Family business tip #6 – “Develop your Future Leaders.”


Every family or privately owned business will need to answer this question: “How will this company endure after the current owner departs?” With a family owned business, that may be a passing of the torch to one in the next generation, a non-family CEO, or other scenario which involves some form of leadership succession. With a privately owned company, perhaps a strategic sale or employee ownership transaction. Regardless, preparing for that event takes time, people and expertise.

Remarkably however, an orderly succession is rarely the case. In nearly half (47.7%) of all FOB collapses, the failure of the business was precipitated by the founder’s death, or in 29.8% of the cases, the owner’s unexpected death. Only in relatively few instances (16.4%), did the business failure follow an orderly transition, and in situations where the owner was forced to retire, the figure drops to 6.1% (University of Connecticut Family Business Program, 2009).

Why is developing your future leaders important?

  • Leaders must be prepared and qualified to take over the helm.
  • Respect is earned through time and demonstration of abilities.
  • The desired plan may not always coincide with reality:
    • Death or disability may necessitate a hasty change.
    • The “ideal” family member may not be available or ready to take over leadership.
  • Today’s leadership landscape has changed:
    • Pull, not push leadership.
    • It is about sharing information, not controlling it.
    • Constant innovation is critical to the success of many family businesses.

What are important leadership characteristics?

  • An independent vision and goals, coupled with a keen history of the business.
  • Develop new products, services, relationships, organizations, and channels.
  • Manage complex relationships between the organization and its network of stakeholders.
  • Decision making
  • Risk taking

Why do some families resist identifying who the leader will be?

  • Assigning roles or picking a leader my result in conflict or hurt feelings.
  • Current leader is not prepared to let go.
  • Lack of company support
  • Legacy is a double edged sword:
    • Previous generation embodies it
    • Younger generation often feels saddles with legacy.

Where to start developing leaders?

  • Assessment:
    • Is there a passion for the business?
    • Is there a good alignment of skills?
    • Does he/she fit?
  • Education:
    • Some programs are now specializing in Family Business studies both at undergrad and grad level.
    • UVM teaches a course in “Leading and Managing the Family Owned Business”
    • Professional programs also exist such as the “Certificate in Management and Leadership at UVM.
  • Experience:
    • Outside experience will help develop skills and network, as well as respect
    • Internship at another family business
    • Develop within the business prior to assuming management or leadership positions.
  • Peer groups, mentors and coaching
    • Peer groups are an effective tool to develop leaders and create a strong support network.
    • Mentors, both outside the business and inside the business
    • Coaches can help developing leaders establish their priorities and decision making abilities.
    • Non-family directors or Boards of Advisors
    • Non-family executives can provide a bridge to future family leadership and instill professional benchmarks.
    • Provide a nonbiased view on who is best fit to take over leadership.

Some relevant stats related to developing your future leaders:

  • Integrity and commitment are the two most important attributes considered by senior generation members for next generation leaders. The ability to garner respect is a close third. (Chrisman, Jh., Chua, J.J. & Sharma, P. 1998).
  • The average life span of a family-owned business is 24 years (, 2010). About 40% of U.S. family-owned businesses turn into second-generation businesses, approximately 13% are passed down successfully to a third generation, and 3% to a forth or beyond (, 2010).
  • Currently, 24 percent of family businesses are led by a female CEO or President, and 31.3 percent of family businesses surveyed indicate that the next successor is a female. Nearly 60 percent of all family owned businesses have women in top management team positions (Mass Mutual American Family Business Survey, 2007). Of the non-family firms in the Fortune 1000, only 2.5 percent are currently led by women (Fortune magazine, 2007).
  • Between 10% and 15% of U.S. family firms are now managed by non-family executives (Barclays Wealth and The Economist Intelligence Unit, 2009).

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