You don’t have to be a New York Yankees fan to conclude that passing the torch to the younger generation in the family business can be treacherous. But receiving the baton in this inter-generational relay race is no easy matter, either. Who bears the responsibility to make this work?
The incoming family member bears the primary responsibility to devise and implement the strategy to succeed in ascending to the leadership of his family business. He or she should not rely upon the assumption that his family, the senior management, has learned all there is to know and is capable of insuring a successful transition.
Generally, there are three key players in the typical family business succession scenario: the incumbent parent generation; the non-family member key employee, and the incoming, younger family member. The incumbent member wants to transition management and, possibly, ownership of the enterprise; the younger member has been racing to be ready and is eager to receive the handoff; and the non-family member is work horse, reliable member of the team, often unnoticed, who is critical to the success in this transaction.
The younger family member should be clear that while being a family member may be a necessary condition to her reaching the executive suite, it is not a sufficient condition. He must clearly understand that he is entering a business, not an extension of the family. He will be expected to perform to higher standards than, and often different from, those by which the non-family management team has been tested. He will need to establish his own credentials.
Scorched earth strategies, thinking that the transition of management to the younger generation is an opportunity for wholesale replacement of key personnel and the implementation of radically different strategies, are not productive. Drastic upheavals in a successful business should be very carefully considered and generally, avoided. Unlike a non-family business where the appointment of a new executive team is often an opportunity to clean house and lay the blame for the businesses problems on prior management, this approach may have deep and very negative consequences for the family business. The phrase, “it’s not personal, just business”, does not apply to the dynamics of family businesses.
The younger family member should learn the business, learn to recognize the valuable roles played by the non-family members, and learn to demonstrate his leadership skills. His ingoing assumption should be since the business is successful, those in leadership roles are valuable team members; he should work with them, not against them.
Before joining the business, the younger family member might do well to spend some working time for another business. Family businesses, particularly successful ones, can be very insular and, learning how things are done elsewhere will significantly contribute to the potential leaders’ knowledge base, materially improve their network of useful contacts, and provide opportunities to make mistakes and elevate their credentials. Having achieved a degree of success and recognition in a non-family business is a valuable asset when navigating the family business environment.
Both before joining the family business and regularly thereafter, the younger member should also have extended, candid and extensive explorative conversations concerning the job, the career, the expectations and time line with their parent. The traditional executive interview process, through which as much is learned by the executive about the business as is learned by the business about the candidate is conspicuously absent from the process through which family members are enticed to join the business.
Lastly, like any executive being recruited to a new high-level position, these potential leaders should conduct their own due diligence on the business, its key players and business strategy. These are not contractual discussions; they do not have to result in agreements. They are exploratory discussions, aimed at gathering information, sharing views and helping to determine which values are shared by the generations and which will have to be reconciled in the future. They might include a discussion to air the senior member’s mid to long-term plans for his continued relationship with the business.
The younger, incoming executive should also develop a realistic understanding of how his entry will impact key employees: who will be welcoming, who will they feel threatened, who will they likely be supportive and who will they be inclined to undercut his initial integration. Equally important, the younger member should begin to develop strategies to identify indispensable players and how to gain their support and build alliances
The senior family member needs also to recognize that his business is not a family unit, that he has succeeded by recognizing talent and contribution and by promoting the most accomplished of his employees, not by nurturing those who couldn’t cut it. As the person of authority and last resort in the family business, he or she has an important responsibility to create an transparent atmosphere in the business, one in which his trusted and valuable employees understand his business and family plans and the roles which they will play in implementing these strategies. Usually, if key non-family employees are informed and properly motivated to implement the family strategy within the business, they will understand that cooperation is in their best interests and will be rewarded.
By doing his homework, by planning his entry into “his” business, the younger family member is doing his part to partner with his senior family members; he is fulfilling his responsibility to make the transition successful. It is not a guaranty of immediate success in integrating him into the business. But it certainly increases the likelihood that the incoming family member will be better prepared for the challenges he will encounter, will be smarter in choosing battles worth waging, and ultimately will be more likely to navigate a successful transition.
Although there has been considerable scholarship addressing the challenges facing the incumbent family members when bringing the younger generation into the leadership of the family business, very little attention has been focused on the younger generation. Little help has been offered to these future family business leaders. Many of them enter this race unprepared, too often not understanding the challenges they will face, the alliances they will need, or how to devise the strategies that will help them to succeed as they work to earn their place in the family enterprise. Consequently, they often participate passively in shaping their careers and rely on their parents to create successful career paths for them.
