July 17, 2020
The statistics on family business succession are striking. About 40% of family businesses transition to the second generation. Approximately 13% pass down successfully to a third; and only 3% survive to a fourth generation or beyond.1
The rapid drop in lineage is mainly because next-gen leaders of a family business face added responsibilities and considerations non-family business leaders don’t have to contend with, like preserving the family legacy and navigating family dynamics.
If you have a passion for continuing the family business, chances are the current managing generation is equal parts thrilled, relieved and anxious. Thrilled because most family business leaders would love to see their children or other relatives continue their legacy; relieved because it allows them the opportunity to consider succession planning; and anxious because they may not yet be ready to embark on the next chapter of their own legacy. There are a lot of dynamics at play, but ultimately all stakeholders have the same end goal in mind — the continued success of the family enterprise.
Whether you’re a seasoned leader or still developing your skills, your role in your family’s business is critical to the company’s successful continuation. You may be ready for a more prominent leadership role within the business, but there likely will be challenges along your path. What are some actions you can take to ensure you are ready to step up to the leadership challenge?
To accelerate your skills and elevate your profile, seek opportunities to take on leadership roles. It could be leading a critical initiative, overseeing a new product line launch or navigating new policies and procedures around a change in your business.
Perhaps you’ve identified inefficiencies in technology or you’re looking to maneuver around a threat to your operations. Is there an opportunity for you to champion implementation of new technology to drive efficiencies that will benefit the business?
Maybe there’s work to be done in human resources to update outdated policies. Consider starting an employee resources group or an affinity group to help foster a diverse, inclusive workplace aligned with organizational mission, values, goals, business practices and objectives. These groups have been shown to increase employee engagement and develop future leaders.
Increasing brand awareness for your company is likely high on the list of your firm’s goals, but there may not be a family member dedicated to this objective. Writing blog posts, interacting with local news outlets to provide industry expertise and outlook, and engaging your community on social media channels all help to increase brand awareness, share your expertise, and demonstrate your leadership skills.
Find a way to leverage your interests and passions into a meaningful contribution to your community. Serving on a board of a local nonprofit can be an excellent way to demonstrate your leadership capabilities, hone your skills, build relationships with the community and enhance your company’s image.
Some next-gen leaders face opposition from long-time employees who still see them as the kid they once were. If you’re facing this challenge, be patient. Simply being aware that this consideration exists is helpful.
As you develop your leadership skills, you’re going to stumble and make mistakes; everyone does. Acknowledge your mistakes, learn from them and move forward. Be humble and open to feedback, even from unexpected places. Notice the employee others go to with questions. Be curious and absorb knowledge from all areas of the business. People are naturally motivated to share their unique knowledge and talents. Consistently giving respect to others is key to earning respect over time.
Much has been written about the importance of having a sponsor at work. More than just a mentor, a sponsor is someone who advocates for you. Is there a family member or senior leader in the organization who will help drive your vision for your career, guide you toward meaningful opportunities and advocate for you even if you aren’t in the room? It’s extremely valuable to have a sponsor focused on your development within the company.
Although much of your learning will be on the job, enhancing your knowledge in technical areas will make you a more well-rounded leader.
If you’re lacking experience in a critical area, take the initiative to fill this gap by either enrolling in an educational course on the subject matter or by reaching out to local experts. When it comes to understanding the financial statements, chances are your company’s accountant will be more than willing to guide you.
Julie Bogle, a tax principal at advisory firm BDO and a Wisconsin Family Business Center sponsor, says, “Many next-gens have never seen the company’s financial statements, but it’s important to the business’ success that those statements be shared on a regular basis. The company’s internal or external accountant can help the next-gen understand the key drivers of success for that business. By studying and internalizing those key drivers, they can focus on maintaining or improving those areas of the business, thereby adding real value to the company’s management team.”
Another opportunity for learning and development is participation in a peer group. Groups of peers working through some of the same issues you are can be impactful as a confidential forum for discussing the challenges and opportunities you face along your path to leadership.
Vanessa Costanzo, director of business development & technology at Recruiting Pro Software LLC in Madison, Wisc., says joining the Wisconsin Family Business Center’s Future Leader Affinity Group (FLAG) has been one of the best decisions the family business has made. “Our FLAG meetings are something I continually look forward to. It is a trusted group of peers who know the unique challenges faced in a family business,” she says. “The group provides honest feedback, based on what they have learned from similar situations and has been an invaluable resource for not only me personally, but for our company as we grow.”
Communication is critical in the next-gen transition. Often the generation currently leading the business is not yet ready to tackle the subject of succession. You can plant a seed by starting small, ensuring they know you are serious about the family business and by demonstrating your leadership in meaningful ways.
As a next-gen leader, you have tremendous skills and talents to help grow your business. Chances are you are knowledgeable about the importance of social media, brand image, socially responsible business practices, and how critical diversity and inclusion are to the long-term success of your business. You may also have the educational background to lead a family business from taking traditional finance, accounting, management, marketing and other business courses.
Succession can be both a challenge and an opportunity. Embrace your knowledge and passions — step forward and lean into your role as future family business leader.
1Source: Businessweek.com, 2010, as quoted by johnson.cornell.edu/smith-family-business-initiative-at-cornell/resources/family-business-facts/.
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