In many family businesses, the tension between the eagerness of the next generation’s leaders to take control, and the founding generation’s willingness to relinquish control, is the source of many failed relationships and companies. The founder does not trust the next generation to take on the responsibilities of the business, and the next generation does not sense the empowerment to do so. So, they find themselves at an expensive impasse with family harmony and the future of the business at risk. A lack of a co-designed transition plan can create havoc for a family business when, for example, a founder suddenly suffers a medical limitation that impairs their ability to function optimally, or the next generation throws in the towel because they don’t feel included in the future growth of the business. Based on our research of more than 2,500 families and our collective experience as family business consultants, we’ve found that the following strategies can help family businesses best manage the transition to the next generation.
Plan a Smooth Succession for Your Family Business
A central concern of family business leaders is assessing the readiness of the next generation to take over the business. This is critical, because research shows that 25% of failed transitions occur due to a lack of a prepared heir. Taking time to co-design what readiness looks like enables both parties to align and have confidence in their ability to step into leadership roles. Families must bolster the participation of the next generation by giving them more autonomy, embedding high-trust behaviors, and adhering to clear standards of readiness. When done effectively, succession plans provide a pathway for future stability and ease the transition of next generation leaders. Engaging the next generation in business transition planning promotes greater alignment, collaboration, and perhaps most importantly, trust in each other and a shared vision for the future.