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Statistically, most family businesses will fail before the third generation gets a chance to take the helm. And, only a few will survive through the third generation.
Family business succession is a complex, and long-term process. It is a journey infamous for its difficulty to navigate. Key factors that typically lead to less-than-ideal outcomes are 1) conflict within the family and 2) unprepared next generation leadership. The good news is that both can be mitigated when faced with aware ness and intentionality. Succession planning is a responsibility that falls on the incumbent generation and may prove to be its greatest contribution to the family business legacy. If family business succession is in your future, here are a few things to think about now.
Lay the Groundwork
For the family business succession to be a relatively smooth transition, experts suggest adopting a continuity mindset. What that means is seeing the business not simply as the engine that provides a living, but rather as a separate entity that will outlast your lifetime. Founders and now generation leaders must see themselves as shepherds of the family business, their job to pass it safely to the next.
It reminds me of the egg on a spoon race we played as kids. When the spoon cradling an egg is passed to us, we don’t get to eat it nor carelessly drop it. Rather it is our job to safely carry and hand it off to the next person in line. Adopting that thinking within the family business culture, lays the groundwork for succession. When we see our role as caretakers, the continuity mindset will be reflected in every decision made along the way.
Water The Family Tree
Relationships can be hard. When lives are busy with day-to-day tasks, it’s easy to let communications and connection dwindle. Intentional planning such that siblings, cousins and married ins of the next gen get to know one another well is important. Create and provide opportunities that allow for trust and relationships to build from childhood through adulthood.
Next gens will someday share ownership responsibility and be called on to make big decisions together. If they can come to see themselves as an interdependent unit with a common goal their commitment and willingness to work together will be strengthened. That kind connection rarely happens in a vacuum. By spending time, learning, solving problems and having fun together, related kids are far more likely to grow into connected adults.
Prepare Next Generation
When it comes to preparing next gen leaders, the transition from first generation to second often happens quite naturally. Gen-two typically has the experience of growing up alongside the family business; summertime likely spent working for Mom or Dad, business phone calls and dinner table conversations overheard. This kind of organic training is often enough introduction to prepare gen-twos for their family business careers.
But if your family business transition is to its third generation or beyond, the training required to prepare that group for leadership roles needs to be far more structured. With their distance from the business’ origin so much greater, relying on organic training won’t be enough. Set up intentional learning opportunities and invite gen-three teens and young adults to experience various aspects of the family business. Start early and stay committed to the process.
Tell Your Family Business Story
Most family business owners take for granted how we got here. But, all the hard work, twists, turns and circumstances that drove our decisions along the way are meaningful. What family history should the rising generation know? Who was the original founder and what is important to know about their life? By providing context and story around the people who built the business, the hard work, the wins, the challenges and the dream, the story becomes relatable. Helping a young person see themselves as part of a bigger system can be a source of meaning and purpose. Family legacy is not just looking back; it includes looking forward. It’s the perfect opportunity to articulate the family values that are foundational to the family business.
I Help Families Prepare and Plan for Succession
Family business wealth built over a lifetime can easily slip away. To increase the odds of longevity, prepare the next generation for its success. After all, our grandchildren hold the future in their hands. No estate plan or overarching family governance structure can supersede the value of a family who can work well together. The efforts you lead now will pay dividends by building a family legacy.
If family business succession planning is in your future, let’s talk now. You can reach me at Angelika@AngelikaOlsen.com.