An estimated six to seven million privately-held businesses owned by Baby Boomers are expected to change hands over the next fifteen years. A significant percentage of those businesses are family-owned. Family businesses that want to preserve their legacies need to carefully consider how and when to turn over the keys to their next generation of leaders.
Here are three frequently asked questions as you consider how to plan for your family business’s transfer of leadership.
1. When should the next generation enter the business?
It is generally considered a best practice for family members to gain some outside experience before joining the family business. Having outside perspective is important when facing management decisions and considering the potential impact of those decisions.
As for when family members should enter the business, the earlier you start, the more time you will have for adjustments. You need ample time to identify an appropriate successor candidate and groom him or her into a successful leader. Beginning this process early gives you time to make corrections along the way. Plus it gives your next generation leaders an opportunity to deal with various organizational challenges while they have some extra guidance on hand.
Family members are always fighting to gain acceptance by non-family employees. They are frequently judged on their competency and whether they can be trusted. Devoting extra time to the transfer process puts your successor family member in a better position to succeed.
2. What should they do after they join the business?
Once a family member has made the long-term commitment to continue the family legacy, there needs to be a clear role for them within the organization. It is a good idea to hire only when you have an open position, rather than create one.
Try to rotate family members through various roles in the business, as it is feasible. This will help them gain perspective on different aspects of the business, develop new skills, and build connections with non-family employees. Also, gradually include them in meetings with your business advisors. This will help them gain valuable insight into the overall management and stewardship of the business.
Finally, family members should be supervised by a non-family manager when possible to provide unbiased feedback and support.
3. What else can I do to ensure my next generation leaders are prepared?
It is no surprise that family businesses that make a deliberate point to continue the education process after employment have a higher rate of success. There are a number of conferences and courses available for younger family members to learn family business best practices. There are also more formal training programs for leadership development.
Each family business’s timetable for bringing the next generation into the business is unique and you know what will work best for your company. But having a plan in place for a gradual, meaningful entry is the most effective way to integrate the next generation.