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The Next Generation of Your Family Business

family business May 14, 2024

- By Sophie Pinkoski

Running a family business is a unique journey laden with complexities that extend beyond the realms of a regular organization. Dynamics become much more intricate when you bring family members into the fold. Navigating these relationships requires a delicate balance of transparent communication and empowerment. Despite this, many family business owners assume familial ties alone will be enough to keep the business going; that there will always be someone there to keep that legacy alive. Yet when this isn’t communicated properly, family members doubt their place in the business, and lack the confidence or interest to take it on. Alongside this, another aspect hindering family business growth is the current generation's reluctance to relinquish control and trust the next generation with their legacy. If the next generation doesn’t feel adequately equipped to take on the responsibility, this can lead to a stalemate with the business's future hanging in the balance.

It is essential to recognize that the next generation holds the key to upholding that legacy when the current leadership generation moves on.

The reality is that the leadership generation of today isn't going be in their roles forever. According to PwC’s 2021 Family Business Survey, only 40% of American family businesses are successfully passed on to the second generation, with only a third of businesses documenting a clear succession plan.

It is therefore imperative to start having serious conversations with your family members about the future of the business as early as possible.

Here are some ways to keep the next generation engaged in the family business to ensure its legacy lives on:

Share your family’s values to create a clear vision everyone can get behind–– PwC has found that 70% of family businesses have a clear vision in place, yet only 40% of them are formally documented. This muddies the waters for family members attempting to understand the business’ purpose and how their individual values align with it. It’s important to include everyone in discussions addressing the company’s values, goals, and legacy. Each family member will have their own values and perceptions of the family business.

By bringing everyone together to discover common values between them, you can better identify what your family business stands for.

Schedule regular family meetings for transparent communication–– Many individuals raised within a family business only ever see the stressful side of operations, which makes them wary of getting involved. Engaging them in all aspects of the business is key to maintaining their interest in the long term. Hold regular family meetings and events where they can see the inner working of the business and contextualize their own skills, interests and aspirations within it. The family businesses shouldn’t have to be an obligation to them; engage them to be genuinely interested by appealing to their passions, values, and personal goals. These regular get-togethers are to facilitate an open dialogue for the family to clarify how the business works and address any challenges or conflicts that arise. It’s an opportunity to create a safe space where everyone can share their ideas, concerns, and questions, while also imparting wisdom to the next generation.

Transparency is key here, especially when imparting clear expectations and addressing why certain decisions and plans are being made.

Embrace both traditional and new ideas–– Part of relinquishing control over your business as the leader is accepting new ways of thinking alongside the traditions you have built up over time. A family business is a collective venture – a “my way or the highway” mentality isn’t necessarily going to be conducive to resilience in the long run. The next generation comes with fresh ideas, insights, and perspectives that will ultimately lead to a more adaptable, innovative business model. It’s essential to harness that potential by stimulating their entrepreneurial spirit through a culture that supports creative thinking, innovation, and proactive problem solving. Aligning these thought processes with the next generation’s skills will ultimately benefit the family business and keep it evolving to accommodate fast-paced change.

Offer developmental growth opportunities through mentorship and coaching–– The more confident the next generation is with their skills and knowledge of the business, the more likely they will want to stay involved long after the current generation retires. Building their capacities involves careful mentorship, coaching, and training. Give them opportunities to develop their skills in areas they are most interested in pursuing so they can easily see how the business can benefit them and vice versa. Offer them roles across the organization to build up their experience so they can eventually escalate to more challenging and fulfilling roles as they explore their place in the business. Just as it’s crucial to appeal to their interests, it’s essential to cultivate their development around the business’ needs as well.

Decision-making, strategic thinking, problem solving, and open communication are all ideal leadership skills to instill upon the next generation to best equip them to carry on the family business and its legacy.

Integrating the next generation into the family business requires a multifaceted approach to address the family’s unique dynamics. By navigating these complexities with patience and foresight, you can empower the next generation to become stewards of the family legacy and guide the business towards continued growth and success for generations to come.


Further Reading:

Preparing Your Family Business for the Next Generation, Harvard Business Review

Successful Succession In A Family Business, Or How To Ensure The Company's Survival In The Next Generation, Forbes

Plan a Smooth Succession for Your Family Business, Harvard Business Review                          

Succession Planning for Family Businesses: What You Need to Know, PwC

Succession Planning for Family Business: Leadership Transition and the Next Generation, Deloitte

Merit or Inherit: How to Approach Succession in a Family Business, Harvard Business Review

How to Prepare the Next Generation to Run the Family Business, Harvard Business Review


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