Family Businesses Often Need Leadership Transformation not Succession

Otis Baskin

Often when good succession planning occurs in a family business the next generation leader is told (or at least understands):  “we need you to lead us just the way mom or dad did.”  Certainly this expectation seems logical if the business had been successful.  After all, dad or mom’s leadership has put our family in a strong financial position and passed along a great legacy to the next generation.  However, this expectation on the part of mom and dad, brothers and sisters, cousins and key non-family executives may be setting the new leader up for certain failure.

The least effective way for new leaders in a family business to prepare for their role may be to follow the example of their predecessors, no matter how successful.  While it is certainly important to set a good example for the next generation to follow, new leaders must be developed with the awareness that the next generation will face different challenges and must therefore, lead differently.  This principle is true of course in any organization because of the rapid rate of change all businesses experience today.  However, because of the unique nature of family business the temptation for the next generation to model the previous leadership is very strong.

The tendency to “lead as we have been led” is supported by the naturally strong bonds between parent and child.  The admiration of a child for their parent can make it difficult to see and acknowledge shortcomings that need correcting.  Even when the need for change is intellectually acknowledged, the psychological tendency to emulate our parents has been demonstrated to be very strong.  How many adults have you heard reflecting:  “I can’t believe I have become my mother or father”?

However, even when parents have done an outstanding job of leading the family business it is important to understand the next generation cannot and should not lead the same way:

  • Children and their parents are different people and do not have the exact same gifts and abilities.  What works for one as a leader may not work for the other.
  • Business environments change and leadership must be prepared to respond accordingly regardless of what has proven successful in the past.
  • Families and ownership structures change and leadership must be relevant for their needs. 

Generational transitions in family business call for leadership transitions that are much more than just leadership succession, often what is required is transformation.  Leadership development must be a part of the planning process to acknowledge that changes will occur at key transition points and the demands these changes will place on leaders and the process of leadership will be different than what the previous generation has faced.  Businesses and business owning families grow and develop with each generation in ways that require changes in leadership processes as well as the people who lead – not merely succession but transformation may be needed.

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