Members of family businesses have varied skills. They are hard-working and visionary. Family businesses need to move on for generations with their unique skills as a foundation for building a legacy and creating wealth. It is important that the transition of the family business, from one generation to another is strategized and carried out at the appropriate time, within the appropriate framework ensuring harmony within the family is not etched. Every generation transition in a family business is unique and brings about its own set of challenges and opportunities for the next generation.
Planning the integration of the younger generation into the family business needs to be done strategically. The next generation should also understand their responsibilities and capabilities and enter the family business strategically to be able to understand & prepare themselves for leadership roles in the future.
Entry of the younger generation into the family business, mentoring the next generation, the exit of the family business leader or the incumbent CEO, and the transition of the family business from one generation to another, with timelines, should be synchronized & orchestrated like an opera to be able to listen to soothing music for generations.
In this article, we focus on the entry strategies for the younger generation to enter the family business and prepare for higher roles.
As per global statistics, only 1/3rd of the family businesses have a documented succession plan in place, and approx. 25% of the family businesses are focused on next-generation mentoring. The older generation basking in their own glory does not know how to think about succession and generation transition. They believe that the business will keep moving and the transition will happen at the right time on its own.
Sometimes, the older generation is highly controlling and stubborn. They have their own internally agreed and unwritten policies and procedures, which need to be understood by the younger generation. This snatches away the opportunity for the next generation to participate in strategic discussions and diminishes the spirit of entrepreneurship and leadership within them.
Understanding the above hazy situations is difficult indeed. So, some younger generations, prefer to be away from the complexities and difficult situations. They either keep struggling in their family business or even prefer to move away from it and lead a simple life of their choice.
All family members should discuss, plan, and agree on the family vision and goals. The younger generation must appreciate the journey traveled by the family business founders, and the challenges and opportunities lying ahead of them. They should also understand the importance of family wealth protection, management, and enhancing the same.
Prepare governance structures for the family business. The Family Constitution can lay down the rules for succession planning, including entry and exit policies. The Family Council, an important part of the Family Constitution, keeps the family and the business connected. The family advisors conduct the family discussions under their guidance and understand the family and business expectations. Family meetings and family retreats are the key platforms of governance that align the purpose of business and family togetherness with equal spirit.
Family meetings should be held every quarter and should include all shareholders, non-employees from within, and the extended family. The meetings are a great platform for connecting and understanding each other. Along with the fun, there lies the opportunity to educate the family on business performance, strategic decisions, policies, and much more. Family members can voice their concerns and expectations and feel satisfied with being heard within the family. The meetings are a great venue for the next generation to discuss and make decisions about joining the business.
The younger generation should be exposed to the business environment at an early age through informal visits to the business entity, helping their parents or grandparents in their business routine, or through apprenticeship programs. This excitement of involvement and new learning helps the younger generation understand the opportunities available to them and encourages them to explore further and prepare for those roles. The next generation should enter the family business only if they are passionate about it.
The younger generation should follow the policies for entry into their family business, laid out in the Family Constitution. They must gain sufficient work experience outside the family business to understand the importance of hierarchy, work discipline, communication, interpersonal dynamics, and performance. They should believe in teamwork and mutual respect and learn the finer nuances of decision-making as a fundamental requirement for entry into the family business.
The younger generation must know their passions and be encouraged to choose a role from any different business functions. Under the mentoring & guidance of the family business board, they must choose the right role for themselves. From being on the board to being part of the family office, leading the family council, or even managing the family foundation, the next generation should express their preferences to the board and the family council.
Family business leaders should continually assess the capabilities of the younger generation, and give them continual feedback. They should create opportunities for skill development and get mentored by experienced family business advisors on a need basis. The younger generation must deliver more than the other employees in the family business. They should develop leadership skills, explore the best management practices in the world and understand global markets. They should be able to understand the expectations of the business and the older generation and their contributions to the same.
The older generation must give the younger generation enough time, space, and freedom to understand the family business and prove themselves in the chosen role. The younger generation should physically, emotionally, and strategically align with the family and business needs to take the legacy forward.
Prepare a career growth chart for the younger generation highlighting the roles, deliverables, and entitlement of performance-based dividends. The younger generation should be ready either for role rotation or to leave the family business if it doesn’t work out for them. They should analyze their failures and move on with the learnings to find their right lane.
If things are not working out in the family business, the younger generation should move away from the business, but not the family. Never estrange the family. Family and relationships are independent of the business.
