On Tuesday, October 17, 2023, we hosted a panel discussion on how family businesses are preparing their next generation leaders. Participants had the opportunity to hear from three leaders of family-owned businesses, including two 3rd generation leaders and one 2nd generation leader.
To kick off the discussion, we shared insights from Kreischer Miller’s 2022 Family Business Survey. The goal of this survey was to uncover trends and gather information that helps us understand the needs and objectives of our family business clients. Our survey found that although 52.7 percent of respondents intend to transfer ownership of the company to family members, only 39 percent had a formal development and mentoring plan for their next generation leaders.
We then turned it over to our panelists to share their experiences regarding their transitions and the types of transition plans they had in place. Here are some of the key observations from our panel discussion and advice from three next generation family business leaders.
- Learn from previous successions. The 3rd generation leaders had the advantage of observing the previous succession from founder to 2nd generation. They commented on how they utilized those observations to make adjustments that will benefit their transition. Communication is vital in family business leadership succession, and when it fell short in the previous transition period, it’s vital to make sure it’s not overlooked again. Similarly, they wanted to be sure to replicate things that went well in the previous succession.
- The responsibility falls on both the rising generation and the exiting generation. It’s clear from our panelists, that the next generation of leaders wants opportunities to grow and for the family business to be successful. The next generation was clear that they appreciated the opportunities that were provided by the previous generation. These opportunities gave them more of an “on-ramp” into their own leadership roles. However, in many cases the panelists wished they had done a little more in their own leadership development leading up to the transition.
These next generation leaders also took initiative for their own personal and professional development. They advocated for themselves and encouraged the generation before them to take an active role in the succession. One sentiment rang true amongst the group, that while they were all eager to take on leadership roles, the senior generation was hesitant to let go. We see this in many family businesses, where the rising generation feels the transition process drags on, while the exiting generation feels the process is going too fast. That’s why it’s important for the generations to work together and share responsibility for a smooth transition.
- Leverage third parties to assist with the succession process. Because of the nature of growing up in a family business and the pride that comes with its success, the panelists admitted that egos can sometimes get in the way. All the panelists were adamant that leveraging third party assistance was both crucial in their individual development and critical in gaining congruency with the generation ahead of them. This is consistent with the results of our 2022 Family Business Survey, which found that the respondents who had a formal development plan for their next generation leaders tended to utilize third parties in the form of peer groups and formal executive coaching. All three panelists found high value in this type of support.
- Respect is earned, not given. Whether it’s from outside work experience, working in various roles within the family business, or a combination of the two, the respect of family members within the business and other employees must be earned. As family members and rising leaders within their companies, the panelists felt like they always had something to prove and were eager to earn this respect and build credibility. They also recognize and appreciate all the hard work and dedication the generation before them put into their family businesses and often look to those people for guidance in their own development as future leaders.
Regardless of what stage your family business is in, it’s vital to begin having conversations about your transition plan. The takeaways above are helpful to keep in mind as you continue to develop your plan. Please contact us if you have any questions or would like to discuss ways to prepare your next generation leaders.