Family Business Transitions: How to Build an Early Leadership Development Program
Transitioning leadership from one generation to the next is a pivotal evolution in any business, but it’s particularly so in family businesses where the likelihood of failure is quite high, and the interpersonal dynamics are more complicated and nuanced.
To address these issues, we suggest building an early leadership development program for family members who are just beginning their careers. In our experience, the best programs blend education, training, development experiences, and individualized leadership and career coaching.
The reasons for building an early leadership development program are threefold:
First, an early leadership development program allows family members to experience impactful learning and training opportunities while they’re still building their habits as professionals, which will help to set them up for success in the future.
Second, an early development program sets the stage for the current leadership, and the organization more broadly, to objectively identify and assess the next generation of leaders and carefully begin preparing family members for transitions in the years to come.
Finally, combining training and development opportunities with individualized leadership and career coaching allows family members to reflect on their learnings, share concerns and challenges, and consider how they might best impact and influence the business in a safe, confidential space.
Starting the work off early with objectively identifying talent and motivations and supporting individual development will go a long way toward helping avoid many of the pitfalls of family business succession planning.
In partnering with family-operated businesses to build these programs, we have developed a core set of best practices. We encourage anyone building an early leadership development program for their family business to consider how they can integrate these concepts into their unique process.
Set clear boundaries around confidentiality for everyone involved with the program
The complexity that emerges when you combine family systems with business results is about as complicated as it gets. This is particularly true in family-operated businesses, where family members are engaged in ways that make them colleagues and business partners in addition to their family roles. As such, family enterprises will often engage with outside partners – consulting firms, accountants, etc. – to provide objective support for the family business. In some ways, adding a third party to the equation adds another layer of complication. However, whether a third party is involved or not, everyone touching the program must clearly understand what information is being shared by whom and with whom in order for the program to be trusted.
Create a mechanism for getting and implementing feedback on the process from program participants
We encourage inviting family members to be involved in program design and development. The ability to help mold the program should promote a sense of ownership and buy-in, and drive commitment to the process itself.
As the program continues, keep gathering feedback from family members. In particular, family members being considered for leadership roles should have a voice in the transition and selection process as early as possible, as well as have an opportunity to provide input or guidance on how the transition will occur.
Make it clear that participation in the program is a choice, not an obligation
Parents in family businesses may differ in how, or even if, they encourage their children to participate in a leadership development program, which is fine, because the ultimate decision should be left with the next-generation family member themselves.
Allowing participants to select when (and if) they “opt in” to participate in a program or leadership development experience leads to a more productive and meaningful engagement. It also enhances the individual’s accountability and ownership over their own growth.
Communicate the goal of the program and be open to individual leadership development journeys within it
It’s important that family members understand what will make their participation worthwhile, both personally and professionally. A key step is to identify, discuss, and make fully transparent the real and expected consequences for participating or opting out.
In our experience, there are usually several family members who are not interested in leading the business into the future, but still desire development and growth opportunities to improve their professional skillsets and allow them to add value to the business in their own way. We encourage family businesses to allow each individual to explore their goals and gain self-insight through participation in the process (whether they desire to lead the business into the future or not).
Have clear milestones and responsibilities to create accountability for the participants
When a family member does not live up to expectations or resists consideration of developmental feedback, it can be challenging for all involved. However, should participating family members fail to cooperate with their commitments, it is in their best interests to receive feedback and have an open dialogue about developmental curves and challenges in reaching agreed-upon milestones.
An objective third-party coach can be invaluable here. We often see family business stakeholders struggle to provide direct and challenging feedback to family members themselves. Providing challenging feedback in a way that is sensitive, constructive, and honest is what a good coach does. At the outset of an engagement, we find it particularly helpful if we ask family members to openly share feedback regarding their level of satisfaction with their program experience so far. This helps set the context that the dialogue and feedback will be reciprocal, and that the participant has some control over their own unique experience.
When in doubt, refer it out
As psychologists, leadership practitioners and coaches, we have specific training and expertise that guides the work that we do. Boundaries can quickly blur in working with family businesses, so before we find ourselves in the middle of a conflict between parents and siblings, we map out where we will contribute to the partnership as well as where we won’t. We also call upon our alliances to make referrals and connect the business with best-in-class practitioners to support their needs. The ultimate goal is to provide seamless, value-added support — however that needs to be accomplished.
The same line of reasoning applies within the family-operated business as well. Understanding what can be handled in-house and what requires tapping into an extended network of resources (and what might trigger a call to bring in support that’s not already in action), is an important consideration in designing any program.
Be aware of, and have a plan for, sensitive family issues and history that can impact participation and engagement in the program
Relevant information about the challenges facing a family can be so sensitive that they are not easily discussed. In these circumstances, the optimal path forward has to do with the best interests of both the family members and the future of the business, as opposed to the internal politics of the family.
We encourage taking the time to understand, clarify, and discuss family dynamics and relevant information early on. Where appropriate by the identified boundaries of confidentiality, we encourage ongoing and transparent dialogue throughout individual engagements around dynamics that could negatively impact the individual or the business.
By beginning the process of developing and assessing leadership early on in family members’ careers, a family business will find themselves better-situated in the difficult and deliberate process of managing a leadership transition across generations. Building an early leadership development program involving objective assessment, training, coaching, and exposure is a good way to provide the support that both individual family members and the organization require to surface the future leaders of the organization. However, creating a program requires careful attention – following the best practices listed above will help any family business create an effective and sustainable program.
Do you work with or for a family business that would benefit from outside counsel? We’re uniquely positioned to add value in this space, and we’d love to talk with you.