How next generation talents can master family business leadership

Incorporating the family story and managing the perception of entitlement while handling complex relationships are key skills for rising leaders of family businesses, executive leadership experts say.

Meredith Persily Lamel (pictured), chief executive of Aspire@Work, an executive coaching and leadership consultancy based in Washington, DC, co-wrote the new book Six Paths to Leadership: Lessons from Successful Executives, Politicians, Entrepreneurs, and More with Mark A Clark, PhD (pictured), associate professor and management department chair in the Kogod School of Business at American University.

Lamel told CampdenFB of all the leadership paths the authors explored in more than 60 interviews they conducted with global family business leaders, founders, executives, politicians and high-level government appointees for the book, the family business path was full of unique challenges.

“Relationship management is complicated and essential for leaders of all paths,” Lamel said.

“Now stack onto that challenge that many of these relationships are also family for life. This puts an incredible amount of stress on these relationships. For other paths, like the outsider, when brought in as a change agent you might be expected to dismiss a certain percentage of the employee base.

“As a family leader, key talent decisions may affect a sibling or a cousin, or sometimes even a parent.  Additionally, because of these relationships, there are certain options that are simply not available to leaders.”

Lamel said she and Clark were impressed by the amount of support family business leaders sought to ensure the health of their relationships. Some used a robust governance process that included non-family members, while others tapped into family business consultants or coaches, and many used family therapists.

“The bottom line is that family businesses bring tremendous fortunes and opportunities to many families, but they can also bring lots of pain and conflict. Those families who brought that intentionality to run both great business while also preserving healthy family relationships really impressed us.”

CampdenFB asked Lamel how family business leaders can adapt to a changing world, what the next-generation of leaders can do to broach the delicate matter of succession with ageing founders and how next-gens can earn their place in the eyes of others.

What personal and professional qualities make a successful family business leader—can leaders be taught and trained?

The personal and professional qualities of successful family business leaders are not dissimilar to those of other organisations. That said, there are certain advantages and disadvantages for the family legacy leader path that require greater attention. There are qualities that may help these leaders to better leverage the opportunities and manage the challenges.

For example, one of the opportunities for family legacy leaders is incorporating the family narrative into their leadership. Those who are strong inspirational storytellers will be able to better leverage that opportunity. Likewise, one of the greatest challenges is managing the perception of entitlement. For that, leaders with greater humility and appreciation will be better able to manage through that perception. Additionally, the challenge of managing through complicated professional-familial relationships will require exceptional communication and conflict management skills.

Are the demands on, or expectations of, a family business leader changing in an era of blended and longer-living families, economic uncertainty and technological disruption and, if so, how can they adapt?

The distinction we heard about more was the generation of the leadership. For example, 2G, 3G, 4G, etc. is the number of the generation since the founding. Certainly, with each additional generation there should be a larger talent pool of family members to choose from.

I would say that one of the differences over time is that previously there would have been an expectation of especially the sons of the founder to take over. Now, we see sons and daughters.  Additionally, families are recognising that an expectation of a family member taking over the business, even if their heart isn’t in it, may not lead to great leadership. So many family businesses even encourage future generations to pursue their dreams and interests and if that is also to work for the family business all the better.

What can families do to nurture more women in leadership roles and what do they bring to the role in contrast to male leaders?

There is a lot of informal mentorship in family businesses. We heard stories about large Thanksgiving family reunions that are combined with the family annual meeting. With multiple generations of leaders present, they can reinforce the family narrative and culture and to develop interest in working for the family business. Given that more men likely held senior positions in the past, it is important that these elder family members seek to mentor and develop the passion in the emerging female leaders in the family.

We certainly have seen the business case for diversity of all types to support successful businesses.  Given that a certain number of leaders in a family business will come from the family’s background, we are already potentially limiting the diversity. Building a bench of diverse leaders ought to be a priority for any business, this includes gender and otherwise.

How should families choose their next business leader in the 21st century—for example by progenitor, from outside the family, by merit, experience or qualifications?

We found the family businesses that develop an objective process of governance tend to lead more effectively. This includes setting up the criteria for selecting leaders outside of the individuals and ensuring that the process is fair. Then they can set up specific requirements for C-suite positions, for example, without having to think about particular individuals being favoured.

A criterion we often heard was that to be in the C-suite, one had to have worked in another company and been promoted into a leadership position prior to being considered for that leadership position. We also heard about educational and international experience requirements.

How can families encourage ageing first-gens to relinquish family business control to their next generation successors and what role can those first-genners take instead?

We heard about this challenge in many of our interviews. Again, the companies with the greatest success here tended to have a governance system that was objective and also included board of directors of both family and non-family members.

Ideally the governance documents would include information about retirement ages and/or expectations so that these decisions have less of an impact on the family relationships. The first-genners play an incredible role in mentorship of the future generation and establishing the core family values that drive the culture of the company. They can also play a key role in passing on the relationships that made the company successful in the past. We heard great stories of newer leaders sharing stories with business partners about their grandparents, etc that helped to build immediate trust.

What can newly appointed next-gen family business leaders do to earn the respect and trust of their family, peers, staff and suppliers?

Everything in our book is about the strategies in those first 3-6 months in position. If I were to choose one strategy it would be do go on a listening tour of all the different stakeholders. Inquire about their expectations, learn about their perspective on the business, and figure out where they think you should focus your efforts.

They can then better meet and/or manage the expectations of their stakeholders. Additionally, they can begin the habit of participating fully in a feedback loop whereby others bring information to them and they then share those key messages regularly. Managing the messages is key for any leader. When you are trying to build the trust of family members, you want to make sure that you treat them as invested owners as well.

Six Paths to Leadership: Lessons from Successful Executives, Politicians, Entrepreneurs, and Moreby Mark A Clark and Meredith Persily (Palgrave Macmillan) is available now.