Preparing the Next Generation of Leaders for the Family Business: Part 1 of 4BondBeebe
Posting by Geoffrey D. Brown, CPA, Principal
Preparing the next generation of leaders for the family business is a difficult task, one that many businesses begin after it is much too late. In reality, successful succession begins with developing tomorrow’s leaders today, and undergoing a thoughtful selection process to educate, engage, and grow a leader that will help your family business beat the odds and continue for generations to come.
To distill the basic principles of developing leaders in the next generation is a formidable task. In this series, I will break down this important topic into four areas: identifying the possible leaders, education, work experience (both in and out of the business) and other considerations.
Considerations for Preparing the Next Generation of Leaders
When identifying and preparing the next generation of leaders, there are a number of important considerations:
Be Patient and Flexible. While some might assume that the oldest offspring, or the son, is the natural choice to take over the business, that view is shortsighted and often bypasses significant talent and opportunity for both the family and the business. Allow yourself the luxury of time, start early and be prepared to change your mind. Your job is to identify the best possible person to run the business, and patience and flexibility will serve you well in this endeavor.
Communicate and Establish Transparency. I would be remiss if I did not emphasize the importance of communication. Everyone should be aware of the rules and requirements for company leadership. Clear requirements will make the process more objective and help to settle the inevitable family squabbles that arise in the succession process.
Start Early. Educate the possible successors about your business as early as possible. Let them work in the business in their teens. Talk openly with them about your experiences running the business and let them tell you about their experiences, as well. Those discussions will provide great insight into how your possible successors think, where their values are, and their leadership potential.
Gauge Interest. While you may have identified one of your children as the likely successor, he or she may have no interest. Forcing a child into the position would probably not be best for your child or for your family business. Yes, it worked out for Jimmy Stewart in It’s A Wonderful Life, but that is one case where art does not usually imitate real life. (As an aside, I do wonder, sometimes, if he got to take any of those trips he dreamed about.)
Look Outside. As important as it is to cultivate an interest in the business, it is not the only factor. Do not let interest blind you to who would be best – which person has the leadership skills, industry knowledge, and business acumen – to run the business. Consider leveraging outside help to determine who might grow into your company’s leadership roles. You could ask those whom you trust or even seek an outside consultant.
Also keep in mind that the best person to lead the business may not be a family member. You can still maintain family involvement and ownership with an outside leader.
Leadership is a complex task. When preparing the next generation to lead the family business, look at who best exhibits the personality, skills and intellect to run your business. And, be patient when assessing who’s got what it takes. If we look at another Hollywood classic, The Godfather (which offers a number of interesting family business lessons), I believe that Michael (Al Pacino) was most qualified to run the Corleone clan and he happened to be the youngest. Yet, it was not apparent at the beginning; it took other events to bring him to the position of leader.
Identifying promising next generation leaders is only part of the succession process. Establishing clear criteria around education and work criteria are also key to leadership development. In my next posts, I’ll cover those topics and help you to develop a system for successfully selecting the next leader of your family business.