In a two-part blog post, Family Business Group consultant Stephen P. Miller highlights some key findings from his recently completed research on how next–generation family leaders develop leadership skills.
Engineering a successful generational transition is often the issue that most concerns family business entrepreneurs who hope the businesses they have created will thrive through multiple generations of family ownership. Family firms that develop effective next–generation leaders often employ the following leadership development strategies:
Ensure next-generation leaders have job assignments with real responsibility, accountability, and risk; inside or outside the family business. Next–generation leaders need opportunities to make complex decisions and experience the results of those decisions.
Provide accurate feedback on performance, often from trusted non-family leaders in the business. Next–generation leaders benefit from knowing how others perceive their leadership practices in order to learn the emotional and social intelligence competencies that account for over 85% of top leaders’ performance.
Create a positive and supportive family culture. Families that work hard to foster open communication, establish effective conflict resolution and governance processes, and create an overall positive family climate enhance the chances that next–generation family members will develop leadership skills.
Start early: Learning leadership skills takes decades, so wise family business owners encourage next–generation family members to gain leadership experience in activities in which they are personally interested in school and early in their careers.
The good news is that leadership skills can be learned. Forward–thinking family enterprise owners focus as much or more on the development of their human capital, including next–generation family leaders, as they do on their financial capital.
I am particularly intrigued by the recent research being conducted in the world of neuroscience. We are learning more about our brain and how it functions everyday (not just when something goes wrong with it). I believe this body of knowledge is particularly relevant to leadership and to families running businesses together.
We know for example that when we recognize someone for a job well done that their brain releases a chemical called Dopamine. Dopamine rewards us with a sense of pleasure. Likewise we can also experience a downward spiral in our confidence and performance when we do not receive positive feedback over a long period of time.
We also know that our brain receives and processes negative comments and rejection in the same way as it receives physical pain. The old saying “sticks and stones may break my bones but words will never hurt me” is not true as far as our brain is concerned.
For me the most exciting aspect of this research is that it provides the evidence for why leadership development is so critical for the next generation of leaders. Leaders are not just born, they are also developed. Some of the executives and business owners I have worked with in the past have needed proof of why good leadership principles work. For those less relationship oriented personalities, the new discoveries in neuroscience are providing the evidence they need to lead in a more powerful and effective way.
“Hey dad, could we talk about what Uncle Ted is doing to turn-around our construction division?” asked Jerry Bates, third-generation family member working in the business as Vice President of Development. His CEO father, Donald, replied: “Sure son, we can address this in 2016 when Ted is ready to retire!”
Why do so many members of an enterprising family avoid discussing difficult matters? Some of the brightest family business leaders simply cannot, or will not, take on issues that could create a potential fissure in a family relationship. As close brothers, Donald and Ted have gone through many challenges together in life after their father died when they were in their twenties. Although not fully prepared, they had to grab the reins of the business and learn quickly on the job to lead the family firm. They built the company into a thriving entity that now employs over 300 people, including five family members. As the Great Recession severely impacted the business, particularly Ted’s division, they have not been able to fully discuss some tough measures to take with employ lay-offs and other expense reductions to bring the division back to profitability.
Whatever the reason, family members are prone to avoid many tough issues when they believe the risk of damaging the family is too high. Unfortunately, most difficult family business issues do not go away. Like a weeds in a garden, the “un-addressed tough issues” can eventually choke out the valuable elements of the family business.