How business families can raise a generation of givers
Trillions of dollars are passing to the next generation. How do you ensure it lands in the right hands? ...
Family business
Six steps to succession: How to identify and engage the next generation of wealth owners
$124tn is being passed down to the next generation, prompting a profound succession dilemma in family enterprises. Here are six steps families should take to identify and engage these future wealth owners.
We are living in enormously uncertain times, characterized by multiple crises. Every day, business families wake to a new reality regarding tariffs, invasions, wars, and the associated consequences. They are increasingly worried about what they own, both in tangible and intangible ways, and fear that instead of preserving or growing their patrimony, it could be destroyed within a few generations.
At the same time, economists describe the rise of an ‘inheritocracy’, with more wealth being passed down than ever before – often into the hands of unprepared or disengaged family members.
Families must work now to future-proof their galaxies. They need to identify, educate, and engage their next generation of leaders. This begins with a shift in mentality.
Identifying future leaders
Families must see succession not as an event but as a process that starts on the first day of their incumbent leader’s employment. While pedagogical education and training are often thought to begin at 18, there’s no need to wait until adolescence to recognize, evaluate, or valorize a person’s characteristics, behaviors, or ambitions. Families can use an array of tools to identify potential successors within every cohort.
Exposure to the business can begin with conversations around the dining table. Family symbolism may take the form of artifacts displayed around the house, or, as is common in Italy, preserved within dedicated family museums. Another method is the “family safari,” where next-generation members are invited to visit the multiple organizations, properties, and assets that sit within the family galaxy and to read family stories. Storytelling is an incredibly powerful engagement tool – one that not only contributes to the preservation of family legacy but also creates a strategic advantage over non-family firms.
“Today’s leaders must focus on innovation, growth, and adaptability to align with the next generation’s characteristics, rather than expecting conformity.”
Clone desire syndrome
Families need to find future leaders who have a high level of ability and a high level of willingness. Family businesses cannot succeed with just one of the two characteristics, and identifying them is often a challenge. That said, they do not need to be a clone of their predecessors.
While successors should aim to preserve what has been built – which may, in some cases, require prioritizing continuity – the next generation is often more change-oriented. They are digitally native, speak multiple languages, and spend their time traveling and experiencing global perspectives. Today’s leaders must focus on innovation, growth, and adaptability to align with the next generation’s characteristics, rather than expecting conformity.
Equally, they must look to equity as a guiding principle. While parents naturally try to treat their children equally, in business, it is unlikely that any two children will share the same competencies, commitment, or willingness. Often, the most competent is the least committed, and the most devoted may lack core competencies. Focusing on equity over equality creates the best conditions for the business to prosper and grow – and as we know, once the business grows, the family indirectly benefits.
Six steps to success(ion)
In my recently published The Family Business Book, my co-author Emanuela Rondi and I present the concept of the family academy, a pattern and approach that enables families to gradually involve next-generation members in the business. This approach not only fosters engagement and learning but also identifies the best leadership match. It is built around six pillars, which can be interpreted as the six steps to success.
1. Listening and understanding: The next generation needs to feel valued, so it’s important to go beyond assessing competencies and experience to understand their ambitions and attitudes. This helps to determine whether they have the cultural fit, altruism, and behavioral tendencies of good leaders.
2. Education: It is essential to invest in educational programs and pedagogical curricula. This does not simply mean sending the next generation to business school, but rather focusing on creating entrepreneurs within the family through next-generation training programs and internships. That said, formal education can also be tremendously useful.
3. Guidance: Building on this entrepreneurial spirit, job rotation programs can help create the conditions for next-generation members to develop entrepreneurial skills – including the opportunity to fail. Some families, particularly in Germany, go further by establishing family incubators that lend money to members on competitive terms to help them support the development of their own business plans. If successful, the new venture may be integrated into the parent company; if not, the experience still offers valuable learning, but the damage will be limited.
4. Networking: A lot can be learned by connecting with other families to learn different ways of working as a business and, importantly, as a family system.
5. Inspiration: As mentioned earlier, inspiring broader family members can be achieved by organizing a family safari to enable family members to experience all the organizations, assets, and buildings in the family galaxy and consider their own evolutionary structuring.
6. Storytelling and family narration: Communicating the family galaxy and legacy – internally and externally – through memoirs, books, or documentaries can help build a strategic competitive advantage. Sweet Mandarin, a Chinese restaurant in the UK, has excelled at using storytelling to stand out in a crowded market. By differentiating themselves from typical Chinese restaurants, they cooked for the prime minister, became the subject of a TV show and theatre production, and published several cookbooks – all while engaging the next generation of family leaders.
I touched upon the importance of building entrepreneurs within the family ecosystem, and while this is imperative, other roles must not be overlooked.
Don’t judge a book by its title
Families then need to focus on three key areas: sense-making, governance, and broader roles within the galaxy.
One important step is organizing events that stimulate members’ socioemotional attachment to the business – and to the broader galaxy. This could be spending one holiday a year together as a family in the same villa or arranging regular social events to gather and celebrate the family spirit. These traditions help pass down the family legacy and can be reinforced through governance structures such as family councils.
I touched upon the importance of building entrepreneurs within the family ecosystem, and while this is imperative, other roles must not be overlooked. One of these is the role of the family creator – not a manager or executive within the business, nor a director of the board, but more akin to the role of architect. They are called upon to design the vision of the galaxy’s evolution and the competitive arenas in which the businesses operate.
Another key figure is the moral wealth owner – typically a role held by spouses who are the first to inherit wealth during significant wealth transfers. Although not often involved in the business directly, they are nonetheless hugely influential and must act as ambassadors for the family’s goals across the different shareholder groups.
There is also, quite simply, the role of ownership. In my experience, many third-generation millennials want to become owners and often take a step back from management and governance to embrace this role. This should not be seen negatively or as something that delegitimizes the family. On the contrary, it can greatly benefit the business and often aligns well with the attitude and goals of this generation.
Succession is not merely an event that leaves the family legacy in the hands of a single leader. It is a process which, when architected efficiently, allows family firms to maintain a sustainable and competitive edge over their competition, preserve their socioemotional wealth, and cultivate cohorts of educated, inspired, and engaged leaders – generation after generation.
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