Family businesses, beyond their economic impact, hold a special place in the hearts of their owners, embodying a legacy of pride, identity, and shared dreams. However, the sobering reality is that fewer than 12% of family businesses endure into the third generation. One prominent cause is the lack of interest or preparedness in the next generation to assume leadership roles. This article explores five strategic approaches to inspire and equip the rising generation to not only engage with the family business but also contribute to its sustained success.
Preserve Legacy Through Storytelling: Narratives are powerful tools for instilling pride and connecting generations. By recounting the business's creation, the founder's vision, and the values sustaining it, families can create a shared heritage. Documenting this history not only preserves it for future generations but also serves as a valuable resource for analyzing the business's trajectory, identifying strengths, weaknesses, and guiding succession planning decisions.
Facilitate Exposure to the Business: Engagement flourishes with understanding. Regular exposure through facility tours, mentorship programs, summer jobs, and internships provides the rising generation with firsthand experiences, helping identify those genuinely interested in the business. This not only establishes a pipeline of potential leaders but also fosters a deeper appreciation for the responsibilities and benefits of being part of a family-owned enterprise.
Define Roles and Educate Family Members: The Three-Circle Model by Tagiuri and Davis aids in clarifying the often-competing priorities within family businesses. Defining roles and responsibilities for family, business, and owners mitigates conflicts and establishes transparent communication. Recognizing rights and responsibilities, especially for owners, ensures a smooth transition, emphasizing the importance of role clarity, transparency, communication, and ongoing education.
Implement a Family Employment Policy: While family ties are essential, not every member is suited for every role. Families must decide whether the business is family-first, business-first, or a balance of both. Creating a family employment policy, based on objective criteria, ensures fair hiring practices and manages expectations, reducing potential conflicts arising from unrealistic assessments of competence based on familial connections.
Teach Financial and Business Fundamentals: Basic financial literacy is crucial for informed decision-making. Providing education on financial concepts from an early age, using creative methods like experiential learning, lays the foundation for understanding the business's financial health and growth potential. Encouraging attendance at educational programs further nurtures financial acumen, ensuring the next generation is equipped to make sound business decisions.
Running a family business requires intentional efforts to engage and prepare the rising generation for leadership roles. While challenges exist, a systematic approach involving storytelling, exposure, role definition, employment policies, and financial education can significantly increase the likelihood of a family business thriving across generations. By sowing the seeds of knowledge and passion today, families can secure a prosperous future for both their business and their legacy.
Additional Resources & Videos
-How to use the Three-Circle Model
-How to Raise the Next Generation of Family Business Leaders