The Generational Disconnect Or How To Go From Brussels To Botswana In 100 Years

Third- or fourth-generation heirs are “supposed” to take over the family business, but do they want to?Fineas Anton / Unsplash

A man starts his business in 1912 and runs it passionately for 30 years, then his son takes over, running it, if not passionately, at least competently, for the next 30. That man’s daughter then makes it for 25 years and retires early to play golf. Now it’s time to turn the family widget business over to the founder’s great-grandson. Unfortunately, he’s sick of widgets and wants to grow squash in Botswana . . .

Now What?

Many family-owned businesses were started around the turn of the 20th century and although related, most third-generation inheritors probably never met the company founder. Millennials almost certainly won’t have. Meanwhile, business models, technology and the general social structure will have altered in ways literally unimaginable to the originators. Third- or fourth-generation heirs are supposed to take over, but do they want to? Did anyone in the company anticipate this?

Good News, Bad News

This generational disconnect is a tripping point for many companies. Research shows that about 30% of family-owned businesses survive until the second generation, 12% to the third generation and only 3% make it to the fourth generation or beyond. Those are not good odds, no matter how you spin the data.

Thus, if you are planning on multigenerational longevity for your company, it’s crucial to prepare for and overcome this generational disconnect well before your great-grandchildren decide to emigrate to Lunar Colony Alpha. Which means you have to prepare for things you can’t imagine either.

The bad news: it’s an interesting problem. The good news: with solid planning and a weather eye to current trends, you can still create a solid basis for the active participation of future family members in the family business decades into the future.

So, Maybe Digital Widgets . . .

Strong emotional ties and a positive, inclusive environment encourage the next generation to get involved and stay involved in the business. However, if present-day principals and managers don’t actively focus on and plan for strengthening the emotional attachment of the next generation to the business, there’s a risk that future candidates will choose different career paths.

Maya Færch, board member and part of the next generation group of the members’ association Family Business Network, works with many different family-owned businesses and is a member of a family-owned business herself. She argues that it’s very important for the next generation to find their own places in the business.

Instead of choosing the next leaders based on birth order and gender, each family member should focus on finding his or her own dreams and then see how the family business is compatible with these. Some are passionate about the product, some about running the business, and others might want to be artists instead. To do so, external consultants can be crucial to help ensure a smooth process.

The Prince of Wales Dilemma

To add a wrinkle, so to speak, today people are getting older and staying productive longer than ever before, meaning the next generation is often ready to take over long before their grandparents or parents want, or are able, to retire.

The challenge today is that more and more leaders continue their work until they are 70-80 years old. The next generation might be 50 years old and competent but they don’t get the chance to run the business and might find someplace else to work. The solution is to focus on cooperation between generations instead.

Start Now, be Creative

The key is long-term planning. First, you must design your company so there’s actually space for future generations, and that may mean modifying your favorite business paradigms. It’s also important that the members of the next generation become involved from an early age, so they understand the fundamentals and are able to help shape the future of the business. By encouraging a culture of innovation, a company constantly reinvents itself, and in doing so increases chances for future generations to find the space to belong.

Innovation is a way to open the next generation’s eyes to the business.  Founding small start-ups inside the business is a nice way to give the next generation space to develop their competences without boxing them in existing structures. It’s a strong way to involve the next generation without committing them too much to the business,” Maya Færch argues.

Two Bytes, Four Bytes, Six Bytes, a Google

Barring an asteroid impact, the future looks like a technological rocket ride for digitalization, making all things digital an excellent focal point for innovation. The ever-increasing amount of available data, the improvement of communication and production channels, computerized fabric and glass and the probability of inexpensive and hugely more powerful computers all create the fertile business ground for the involvement of new generations. So if your great-nephew in Bulgaria tells you the future is in carbon nano-tube computing, pay attention. You might want to look at ways he—and his interests—could join the company fold sooner than later.

Manage the Brand, Manage the Brand, Manage the Brand

Consumers still largely trust the older generation, but research shows that, rightly or wrongly, the next generation of CEOs will be less trusted than the founders and are perceived to be more likely to mismanage the company. Which is where managing the brand comes in.

A properly managed and successful brand should demonstrate across multiple media platforms that the next generation is already responsibly involved think images of granddad, mother, and son lined up, each with a hand on the other’s shoulder. By showing the founder and his hard-working descendants working together, the public is pulled into the family back-story with positive results.

Different Paths to the Same End

Of course there are many ways to forge a successful succession, but by engaging family members from the beginning, discovering and developing their strengths, and determining where and how they want to be involved in the business’s current and future operations, chances are that your family business will stay a family business for a long time to come.

And the end isn’t always the end: If digital widgets eventually hit it big, who knows? Perhaps the same path that led the great-grandson to Botswana may lead him right back to Brussels one of these days.

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