The transition from one generation to the next can make or break a family business; and as the ‘baby boomers’ hand over to the ‘millennials’, the risks of getting it wrong have never been greater. In Luxembourg, at least one-third of the companies will have to transfer their business in the next ten years. What’s the best strategy to develop next gen leaders, while taking their ambitions into account? Check our four tips to bridge the business generation gap.
New generations, new ideas
The next gen leaders of family business have great ambition – both for themselves and for their firms, according to a recent PwC study. 88% want to make their business more international, more diversified and more modern. This new generation of leaders wants to leave its marks and is not afraid of taking risks to achieve its objectives.
New generations aspire to bring something new to the business. Most of them have already worked in a non-family company to gain experience and credibility, as well as to broaden their horizons. They’re more selective than generations currently in charge and want to be sure their job will match their skills and ambitions.
Major threats next gen leaders will have to face
As ‘baby boomers’ get set to hand over to the ‘millennials’, the business generation gap becomes more visible. For the next gen of leaders, the pace of change can only accelerate in response to global megatrends like demographic shifts, urbanisation, climate change and new technology. The latter is probably the best example to illustrate the potential of a clash. PwC’s survey shows that current generations don’t see the value in investing in digitisation, while the next-gen would like their business to focus more on digital. These type of disagreements can generate frustrations and tensions within the family.
Four tips to develop next-gen leaders in family business
The succession phase is crucial and families must prepare thoroughly to facilitate the next gen leaders’ transition to their new role. To make it as smooth as possible, we recommend you to:
- Start early: business owners should involve their children as early as possible, so they gain a good knowledge of the company and a leadership experience.
- Communicate: both current and next generations have to discuss essential topics together: when will the transfer of the company take place? What type of strategy to set up? What changes will new leaders make?
- Create a positive and supportive family climate: create a trust-based family culture and set up effective conflict resolution and governance processes to help the next-gen develop effective leadership skills.
- Provide constant feedback: next-gen leaders will benefit from the current generation’s advice and feedback to grow and take better decisions for the business.
What we think
Besides the generation gap, next gen leaders feel they’ll have to work harder to prove themselves and gain credibility. Since current owners have left a strong mark in the company, new leaders will have to show their internal and external stakeholders their ability to run the business and convince them to accept changes and transformation. They’ll have to prove they’re not just the “boss’s child” and that they’re working hard to run their business. Earning the respect of other people is one of the biggest challenges new leaders will have to face.