When advisors talk about planning for succession, they are often talking about the immediate challenge of selecting an individual who can run the business once the CEO retires. The process of succession planning is actually more extensive and multi-faceted and including issues such as good corporate and family governance, and strategic planning. That being said, one of the most important things that families who seek to maintain ownership across generations can do is to prepare the next generation for their unique leadership roles.
In talking about succession – again – the focus almost always looks primarily at the idea of preparing “a successor.” Yet, the reality is that the most successful family businesses need leaders across the family – not just in the role of President and CEO. Families need individuals to lead family meetings, they need family members to set the example of leadership throughout the company, and they need family members to be leaders in the community.
In my 15 years of working with successors, I have found that the 3 main traits needed in order to fulfill these leadership roles are;
(1) To have a strong sense of self-confidence,
(2) The ability to create their own definition of success (which may conflict with the views of other family members), and
(3) The people skills to work with family and non-family members to do whatever is necessary to keep the family business thriving for future generations.
How we understand and instill these qualities in successors is a greater challenge.
Self-confidence: I have found that the wealth of the family often robs the successor of the opportunities to develop self-confidence. Self-confidence is built through coming to grips with who we are, and what we are good at. We do this by coming up against obstacles and challenges, and learning how to overcome them. In family businesses however, children are often protected from failing or saved from having to overcome their failures by having their problems solved by their wealth or their parents.
Developing self-confidence: We can help successors to develop a sense of self-confidence by giving them an honest sense of who they are in the world. It is important to give them accurate feedback about what they are doing well and what they need to work on. In addition, paying them market rate is key. Overpaying them may erode their self confidence, and under-paying them may make them resent the family business.
Creating an Internal Definition of Success From a young age, successors are often rewarded for taking an interest in the family business, rather than pursuing what they are interested in and passionate about as an individual. It happens subtly at first – a parent returns from work and is still talking about what happened at the family business – overlooking what their children are interested in or thinking about. Over time, when this happens again and again, the only opportunity a child has to relate to their parent is through taking an interest in the family business, even if it is not what they are interested in.
Developing an Internal Definition of Success: We can help successors with this task by letting them explore their interests and allowing them the freedom to choose the family business. Successors often get caught in the game of trying to fulfill their parents’ definition of success which isn’t always best for them or for the business. Encouraging outside work experience can be a great way to spur this process along
People skills; Just because one has the technical skills to succeed doesn’t mean the successor has the leadership skills to do so. We do very little to prepare successors for how to manage the complex personal relationships with which they are faced when owning a family business. They must develop the ability to resolve conflict, build support for ideas, and understand behavior.
Developing People Skills It would be easy to say parents can best teach this through leading by example, but often parents weren’t taught these skills either. Successors can learn these skills through Education such as Loyola’s Next Generation Leadership Institute and conflict management programs; one on one Coaching to provide focused help to guide a successors growth, and Peer Support – through regular meetings of a group of peers who are interested in supporting the growth and development of that family member.
In the end, what is clear is that families need to invest in the next generation if they to are expect them to lead with values and integrity. By helping to build their self-confidence, develop their sense of what it means for them to be successful and giving them the people skills necessary to succeed, the next generation fulfill the true role of a successor.