Will your kids be ready to succeed you in the family business?

Family businesses are among the world’s most widespread ownership and operating structures, and they are growing in size and complexity. Many of the world’s most popular companies are family-owned businesses that have scaled to unimaginable success. Think Walmart, Ford, Cargill, Comcast, LG, Volkswagen, Mars – the list goes on.

In such contexts, there often exists a natural tension between older generations looking to preserve wealth, reputation, and health of the core operating business, and the younger generation seeking to effect meaningful change for the future. The dynamic nature of families combined with an enterprise that is typically rooted in tradition and values makes preparing the next generation to take the helm one of the most consequential decisions for any family business.

When asked what they want for the next generation of young family members, business owners most often say they want them to be prepared. They want them really ‘ready’ for that time when the keys are handed over. However, young leaders are left to their own devices to figure out how to build the kinds of muscles they will need. In fact, there is no roadmap for the type of developmental experiences necessary to truly prepare the shift from next generation owner to family business leader.

Some younger family members are encouraged to explore their interests and achieve success outside the family. Starting as a nobody instills humility and counteracts entitlement. Outside success boosts self-confidence, and upon return, credibility among family business employees. Other younger family members are given a humbling job within the family’s business. This way, they get to know the business through the lens of their parents’ experience.

While both strategies have merit, they are simply platforms to grow rather than being development experiences themselves. Putting someone in a role, whether it is inside or outside the business, is not enough. Instead, it is important to contextualize their successes and cultivate their leadership with intentionality. At the heart of genuine leadership development is experiential learning. With the right dose at the right time, the following six pivotal experiences help next gen leaders become the best possible versions of themselves and enhance their readiness to lead and positively impact the family business.

1. Self-insight

Executive maturity among next gen leaders is developed through realistic perceptions of their strengths and weaknesses—but this is difficult to cultivate when the feedback cues around them are misleading. On the one hand, next gen leaders can be treated as though they can do no wrong, while on the other, they can be treated more harshly given their relationship with the family.

Cultivating this self-insight requires objective assessments of next gen leaders, which provide a window into their character, personality, motivations, and ways of thinking. Such assessments can then inform coaching around personal leadership and family dynamics, as well as guide vocational conversations around what next gen leaders want and are best suited to do within the family business. For some, they will opt for full-time executive roles, while for others, they will prefer more limited, yet still essential alternative involvement. The key to truly growing requires an accurate picture of where they’re at.

A trusted advisor to facilitate self-insight is especially valuable in family offices. While privacy and reputation preservation are treasured by many wealthy families, they can lead to alienation and isolation. Wealth and prominent last names don’t immunize people from normal human struggles, but they often do prevent them from openly admitting to difficulties or seeking help when necessary. This quiet desperation can lead to much bigger problems when factoring in pressures of the family business.

2. Peer exchange

It is well established that it is “lonely at the top.” In family businesses, it is often lonely from the outset. Few can understand the unique experience of growing up with a prominent last name, enduring the politics, conflict, and rivalry within such families, and entering the business while fighting the cloud of perceived nepotism that hangs above one’s head. It doesn’t have to be such a lonely experience, and, in fact, there is great learning in sharing it with others. The way to do this is through peer exchange.

Such enriching exchanges can occur in different venues. Communities such as Young Presidents’ Organization facilitate peer-to-peer learning among other high-calibre leaders. For female leaders, there is the Women Presidents Organization. Some banks and professional services firms offer ongoing programs that expose next gen leaders to key executives within these organizations, professionals in similar circumstances, and otherwise important people who they can lean onto for support through their careers.

Beyond this, we encourage next gen leaders to form their own networks, formal or informal, that serve as valuable sounding boards and resource providers. As next gen leaders fight to maintain multi-generational relevance and success of the family business, they will need access to social capital from leaders that the previous generation may not have had, such as in technology and entrepreneurship.

3. Visibility

Next gen leaders need to be known by people inside the family and company. Without sufficient exposure to the family enterprise, it will be difficult for management or the board to select an unknown entity for a mission critical role such as the CEO, regardless of whether the individual is a family member or has had outside successes. Absent exposure to the family business, any suggestions or changes that next gen leaders propose can be seen as attempts to “rock the boat.” Finally, it will be near impossible for next gen leaders to establish their own followership within the core business without being known entities. They must be visible to the organization.

Such visibility can be achieved in a number of ways. At some point, the leader will need to take an active role in the business. Wide introductions should be carefully designed to position the next gen leader as an active yet humble player in the business. Beyond this, next gen leaders often assume a seat on the board as an observer or full-fledged member. Regular board meetings also provide opportunities for next gen leaders to stay connected with the business and its leaders. Through direct exposure, next gen leaders gain visibility within the business’ ecosystem and become known to the key stakeholders that will ultimately determine future success.

4. Opportunities to add strategic value

For next gen leaders to truly be ready for the family business, they must be put in the hot seat, which allows them to deliver strategic value and drive family business goals and results. These roles and assignments should provide real P&L responsibility, accountability, and risk, and create opportunities for next gen leaders to make complex decisions and experience the consequences of those decisions. Next gen leaders should be provided opportunities to solve difficult organizational problems or lead important initiatives. Whether it is driving a special project dealing with core business growth, leading an acquisition, or managing an emerging business, it is essential that success leads to material value to the organization.

In many instances, next gen leaders need more than just strategic or decision-support experience. For those who have spent most of their time outside the family enterprise, they will also require general working knowledge of and experience within the family business. This should take the form of real operational exposure or “working in the field,” which will offer insight into the fundamentals and unique subtleties of the family business, and help contextualize any strategic decisions they make in the future.

5. Experimentation

Next gen leaders need opportunities to experiment and innovate, and be given the room to take some risks. Nothing fosters engagement in the family business as much as full oversight of an entity or division. This can occur in a number of streams within the family office, such as the core business, private equity, family foundation, or other businesses within the family enterprise.

Such opportunities will provide next gen leaders with the practice they need to make small and weighty decisions. Beyond experience, they will also be put into situations where they either sink or swim. How they fare will give next gen leaders and the family business honest feedback about their readiness for mission critical roles. The key is for next gen leaders to be given the opportunity to fail. It is likely that their parents were in such positions earlier in their career and that is how they built the battle scars leading to their success. In the absence of experimenting with risk, next gen leaders may never reach a necessary state of readiness to take the big role.

6. Focused learning

Beyond experiential learning, next gen leaders also require focused, formal learning, which will depend on the individual leader. For some who have generalist business acumen, they may require industry-specific knowledge. While for others, who have deep expertise within the family business, they may require learning that focuses on a core business competency or global business acumen to build the relevant skills and perspective to lead the family business.

Gaps in learning requirements are typically unearthed during objective assessments of next gen leaders’ capabilities. By pairing the right program that addresses the learning needs with a critical role within the family business that requires the direct application of these concepts, the true impact of focused learning can be maximized.

The bottom line

These are the six types of experiences that all next gen leaders should seek in order to be ‘ready.’ The earlier one embarks on the journey to achieve them the better, and previous generations have a significant responsibility to support this journey. Through this, you are more likely to achieve leadership continuity, business perpetuity, and family harmony.