When my family’s business suddenly lacked a leader due to my father’s health crisis, I was the only next-generation family member at all positioned to step into his shoes. Yet I was still woefully under-prepared. In this article, I offer 6 tips I learned the hard way to help your family business do a much better job equipping members of the next generation to take the company helm with confidence.
Clarify What and How Your Next Generation Will Lead
What, exactly, are you going to pass on to the next generation? Your company is probably not the same business it once was, and neither will it be competing in the same economic and technological landscape as in the past. Take an overview of your entire enterprise. What should the organization look like in the future? Develop and document that vision, building upon what now exists to reach new goals.
As I ask my family business coaching clients, “What does your ideal future look like for the business and for you personally? Will you have a role in the business, or will you be completely retired?”
With that envisioned future in mind, you can determine what type of leadership will be needed to achieve that vision. What competencies must your next leader possess to fill this role successfully?
When I coach business leaders using the Metronomics methodology and playbook, I lead them through creating a Scorecard for each functional role in their operation. Nowhere is this type of analysis more important than in the top levels of leadership. A Scorecard is more than a list of responsibilities; it also catalogs the competencies required to fulfill those responsibilities. These might include marketplace insight, team leadership, results orientation, or collaboration, for example.
Equally important in your planning is to document how the leader will help the organization stay aligned with the company’s core values. (This, too, is included in a Scorecard.)
An important note: Beginning your search for a next gen successor with this kind of transparently developed and documented set of criteria goes a long way toward avoiding the appearance of bias in your selection process. If you can avert family conflict, why not do it?
Identify Potential Next Gen Leaders
Potential successors should stand out once you have clarified your criteria for the role. But never assume a family member is interested in taking on leadership. Begin discussions early with each potential candidate, allowing them to openly express any concerns, questions, or reservations they may have.
For those family members who appear qualified and interested, perform assessments using tools that will reveal the competencies you desire. At the same time, look for your candidates’ potential—the ability to grow.
As Harvard Business School’s Claudio Fernández-Aráoz describes it, potential in your candidates show up as:
- Curiosity: seeking answers and learning quickly
- Insight: connecting the dots while tuning out unnecessary noise
- Engagement: getting others involved
- Determination: striving toward high goals despite setbacks
- Foundation: humbly committing to building something bigger than themselves
What family members do you know with these indicators of potential?
Open Avenues for Leadership Development
Prepare your potential leaders through a development program designed to engage their competencies and optimize their potential through real-world experiences. Make sure this includes growing their understanding of the business, from operations to strategic planning; their grasp of business and finance fundamentals; and their capability in leading teams.
Expose them to the business. Have them tour your facilities, shadow executives, and hold summer jobs or internships in various business units, locations or roles. Show them the different “hats” a working owner wears. Acquaint them with the intersecting (and sometimes competing) priorities of family members, business, and owners—as illustrated in the Three-Circle Model made famous by researchers Tagiuri and Davis. And always hold up before them the unique culture and values of the family’s business.
Although I ended up joining my family business when it was in distress I did have years of preparation during my youth when I worked in the business and understood the culture and values of the business – even if some of these needed to evolve for us to survive. I also had a few years of corporate experience that were vital in allowing me to gain perspective on our business.
Surround them with wise guides, who may or may not be part of the business leadership. My own experience of rocketing into the CEO position forced me to go out and find this kind of guide for myself, as described in my book, Being Frank. Without Frank’s mentorship, I would never have been able to keep the business afloat, let alone turn it around into a profitable organization in a short time. Clearly, then, I’m a firm believer in the power of wise guides and mentors.
Give them real opportunities to lead. Let them try their hand at turning around a struggling unit of your enterprise. Let them start a new initiative, complete with generating buy-in among the people involved. Give them opportunities that require good communication, hard conversations, and giving/taking feedback. Importantly, let them make mistakes and learn from them. I made some significant hiring mistakes early in my career but learned a huge amount from them.
Provide education. In addition to learning leadership in situ, more formal studies in subjects such as finance, business management, and leadership may be part of what your candidate needs to fill their knowledge gaps.
I had the good fortune to participate in some great executive education with Ford Motor Company that was invaluable when I joined the family business. Courses like Finance for Non-Financial Managers, public speaking training, negotiation skills and role play in dealing with conflict.
Demonstrate that leadership rests on merit, not entitlement. Early on, instill in family members a sense of professionalism, an understanding that a thriving business depends on the excellence of its people, its services, its internal and external interactions, and its operations. Establish objective and clear family employment guidelines. Then no one will inherit the CEO seat; they will earn it by exhibiting excellence in leadership.
Develop leaders aligned with your family values and business goals. Woven deeply into your development program should be two critical threads: what your family stands for and where you’ve prepared the business to go (the vision I mentioned earlier). Part of the reason you’re looking within the family for the next CEO is because relatives are more likely to preserve the values upheld by previous generations. At the same time, you want the business to live on into the future, so your next leader needs to focus on achieving the business objectives that will ensure sustainable success.
Only family members who embrace these values but also have the ability and the desire to work hard and become the leader the business needs going forwards should be considered. Having the same last name as the CEO does not qualify you to be the leader!
Step Back to Make Room for the Next Generation
When your next gen leader is chosen, the current leader must begin to ease out of their way. Some companies give the successor a COO role, managing internal operations, while the present CEO continues leading in areas like strategy and external relationships. If you use this kind of shared-leadership model for your transition, be sure to establish a mutually supportive relationship between the two leaders, and set clear guidelines for reporting within the company.
Current leaders must resist the urge to hold the reins tightly as the transition begins. Replace the language of “me” with “we.” Avoid telling the next-gen leader how not to make mistakes. Instead, have open conversations about past failures, resilience, and lessons learned (yours and theirs). In the event of less-than-stellar leadership moments, model for them the flexibility and patience needed to ride out poor outcomes of their best efforts.
Take Advantage of Outside Expertise in Succession Planning
For some family businesses, decades may have passed since they last considered preparing the next generation of leaders. If that sounds like your company, then this may be an ideal time to bring in an outside perspective.
This is especially true if you are in the enviable position of having multiple possible successors. It’s also useful if you need to consider restructuring leadership roles to share responsibilities among members of the next generation with complementary skill sets.
Calling upon a business coach to assist you through a leadership succession could be the best tip yet for engineering a smooth, impartial, and successful transition. As a business coach specializing in succession planning, nothing gives me more satisfaction than seeing a family business move into the future under capable leadership or doing the work to prepare for a successful exit if it is decided now is a good time to sell the business.
Reach out today to schedule a no-cost consultation to discuss the possibility of working together toward your business success.
