Nurturing the next generation is an important consideration for family business owners, says Michael Farrell.
When family businesses plan for the future, transferring control to the next generation is a frequent succession choice. However, since no individual is born with the skills and experience to successfully lead a business, it is important to nurture talent well before the current leader’s planned retirement or exit date.
Potential future leaders need to be fully committed to their role and should undergo a period of formal training and mentoring to prepare them for their future responsibilities.
Experience suggests that there are a number of practical ways to nurture talent when planning for family business succession. These include:
• Be a positive role model. Leaders should lead by example, demonstrating that they are open to learning as the business develops and grows.
• Encourage potential successors to get involved in the business informally from a young age. Examples include internships, volunteering for charity events, attending family board meetings to observe.
• Where appropriate, encourage potential successors to gain appropriate qualifications/experience outside the business.
• Recruit potential successors on merit. Family members should join the business be on the basis that they have the necessary qualifications and skills for their current role which can be further developed over time. Special roles should not be created just to bring a family member into the business.
• Set a clear business strategy and align individual goals with the overall business plan. This includes listening to, and respecting, individual expectations and career plans.
• Monitor individual performance and give honest feedback so that everyone can improve.
• When things go wrong, turn problems into learning opportunities.
• Invest in continuous education and development, not just in the technical areas that are relevant for your business, but also in soft skills such as communication and interpersonal skills. Like all businesses, family businesses evolve over time. Future leaders must be able to balance the sometimes conflicting interests of employees and family members actively working in the business, external investors, family shareholders who do not work in the business, and so on.
• Create a culture where mentoring and coaching helps each individual to reach their full potential.
Keep in mind that sometimes picking the right future leader may require looking outside of the family business.
Whatever the circumstances, selecting future leaders is an important decision which should always be based on sound business reasons rather than on emotional factors.
The most successful transitions occur when family business owners invest in building strong partnerships with the next generation based on mutual respect.
PKF-FPM host regular development seminars for family business owners. If you are not already on our mailing list and would like to receive an invite to a future event, please contact a member of our team.
Michael Farrell l Director