Balancing priorities of multiple generations during a family business transition

May 1, 2018

Family-owned businesses sometimes find that having multiple generations leading the business can make things complicated. Find ways to create clear boundaries and expectations to keep operations flowing smoothly.

Many business owners who are reaching traditional retirement age plan to continue working for the foreseeable future. In fact, according to a 2017 Gallup poll, 74% of Americans plan to work past age 65. For many business owners, after investing their heart and soul into a lifetime of work, the thought of giving it up can be unnerving.

But when a family-owned business is at stake and the next generation of family leaders are waiting in the wings, how long are these new leaders willing to wait patiently? How do they fit in during the interim period?

Different leadership styles can create frustration

Many family-owned businesses are fortunate to have interested family members who want to lead the company. While it may be comforting to have a younger generation with passion for the business, it also comes with its challenges.

The younger generation wants to add value. Many times, future leaders want to do things differently—perhaps take the company in a new direction or try restructuring the reporting system, but feel their ideas are being squelched.

Baby boomers, a hard-working generation approximately 76 million strong, have a wealth of experience that the younger generation may not have—and that may make it difficult for seasoned leaders to trust giving up the reins to a younger set.

Competing priorities, different leadership styles and disagreements can create an operation fraught with frustration.

Take steps to create an effective leadership dynamic

Adding to that emotionally charged dynamic, crossed communication lines can create an atmosphere where even the smallest misunderstandings get blown out of proportion.

What can you do to create a functional work dynamic? Keep the following best practices in mind while you’re navigating a multigenerational leadership structure. Then, follow these suggested steps to a successful business transition when you’re ready to start thinking about setting the formal transition in motion.

Develop and maintain clear roles and processes

People in family businesses often wear many hats, which can lead to role confusion and add complexity. As discussed in greater detail in our article “When family and business overlap,” for each of the key roles, we recommend mapping these areas:

  • Authority: the legitimate power given to a person to exercise discipline and use specific resources to reach an objective.
  • Responsibility: the ownership of duties or assignments associated with a function or position. Responsibility can be delegated but not shared and must be linked to accountability.
  • Accountability: answerable for the performance of duties within the assigned authority.

Set up a regular cadence of meetings

Create a standing meeting where leaders can discuss priorities, challenges and goals. This is an opportunity to come to consensus on the business’s direction and maintain a consistent message to the rest of the employees. It’s also important to keep these management meetings separate from family meetings.

Looking at the bigger picture, families can also create formal strategies and develop successful business practices for the business today and into the future. Effective communication is essential to family business success, and one way for families to enhance their communication is to create a family council—a forum where the family can get together to clarify and communicate their business and ownership philosophies.

Create formal guidelines

Your family’s philosophy will impact the success of your business, specifically around how the business is run and how decisions are made. The next step is to create a document that communicates this philosophy to help guide future generations as they develop plans and policies for the business. It will also support what is important to the family, and ensure clarity around the rights and privileges for family members. We call this document a Family Charter.

You’ll also want to formalize a successor development plan to help groom your future leaders. This can include training, outlining the selection process, defining roles and responsibilities, and taking steps to ensure you don’t let knowledge slip out the door with your aging workforce.

Separate business from family relationships

It’s not easy to keep these relationships distinct, but by keeping emotion out of business decisions and swiftly addressing any conflicts that arise, you can help maintain stability and foster progress as an organization.

Here are some additional articles that may be of interest:

For assistance developing structures and processes to keep you family business running smoothly along with looking at future business transition options, please contact Lisa Horn at 800-236-2246.