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The Future Leader of Your Family Business May Not Be Who You Think

Steven E. Staugaitis, CPA, CVA
Steven E. Staugaitis, CPA, CVA Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader

Family Business Continuity Planning and Strategies

We recently wrapped up our 2019 Family Business Survey and are currently working on compiling the results, with the goal of distributing our findings shortly after Labor Day. To no surprise, the majority of the family businesses who responded expect to transition the business to the next generation. However, when we asked respondents whether they have a formal development and mentoring plan for their next generation leaders, I was surprised to learn that 63.4 percent said no. Identifying the right successor and adequately grooming them to step into the leadership role is probably the single biggest factor in the ultimate success and longevity of a family business.

We already know that there is a large generational shift taking place in the U.S., and family businesses are no exception. We are seeing increasing numbers of current generation leaders who are planning to transition out of their business in the next few years. Their attention is turning to identifying the next generation of leaders and, naturally, many are expecting family members to step up and take the reins in order to maintain the legacy of the family.

That’s a great plan if you have a family member or a group of family members who you can not only groom to be the successor(s), but also have the right blend of leadership ability, skills, and experience to be successful. However, is there a chance that your desire for a family member to assume the leadership role is obscuring the reality of the situation?

Family members represent just a small percentage of a greater pool of overall talent that is available. When companies myopically focus on just family continuing the business legacy, they can unintentionally limit that talent pool. We often hear from senior generation leaders about the frustration and hesitation they have with the next generation’s lack of engagement or skill sets. Meanwhile, many family businesses have built a strong management team that is unintentionally overlooked and who would really shine in a leadership spotlight role. As a result, it is not uncommon for us to see a delay in family businesses moving forward with their transition plans and the senior generation sticking around longer than they had originally intended.

To avoid going down that path, we recommend a few key steps:

  1. Take an honest look at the next generation. Evaluate your family members – both those who are currently working in the business as well as those who may be working elsewhere – with as critical and unbiased an eye as possible. Try to look through the lens of a third party. Trusted advisors who work with your company may be a resource that can provide some candid insight into the situation.
  2. Understand the difference between managers and leaders. As part of your assessment, consider what leadership truly entails. This Harvard Business Review article articulates a few of the key differences between management and leadership, and one comment really resonates: “Management consists of controlling a group or a set of entities to accomplish a goal. Leadership refers to an individual’s ability to influence, motivate, and enable others to contribute toward organizational success.” In other words, managers manage processes, and leaders lead people. Leaders are expected to create a vision and inspire everyone in the business to work toward it.When you are casting about for your organization’s future leaders, be careful not to automatically view your current managers as your only talent pool. You may have people in these roles who are excellent managers, but not necessarily equipped to be great leaders. Keep an eye out for the people who are exhibiting true leadership qualities, regardless of whether they are a manager today.
  3. Put a formal development plan in place. If you discover that your next generation leader actually resides in your business today, that’s great news! Don’t wait another minute to start grooming them to step into that role. I’ve previously written about some strategies for developing your future leaders such as providing formal mentoring, rotating employees through various departments in your business, and offering opportunities for additional education. Ultimately, the right mix of training and professional development will depend on your business and the individual in question. But whatever you do, ensure you have a formal plan in place.
  4. Alternately, begin looking outside the company for its next leader. If you discover that you don’t have any family members who are willing or able to assume the leadership role, it’s better to know that now so you can begin to plan. Start by mentally separating ownership and leadership. The family can still own the business even if you hire a non-family member to run it. Create a profile for the blend of background, skills, and experience you need your next leader to possess, and begin your hunt – with the help of an executive search professional, if needed. The sooner you can bring the right person into the business, the more time you’ll have to ensure that they are ready to become your eventual successor.

When it comes to identifying the successor for your business, being as objective as possible and considering all of your options are critical. Once you’ve identified the right candidate(s), create a development plan that will ensure their success – and with that, the preservation of the family business legacy.

Steven E. Staugaitis is a director at Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email or 215.441.4600.


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Steven E. Staugaitis, CPA, CVA

Steven E. Staugaitis, CPA, CVA

Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader

Family-Owned Businesses Specialist, Small Business Advisory Specialist, Business Valuation Specialist, Transition/Exit Planning Specialist

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