The book is designed to start conversations on a range of topics that might otherwise remain unaddressed. Questions include: Who is considered part of a family? How to exit the business gracefully? And when should we set up a family office to organize wealth? We categorized the questions into four areas – family, ownership, business, and wealth – with responses from leading academics and enterprising families to each.
What is clear is that there is no one-size-fits-all answer. For example, whether you can leave the family firm and strike out on your own will depend on culture as well as family dynamics. While it might be frowned upon to turn your back on a family business in India, in the US the next generation might be encouraged to be entrepreneurial and set up their own ventures.
There are, however, certain lessons that can help ensure a smoother transition from one generation to the next and enable families to move from division to understanding.
Family dynamics will drive the fate of the business
There is almost no family business that fails solely on account of the business itself. Anyone who has seen HBO’s award-winning TV show Succession will recognize that at the heart of the fighting over who gets to control the entertainment and media conglomerate is a family of lost souls, scrambling for acknowledgment and affection.
Families need to spend as much time strengthening their bonds as they do building their business. The underlying dynamics within a family – such as sibling rivalry – remain consistent across geography and time. Sibling rivalry arises when family members feel they weren’t given an equal share of love and attention. When it comes to handling a transition, you can’t right a wrong that started 30 years ago.
The families that have the least difficulty in transitioning wealth and responsibility across generations are those that have woven the enterprise into the fabric and soul of the family. Take the case of Arial Ben Zaken, chair of Israeli family-owned Domaine du Castel winery, who, unlike many other Next Gens, does not feel guilty about inheriting wealth. The reason? His parents, who founded a restaurant after emigrating to Israel, put the business at the heart of the family. Ben Zaken would head there after school and spend hours in the kitchen inventing recipes. By instilling a responsibility to contribute to the shared livelihood, Ben Zaken’s parents created a solid legacy to pass onto the next generation.
In contrast, we also spoke to several prominent families who had issues engaging the next generation because the children had grown up unaware of the father’s work, the products he made, and the impact the business had on the community. If you want to involve the Next Gens in the enterprise’s future, it’s important to start socializing them into assuming roles in the company by making it part of the family’s shared memory.
Soft skills play a role in smoothing the succession
While many family business owners might be great at running a company, this doesn’t mean that they will be good at passing it on, especially since a succession event is often done once in a lifetime with no prior experience.
Many members of the senior generation may have had little choice over whether they took over the family firm and will have been thrown into the deep end with a “sink or swim” attitude. To set the Next Gens up for success, it is helpful to prepare, and even train them for the task. For example, surveys reveal that more than half of designated heirs lack the necessary education and experience to understand the work of a family office. This does not bode well for the future of families and their wealth.
The questions in the book reveal that many Next Gens would like to know more about the enterprise as they seek to figure out their path and role in its future. The prevailing view for past generations of family business leaders, however, was that one scion should run the business while the rest of the family should be kept uninformed. Nowadays, even those family members who haven’t been crowned successors will want to have their voice heard. Even if they aren’t involved in the day-to-day business, they can still play a role on the board, in the family council, the family foundation, or perhaps by working in the family office. Whether in the boardroom, at the family meeting, or on the shop floor, it is important that family members feel that their opinion is heard.