Business Succession in Family-Owned Enterprises

Thousands of family-owned businesses in Austria will face a transition of ownership and leadership in the years ahead. Much of the discussion around succession focuses on tax, legal and financial considerations. These aspects are undoubtedly important. However, the success of a transition often depends just as much on another dimension: how family members navigate changing roles, how responsibilities are defined, and how expectations are addressed throughout the process.

Succession Through Different Lenses: Observations from Practice

One of the recurring observations in mediation is that the same situation can be experienced very differently by the people involved. The following example illustrates this:

The owner sees the future of the business as clear: "When I retire, I will hand the business over to my children. From my perspective, the succession plan is clear. Over the coming years, I will gradually transfer responsibility to the next generation. At the same time, I would like to remain involved in important decisions."

His son sees a different picture: "I am expected to take over the business, but every decision I make is still subject to comment and review. My professional experience and expertise do not seem to carry the same weight as my father's. I have responsibility, but not yet the corresponding authority. I would like to take first steps towards digitalisation, but my father does not see the need for change. I also do not know what role my sister is expected to play in the future."

His daughter describes another reality: "I have worked in the business for years, but my role has never really been defined. I am involved in internal strategic discussions, but I have no responsibility for customer relationships. I deal with many interpersonal issues in day-to-day operations, but I do not know what my long-term perspective within the business is."

His wife: "I help navigate relationships between the generations, organise company events and support customer relationships. However, my role within the business has never been formally defined."

The challenge often lies in making these different perceptions, as well as the underlying considerations and motivations, visible and bringing them into a shared conversation. A succession process requires families to consciously revisit matters that have evolved over many years and may have become taken for granted, and to decide how they should be structured going forward.

First Step: Setting the Course – Identifying the Successor, Suitability and Clear Communication

The business succession process—spanning strategic planning, gradual handover, and tax, economic, and legal implications—requires ample time. From a tax and legal standpoint, a lead time of at least seven years is often advisable. When addressing the fundamental question of who should take over the business, or how the next generation will be integrated, it pays to begin preparations much earlier. Otherwise, the succession process risks stalling within the family years before the actual transition takes place.

Intent and Commitment. Family interests frequently diverge: while some aspire to assume leadership responsibility, others envision their future outside the company or solely in the capacity of owners. These decisions must be anchored in corporate agreements. They remain viable only if the everyday practical implications of these frameworks are fully understood.

Suitability and Qualification. The initial task is to determine the exact competencies and experience required for a specific position. Particularly for key roles such as CEO or CFO, the question arises whether these can be filled from within the family or if external expertise is required. Addressing this early leaves more time for targeted preparation, such as gaining relevant professional experience, advanced training, or leadership coaching, or for identifying, vetting, and onboarding a suitable candidate. Statutory inheritance claims and executive suitability are distinct issues; conflating them often leads to friction later on.

Communicating Succession. According to a 2025 study by PwC Switzerland, how ownership is distributed is one of the most friction-heavy issues in the succession process (25%), while individual role clarification is cited even more frequently (42%). When family members remain unaware of their prospective roles or long-term career paths, they routinely build futures elsewhere. Consequently, by failing to communicate clearly, families often lose potential successors years before the handover ever takes place, leaving no one willing or able to step up when the time finally arrives.

Second Step: Reviewing Unwritten and Unclear Roles

Successions often bring to light how long individuals have quietly carried out essential duties without any formal mandate. It is therefore wise to map out early what has actually been done in practice, and decide which of those responsibilities should be formally structured and carried forward.

Unrecognised Labour Remains Unseen. The situation described by the daughter above is mirrored in many firms: one person translates strategic vision into operational execution, while another resolves bottlenecks before they disrupt day-to-day business. According to the Women in Power Report, 66% of surveyed women stated they operated without a clearly defined role, and over half possessed no genuine decision-making authority when they joined the company. Such contributions are perceived merely as reliability or team spirit, yet they remain organisationally invisible. What is never defined as a task can rarely serve as a baseline for a future role.

The Peacemaker and Behind-the-Scenes Facilitator. Alongside formal positions, family businesses routinely generate informal roles that stabilise the system. Just like the mother in our example who bridges the gap between family members and competing interests without formal corporate recognition, such roles evolve naturally over decades. With the withdrawal of the older generation, the question arises as to which of these contributions must be consciously assumed and anchored going forward. The true weight of these informal contributions typically becomes apparent only when tensions arise that someone previously absorbed behind the scenes.

