Father and son painters with tool belts.

Most entrepreneurs are concerned about their legacy being in good hands as their family business is passed down to the next generation. This is understandable since weak leadership is one of the top threats to a family business’ long-term success.

Our business coaches have found that one of the most effective ways for families with businesses to preserve and grow their wealth is to build strong, healthy family relationships. Unfortunately, many senior family business leaders focus more on business structures, taxes, and investment policies than they do on succession planning.

After coaching a vast array of family businesses, we have observed that the transition goes much smoother when the heirs have been well-groomed for leadership positions. But how does a family business develop the next generation of leaders so they successfully run and grow the family enterprise? How does the next generation leader earn respect when they’re living “in the shadow” of their mother, father, grandparent, or another close family member who was a successful entrepreneur?

Developing Next-Generation Leadership Talent

One factor that is key to developing next-generation leadership talent is the existing leadership having a high-level of emotional intelligence: If the senior family member has developed a positive family climate, he or she is more likely to create an environment that is safe and supportive for the next generation of leaders, who are willing to take responsibility for their actions, decisions, and mistakes.

When the next generation of leadership has integrity, accepts responsibility, and doesn’t run away from difficult situations, this is a direct reflection of their upbringing and the emotional intelligence that’s been poured upon them. On the other hand, if the family climate has been one of criticism, unquestioned authority, and ruling with an iron fist, the next-generation of leaders are more likely to evade responsibility or show a lack of social and emotional intelligence in their own leadership roles.

Authoritative leadership styles that result in a high-conflict environment are counterproductive to family businesses, especially if senior family members wish to keep their business in the family. The irony in these situations is that the efforts to keep the next generation of leaders from failing actually make it harder for them to succeed.

Shift Focus to Family Relationships

It is no mystery that the demands of building a family business can leave little time for family relationships. But, for senior family members to cultivate the next-generation of leaders so they succeed, they must create positive family relationships. This means open communication, listening, caring, attention, and determining the developmental needs of each family member. The idea is for the happiness and survival of the family to be as important as the business’ success. Our advice to all family business owners is to find a good balance between energy focused on the business and energy focused on family relationships.

When a senior generation leader is ruggedly independent and makes all the decisions for the company, they are denying the next generation of leaders the decision-making and learning experiences they need to sharpen their own leadership skills – this denial can backfire and weaken the next generation’s credibility.

Some ways to develop next-generation leaders: 

  • Make sure that next-generation leaders accept job assignments with real accountability and responsibility, whether it’s inside or outside the family business.
  • Seek real feedback on performance from non-family employees.
  • Focus on creating a family climate that is positive and supportive.
  • Place an importance on effective conflict resolution and open communication so family members feel safe to voice their concerns and personal goals.
  • Start now. It takes time to develop positive leadership skills in the next generation of leaders. If they are young, they can start developing their skills by participating in leadership roles at school and in other activities.

While some leaders are born, others are made. As a forward-thinking family business owner, focus on the development of your own emotional intelligence, and your relationships with the next generation of leaders. By doing this, you can do a lot to build positive family relationships that translate to positive business results. To learn more about this process, contact AdviCoach.