into the third, and just 3% operate into the fourth. “If you embrace your next generation quite early, not to lure them in but instead expose them to the business, it is beneficial,” says Henk de Vries, CEO of Koninklijk de Vries Scheepsbouw. “You can take advantage of the fact you are different generations and look at things through their eyes.”
Generally, innovation and forward-thinking keep yards busy, but it is important to future-proofing this - particularly for family-run yards. In this two-part series, we give an insight to the yards that are family-run and are embracing succession planning as a business strategy. First, we speak with Henk de Vries, CEO, shareholder and fourth generation family member of Koninklijke De Vries Scheepsbouw (Feadship).
“Koninklijke De Vries Scheepsbouw’s succession plan has been an evolutionary process that has been refined with each generation. From generation one to two there was no succession plan; two sons took over the company from their father, and no money changed hands whatsoever. From the 1930s through to the 1960s the company became quite valuable and when it was time to hand over to the third generation, my father and uncles, it had become a financial transaction and the next handover was, essentially, a business deal.Photo: Charl van Rooy / SuperYacht TimesBy the time the fourth generation – my cousins and I – stepped into the company in the mid-80s the succession process had been formalised into rules, with guidelines on succession and mandatory retirement ages, however, these were not necessarily binding. In 1992, almost 90 years after the yard was founded, the very first official shareholder's agreement was written. This dealt mostly with succession, the value of shares, who you could sell them to, who was obligated to buy/not to buy and it was a very mechanical document. Further rewrites came in 1999, 2005, 2009 and 2010. It’s relevant that I know all those dates off the top of my head as they really were milestones in the development of the governance of the company.
Today some, but not all, key positions are still held by family members. Of the seven or eight really crucial positions in the company, four of these are held by family members. It is not automatic that children of shareholders will be appointed to the family boards or key positions. For this reason, we cast our net wider than offspring to find potential future executives and shareholders as there is a good possibility that either our children are not interested or not qualified enough, so we need to be prepared to potentially look at other family members to sell our shares to. This process includes involving wider family members in business integration from a young age. Every year we have a family reunion for the business and we also have a NextGen programme where we call in those aged from 15-30 to join an informal class setting with a family business professor and do development things. Photo: Tom van Oossanen / SuperYacht TimesSeveral initiatives are also in place to ensure those family members who do join as senior executives are the right calibre. In the shareholder’s agreement it states that if you want to come in to a senior executive you have to have worked out of the company for a number of years, have a level of academic education and be at least 30 years old, though those aspiring for a position not in a leadership role are always welcome.
As for my best advice to other companies considering succession planning, the biggest hurdle that you have to cross in a family business is that people have to talk to each other. Often there are a lot of assumptions and because people have the same genetic makeup they think they understand each other. Get everything on the table even if it hurts!”
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The SuperYacht Times iQ 2018 Report
Did you know that in 2017....
- 180 new yachts over 30 metres were sold
- 149 new yachts over 30 metres were completed
- 443 yachts over 30 metres were under construction
- 30% of the yachts under construction were available for sale
- 20% of the yachts were owned by clients from the USA