Succession at Swatch

By Peter Leach, Alexandra Sharpe

Despite having sold 350 million watches since 1983, the Swatch Group could easily have lost its bearings following the recent death of Nicolas Hayek, the founder and widely heralded savior of the Swiss watch industry, write Peter Leach and Alexandra Sharpe.

However, with apparent ease the Group has ticked smoothly over into the hands of Nicolas' daughter, Nayla Hayek. Nayla became an employee in 2007, after previously holding an advisory role. Following three years of preparation, her appointment to the chair was confirmed just two days after the death of her father with a unanimous backing from the board.

Family businesses are at their most vulnerable during times of transition when a vacuum in power can lead to considerable feelings of uncertainty both inside and outside of the business. Yet in this case, Swatch was prepared. The speed and unanimity of the board's decision indicates high levels of confidence in Nayla as her father's successor and sends signals to the market of continued family commitment.

However, while Nayla had been prepared over some years on the operational side of the business, so too had her brother, Nick Hayek Jr. Many had expected that Nick, CEO since 2003, would take the chair in the event of their father's death.

Despite the appointment of his sister, it is expected that Nick will remain the driving force behind the company as CEO, and as such a high level of collaboration will be needed between the siblings. It remains to be seen whether they can work together without sibling rivalry rearing its ugly head. 

Often key elder family members play the role of "family glue" and in their absence, conflict can arise causing problems in the family and the business that would previously have been smoothed over by the patriarch or matriarch. A particular problem that arises where a family member who previously played the role of "mediator" and "peace keeper" passes away is that decisions start to be made for family reasons instead of for business reasons. This is extremely damaging, especially if this conflict is played out in front of non-family board members.

As their father was a larger than life character who revolutionised the Swiss watch industry and who was known for his eccentricities, Nayla and Nick will have to work especially hard to ensure that the shift in family dynamics does not affect their decision-making and negatively impact the business.

What is more, the Hayek siblings now face the challenge of attempting to follow an entrepreneurial parent. While replacing any leader can destabilise organisational structures, the change from an entrepreneur raises particular questions: who will come up with the ideas? The vision? The creativity? And who will broker the deals?

In this case the need for extensive planning beyond the initial transfer is particularly pressing. The creativity and energy of the founder is reflected in Swatch's bright and quirky advertising, with Nicolas hailed not only as a visionary but also displaying an eccentricity rarely seen in global corporations; he was often to be found wearing four watches on each arm, while aged 70 he was one of the driving forces behind the creation of the iconic Smart Car.

For families planning to follow on from the success of a strong entrepreneurial leader, it is often hard to encapsulate all the previous skills in one successor and so measures need to be taken to ensure the business does not suffer. Often this means drawing upon the skills of those on the board to seal any gaps and in fact this is a vital part of any family succession plan: making sure that the board compliments the family members and that a wide range of skills and experiences are represented.

As the only woman to hold the chair in a company of the Swiss benchmark SMI Index, Nayla has already proved she has something of her father's uniqueness. But she needs to ensure that her relationship with her brother does not upset the legacy their father set in motion.