Families that create solid succession planning and develop solutions for future generations can guard and grow the family business for many more generations. But unfortunately, only some companies make it to the second generation. There are, however, approaches that can help the next generation of family businesses prepare to take the reins.
A combination of factors explains this situation. It may be a lack of preparation on the part of leaders or a lack of interest among members of the subsequent generation to take on the responsibilities of the leadership role, Harvard Business Review (HBR).
There are, however, approaches that can help the next generation of family businesses prepare to take the reins.
A collective decision-making process tailored to the individual case.
This involves addressing the potential concerns of family members who may have an ownership interest in the business. That may also mean those who do not work in that business. So how can a family ensure that this is done? Consistent, clear communication and transparency. A structured approach enables families to make the right decisions. Some businesses can be great entrepreneurial successes, but shareholder families can suffer severe dysfunction.
Letting Go and Leaning In
Older family heads may be reluctant to share control with the next generation. As a result, they do not trust their successors to do the job as well as they do and may be cautious about renouncing power. But, conversely, you may also see that some family members are keen to lean in and take the baton and others less. All this needs to be planned, prepped and put into writing.
Passing the baton
When they are old enough, the next generation will gradually become acquainted with the company’s workings while gaining experience. Some families encourage the next generation to test elsewhere to develop their vision. To pass on the baton to the next generation, it is vital to communicate the workings behind setting up the business, financing it and how it works. Family business leaders should also consider their children’s skills, talents and desires at all stages of their development to give them every opportunity to learn about the business and ensure its future success.
Integrity is another critical issue to handle upstream. Petty lies, quarrels and heated sibling feuds are vital indicators that can tell a lot about the future attitude of the company. All of these elements can be addressed with a trusted external advisor. This structure is an effective way to keep family members connected to the business. They can consult with each other about the company’s organisation, procedures and financials, but also its mission and management principles.
Present Future Perfect
A leader needs to define their long-term intentions so that they can plan appropriate career development for the next generation. For example, if they intend to sell the business rather than keep it in the family, the children should be supported in managing the assets generated after the sale.