Responsibility Without Mandate. In family-owned enterprises specifically, professional performance does not automatically equate to growing responsibility or decision-making power. Family members frequently shoulder core operational duties for years, evolving into indispensable pillars of the business. However, this absolute reliability can trap individuals in roles where they are exceptionally valuable for daily operations, yet miss out on advancement to the next tier of leadership.

This creates a paradox: the individual carries mounting responsibility, but still lacks the corresponding mandate or internal and external visibility. If this discrepancy persists, initiative and motivation wane because decisions must still be continuously cleared or legitimised.

Unclear Roles Create Uncertainty. When the son in the introductory example remains unaware of the role his sister is intended to assume, the exact same uncertainty applies to the daughter. Both struggle to accurately assess their own responsibilities and plan their professional futures accordingly. Unresolved roles make it difficult for the next generation to cultivate a long-term perspective within the enterprise.

The Future Role of the Senior Executive. Central questions surround the tasks the senior executive will handle during this transition phase, the authority they will retain, and the role they will occupy post-transition, whether as a shareholder, advisory board member, sparring partner, or stepping back entirely from operations. Accumulated experience, market insight, and long-standing relationships remain valuable assets, provided the future integration model is clearly defined. This involves not only organisational and financial matters, but also the personal transition of the outgoing leader. Having operated as an entrepreneur for decades, relinquishing leadership means parting with more than just corporate authority; it reshapes a core part of their daily professional routine. A clear perspective for the post-transition era can significantly ease this shift. If these questions remain unresolved, it frequently breeds dual command lines, contradictory decisions, and widespread uncertainty among employees, clients, and the incoming generation alike.

Third Step: Identifying Subtle Dynamics in Family Enterprises

Family businesses differ from other corporate structures not through their ownership composition alone, but through the simultaneous overlap of various roles and interests. These unique characteristics shape many succession processes, frequently without ever being explicitly addressed.

Role Ambiguity. A central challenge in family enterprises arises when familial and commercial roles operate concurrently. The senior executive acts simultaneously as a business owner and a parent; the next generation navigates the delicate boundary between familial relationships and corporate accountability. This sparks recurring dilemmas: Is the managing director speaking to their CFO, or is a father speaking to his son? Is the shareholder addressing the future owner, or is a mother speaking to her daughter?

It is important to deliberately differentiate these levels: What role does a statement or decision stem from? The exact same situation can be interpreted in entirely different ways: valuable feedback can be perceived as a lack of trust. Critical feedback directed at a CFO follows an entirely different set of rules than critical feedback directed at one's own son or daughter. What is intended as support can be experienced as micro-management. The decisive factor is that both generations feel recognised within their respective roles and interact on an equal footing.

Siblings Between Family and Business. A harmonious family relationship does not automatically translate into a functional business partnership. Siblings can enjoy profound personal closeness while holding divergent views regarding strategy, market positioning, or the future of the enterprise. Particularly under equal ownership models, such as a 50/50 structure, such differences can become a challenge if mechanisms for decision-making or deadlock resolution are absent. Conversely, existing family friction can burden collaboration within the company.

The Fairness Paradox. This vulnerability is magnified when the parental desire for equal treatment among children collides with the requirements of the enterprise. While parents frequently strive to treat all children equally, a business requires clear responsibilities and unambiguous leadership. An equal equity structure may feel superficially fair, but it can quickly become problematic when divergent competencies, interests, or business philosophies fail to align.

Takeaway

A thorough review and an open dialogue regarding the current status quo, expectations, uncertainties, and individual interests establish a solid foundation for all subsequent succession discussions. It pays to initiate this dialogue early and incorporate professional external guidance when necessary. Particularly where disparate roles, family relationships, and commercial interests intersect, a structured framework helps untangle these various levels and align the underlying motivations of all participants. Introducing such guidance is useful even, and especially, when conversations become difficult or stall, long before an open conflict erupts.

How this implementation can be designed step-by-step, what specific questions must be answered, and what tools can support the process will be addressed in the second part.