Imagine a father and son sitting at opposite sides of a desk. On the one hand, the father has seen his business and boy grow in front of his eyes. He is proud of them both. Yet, how do you transition from being father and son to colleagues? He has taught right from wrong, said no, and led the way. How can he look at this boy as a man? As an equal?
Then, we have the son, trying to fill in his father’s shoes. There are many things to learn, like how respect must be earned and how the father’s success has many lessons to be discovered. At the same time, he is eager to bring new ideas and his company vision. He wants to make changes and adjust to the future.
There are many challenges in passing a family business to the next generation. About 40% of family-owned companies transition into second-generation businesses, and approximately 13% are passed down successfully to a third generation. In comparison, 3% survive to a fourth or beyond.
What is causing this increasingly small number of successful family transitions? Many factors in play could hurt the chances of being able to pass on the business to the next generation. We’ll explore some of the main obstacles that get in the way.
Let’s tackle the most significant and most challenging of obstacles first. Research has taught us that it is the key to be able to have a successful transition of the family business. What are some communication problems that we can encounter?
- Lack of clarity. This can be seen as expectations of children taking over without clear communication of those expectations. When you assume, you fail to plan and prepare. This can lead to many more problems down the line.
- Lack of transparency. Many departments and components come into play for a business to run successfully. Children are not often exposed to the inner workings of the company. When their time comes, they feel out of place and out of touch with the business.
- Lack of direction. Not having a clear vision of what the company’s purpose can impact the transition. If they don’t know where they are going or why they are going there, it is easy to lose the way.
To counteract these communication problems, we need to be clear, transparent, and direct. These skills can be learned, and an executive coach can help as a third party to help ease communication problems
There are two crucial things needed to plan for a successful family business transition. Let’s call the first: early transition planning. This involves all the strategies we can put in place before the real transition starts to take place to increase the involvement of the succeeding generation in integrating into the business. For example, internships programs, bring your children to work events, family and business bonding activities, etc.
The second is the real transition plan. We cannot just expect the new generation to come in and hit the ground running. Shadowing programs, visiting the different departments, building rapport, and learning how to be open-minded and respect each other in a work setting are essential elements to consider.
Generation Gaps and Family Dynamics
The last element we will discuss is how generation gaps play a role in the family transition. The opening of this article was about a relationship between father and son and how they see each other.
The older generations often feel like their wisdom goes unheard, and the same goes for the new generation. The truth is that both generations hold their own kind of wisdom and deserve to be heard. There can be so much power to move forward in learning to respect, listen and consider each other. Instead of allowing dysfunctional patterns to emerge where either party feels unseen or unheard.
One of the crucial lessons to learn here is to successfully transition from one generation to the next: we must begin with transparent conversations from an early age. At a place as casual as the dinner table, we can include and expose our children to what goes on with the business and how it’s vital to the family. We observe that family and company values are connected in many successful businesses.
Psychologist and Emotional Intelligence Coach
Transition coaching helps leaders to dive underneath and see what are the critical areas of the concerns of a family business. See more about Transition coaching HERE.