Many businesses that are just starting out typically don’t have a solid plan on becoming a multi-generational family business. Their plans primarily focus on growing their business and ensuring the business model is successful. Businesses often find themselves in this position when the next generation starts showing interest in the family business.
For many multi-generational family businesses, the next generation plays a vital role. Cynthia Brendel with First Bank states, “The long-term success of many family businesses is often dependent upon the role of the next generation taking an interest in joining the organization. If joining the business affords them the opportunity to leverage their strengths and fulfill their passion, then the partnership will become a healthy one.” When the next generation starts showing interest, it’s important to recognize, engage, and nourish this interest to help the next generation become a valuable asset to the business now and into the future.
Engaging the next generation requires more than communicating with them about the business. It requires learning and understanding what is needed in order to bring value to the company. Some specific areas to consider when engaging and developing the next generation include fostering the needed skills and education for involvement in the family business, determining what the desired characteristic traits are that will contribute to the success of the business, and what external opportunities are available prior to joining the family business.
Skills and Education
For some family businesses, the next generation takes an interest in the business at a young age, often allowing the child the opportunity to work at the family business during their free time or over summer break. Brendel states, “Children can often work side-by-side with a parent on a special project or learn to manage the business by taking ownership of certain deliverables. Shadowing parents or even non-family member employees gives them a chance to learn the business organically and determine if working in the business is something that they should consider.” Additionally, it’s important for parents to ensure that their child has an opportunity for formal education. A formal education can help expand their knowledge and prepare them for involvement if they decide to join the family firm.
Read more at Family Business: Grooming The Next Generation
Characteristics and Traits
When it’s time to pass the business to the next generation, it’s important to ensure the successor has the desired traits and characteristics needed to be a successful asset to the company. The successor should be able to communicate effectively, have a growth mindset, and be goal-oriented. Brendel says, “Great leaders must be able to develop goals, create a plan, and strategize in order to help reach those goals. They must have the charisma to influence others, understand the importance of engaging others, and celebrate success.” Consider what other traits and characteristics are desirable and work with the next generation to help further nurture and develop them.
While the end goal might be the next generation being involved in the family business, it’s ideal for them to consider seeking external opportunities as part of their education and training. Brendel mentions, “Working at external organizations, prior to joining the family business, is often a great practice to give the individual an outside perspective and also provides knowledge of best practices that can then be brought back into the family business.” Seeking external opportunities prior to joining the family business can help develop the person professionally, as well as give them additional knowledge and experience.
If your son or daughter loses interest and/or determines a career independent of the family business is a better fit, then read: What if No One in The Family Wants The Family Business?
As the next generation starts to show an interest in the family business, it’s critical that it’s being recognized, they are being engaged in the business, and are properly groomed for future leadership. Keep in mind what skills and characteristics are needed to lead the business effectively and help the next generation develop them further. For assistance on preparing your business for the next generation of leadership, reach out to our Wealth Management succession planning experts.