Next-generation family business leaders: what goes wrong and how can we prevent issues?

Research carried out recently into family businesses and their practices has highlighted a trend: a consistent decline in enterprising spirit.

Indeed, such gusto tends to be passed on from one generation to the next – if at all – with several reasons identified as being a potential cause.

A commonly held view is that next-generation members are sheltered in their formative years, rendering them unable or unwilling to face some harsh realities with regards to the level of commitment involved in steering a family enterprise.

Research into the area also suggests that once family organisations grow beyond a certain size, a strong desire to protect the legacy and all that has been built leads decision-takers to be more cautious and less enterprising in their approach.

Whatever the cause behind a decline in that sorely needed entrepreneurial spirit to make it in a competitive world, a common thread that runs throughout the research is that successive generations lose motivation and are less capable of leading the organisation.

With family businesses making up a significant proportion of many economies, the reasons behind this trend have continued to be researched and discussed. For some, a core reason behind this loss of spirit is the result of a disconnect, or misalignment, between senior and junior generations.

It is true that both generations want the same thing – a stronger enterprising spirit within the family business – but senior and junior generations fail to make the kind of connection required to execute their goals.

What does it really take to build an enterprising spirit? Many agree that failure often stems from a lack of understanding about an organisation’s vision, and what it needs to execute that vision. Comfortable communication patterns often develop in families, creating a disconnect between the perception of reality for either side of the generational divide.

For the older cohorts, they may feel that all is running smoothly, whereas if you speak to the next-gen leaders, they are likely to voice their dissatisfaction about a number of areas, from how matters are being handled or that their concerns are not being properly heard. There is only one solution to this seemingly simple problem: communication.

Effective communication on its own will not be enough to fully develop and strengthen an enterprising spirit in the family business leaders of tomorrow, and for some, it is a lack of motivation among the younger generations that causes a decline.

Family businesses would do well to take advantage of formal educational opportunities available in the modern world so that the next generation are equipped with the right tools and are more likely to act with the correct enterprising spirit.

An important partner to formal education is that of hand-on learning, which requires the younger family members being involved in the business at a young age, starting from the lower rungs.

We cannot understate the value of shadowing leaders, observing meetings and being exposed to customer-facing duties.

Further to education, being given a fair chance to lead is essential. Next-generation leaders must be provided with a safe space to grow and test new ideas, figure out what entrepreneurial thinking works and what should be abandoned. Some provide younger leaders with the leeway to test out their ideas by dedicating resources for such endeavours. The main point to take home from this is that it is vital for new leaders to be given enough autonomy allowing them to truly act.

A decline in a family business’ enterprising spirit from one generation to the next is not written in the stars, with every family organisation progressing on its own path. There are tangible action-points organisations can execute to minimise issues of disconnect or poor communication, thereby limiting inter-generational issues.

Expectations should be set, and frank discussions must be had in a way that allows the enterprising spirit to prosper. With enough work, and a pinch of luck, this should result in the next generation of leaders to be willing to do the hard work and be fully committed to the family business.