Heir Necessities: Tips for the Next Generation to Successfully Lead the Family BusinessBondBeebe
Posting by Geoffrey D. Brown, CPA, Principal
One of the biggest challenges faced by the senior generations of long-time family owned businesses is deciding how they will transition their business to the next generation, and how to do it successfully.
In today’s competitive business market, families wishing to sustain their organizations over many generations must invest considerable time and energy into developing the next generation. Careful preparation of young leaders will help ensure the success and vitality of the family enterprise. It’s important to nurture and mentor the “next gen,” providing the proper training and support long before they take over the reins. Cultivating their capabilities and transferring your knowledge of the business is crucial for keeping operations running smoothly and successfully.
When planning to transition to the next generation, here are some simple questions to consider:
- Do they have the proper education and skills required?
- Will they be ready to oversee business operations?
- Do they demonstration leadership qualities?
- Are they genuinely interested in the business?
If you’ve answered yes to these questions, that’s a good sign. However, if you are unsure, then it’s time take action. You’re responsible for passing the torch and all that comes along with it. If your successors are ill-prepared, then they may be doing the family and the business a disservice.
Following are some proactive tips to help the next generation carry on the family business’ success:
Engage Early. It’s never too early to talk with your children about what their wishes are for being involved in the business. Help them plan for their future. You want what’s right for them, and what’s right for the business.
Discuss Their Role. An unclear definition of business successors’ roles can lead to muddled expectations and the development of various styles of leadership within the business. You’ll want to communicate the anticipated job responsibilities and ensure that the upcoming generation is comfortable with these.
Offer Real-World Experience. The next gen must understand how to balance the responsibilities and opportunities of the family’s legacy. This requires not only the right knowledge and skills, but also real-world experience in the field. Involve them in the family business planning, goals and day-to-day operations, and allow them to take part in specific functions that are important to overall business strategy.
Encourage Leadership Development. While mentoring and providing real-life experience is crucial to the next gens’ development, you’ll also want to impart key leadership skills. Not everyone who holds a management position within a family business is a born leader, however, leadership can be learned and enhanced through continuing education, increasing communications skills, and setting professional and personal goals to develop business talent.
Seek Expert Advice. Talk with your CPA and/or financial advisor for advice on putting together a plan to prepare your successors for the transition to leadership. It can be overwhelming to undergo this process alone, so go to your trusted sources and advisors to seek their recommendations.
It’s important to fully develop your leadership framework to reflect your business values and strategies. Understanding the next gens’ core strengths and development needs are key for preparing them to transition to business leaders. Engaging with them early on and determining if they have the passion and energy for the business will help you figure out who is best suited for leadership. Both generations must work together to strike a balance between desires and expectations. Creating a positive, encouraging environment to enable the next generation to achieve both personal and professional success will allow your business and your family to flourish.