How Family Businesses Can Adapt for the Next Generation
Many businesses face challenges in being passed down through generations, as younger family members often show less interest in assuming significant responsibilities.
This may result from a lack of preparation for leadership roles when the business requires it or an unwillingness to take on the burden of managing operations or being accountable to other family shareholders.
Here is how family business adapts to the next generation.
Create a Unified Vision
The key step for a family business transitioning to the enterprise model is establishing a shared purpose and a unified vision for the future.
Diversifying into new businesses or industries without a clear direction is not enough; a consistent set of values, principles, and goals must guide the process.
A well-defined purpose for the family’s wealth and its use across generations becomes essential.
Continuity remains the ultimate aim, and one of the greatest advantages of a family enterprise lies in the ability to plan for the long term.
Significant financial and emotional rewards await families who successfully adopt the enterprise model, but achieving this requires unity.
A shared vision empowers a family enterprise to present its distinct identity in the marketplace. There are also great ideas for corporate gifting that you can incorporate as part of your shared vision and values.
Stay Relevant to the Family
Financial outcomes don’t solely measure success in a family business. This becomes even more evident as younger generations step into leadership roles within legacy companies.
Millennials bring a fresh perspective to family businesses.
Their focus often extends beyond financial gains, prioritizing investments in environmentally sustainable and socially responsible ventures, fostering companies with more adaptable workplace policies, and more.
Ultimately, they’re committed to aligning their investments with their values.
As families work on redefining themselves and exploring new opportunities, consider how to reach an agreement on these broader, nonfinancial priorities.
Establish a Strong Governance Framework
After the family reaches an agreement on which business opportunities to pursue, the next step is deciding how to manage the new venture.
Some families opt for a holding company model, with a board that oversees overall activities and allocates capital, while others manage each entity individually.
It’s important for families to thoughtfully consider two key aspects: where the family’s influence will be positioned within the chosen structure and how to effectively integrate independent expertise.
Some families establish a family-only board at the holding company level. Others bring in independent directors for additional support.
Some families prefer having independent directors at the entity level but choose not to implement a formal governance system for the broader enterprise.
Create a Mentorship Program
Introducing children to the energy of a business environment can start small.
Hosting a “Bring Your Children to Work” day is a simple way to foster a culture of inclusion among all employees while keeping the focus balanced, not just on the children of owners.
Pairing the event with a picnic can help owners’ children and grandchildren feel more at ease connecting with employees and their families.
As they grow older, teenagers might take an interest in specific roles or departments.
These initial steps can eventually evolve into structured internships or apprenticeship programs, offering young people a chance to explore the business and discover potential career paths.
Endnote
Handing over a family business goes beyond simply transferring roles and ownership; it’s about safeguarding a legacy and building a future.
The continuation of a family business reflects the commitment and effort of those who paved the way. It stands as a living embodiment of the family’s principles, traditions, and entrepreneurial drive.
