Succession planning: How can millennials prepare for the family business?


A family business is a legacy; it’s an asset; it’s a lot at stake. To ensure successful succession planning, it’s crucial to start considering the role of the next generation and assess their readiness to take on leadership roles. Preparing for the Responsibility: Navigating Succession in Family Business Children/grandchildren (or ‘the Next Gen’) may perceive a need to follow in their parent’s footsteps and enter the family business. But not all children are interested – or in some cases parents may not be interested in their children becoming active in the business despite a child’s desire to do so. For many families, perception of how or if the next generation will become active in the family business is a potential source of conflict and stress and can strain parent/child relationships. 

Careful Next Generation planning is often overlooked. It’s assumed that since the children grew up around the business, they have the innate acumen to now lead the business and the willingness to do so. On the contrary, while parents or children might see working in the family business as the logical step forward, doing so without a clear plan can put family relationships, and the business, in jeopardy. Open conversations need to take place to ensure the path forward is in everyone’s best interest and roles and expectations are clearly defined. 

We sat down with Richter Partners, Justine Delisle and Greg Moore to discuss how the Next Generation can prepare for the responsibilities placed upon them. 

Getting into the business can be overwhelming – how should one prepare for the responsibility of leading a business AND caring for a legacy? 

Justine Delisle (JD): We often say that business owners who are parents typically prepare the wealth or the business for the children – but often do not prepare the children well enough for the business and responsibilities that come along with wealth stewardship. Each family member (including the Next Gen) needs to understand that their personal decisions will have an impact on the family system and the enterprise. Potentially putting the family’s main asset – the business – at risk is a huge stressor. Therefore education and transparency are key to preparing the Next Generation and should be part of a sound family governance structure. 

Knowing how to be a good entrepreneur/business owner isn’t something learned in school and isn’t necessarily innate for many. There are basics concepts of Financial Literacy that should be part of the Next Gen’s repertoire. Understanding concepts such as finance, tax, and legal is key, and integrating these concepts is essential in good decision making and being a responsible business owner. It’s also an important aspect of succession planning for family owned businesses. 

Let’s address the elephant that’s always in the room when it comes to generations getting involved in the business: nepotism. What’s the best way to structure a family member’s involvement without upsetting non-family employees? Where do they begin? 

Greg Moore (GM): Being a part of a business family can be a complicated existence – in many ways a family defines themselves around their business and its success. So, it’s not surprising that many children often feel the desire to follow in their parent’s footsteps and become actively involved in the family’s business. Of course, this can introduce many potential conflicts within the family as the business evolves and the various generations of the family evolve along with it. For families that have been successful in building a business across generations, most have had a clear framework for how, and if, the younger generation enters the family business. This generally revolves around preparation – becoming introduced to the business early on and progressively becoming more adept at assuming specific roles and responsibilities. Most successful family executives will point to a system of meritocracy – where family members earn their increasingly senior roles in the business and typically do so by achieving key milestones and demonstrating an ability to lead the business. Bestowing responsibility that is not earned in the eyes of both passive family business owners and non-family employees can be a recipe for disaster. 

This all falls within a well-defined family employment policy, which helps define what is required to become an active member of the business. It also helps ensure that siblings and other family members understand what is required of them and that each within the business has clear responsibilities and objectives on which compensation is predicated. It may also set forth a well-defined path to assuming leadership in the business, or what skills will be required. Not all family businesses are or should be led by a family member. 

Family sitting together on a boat

What if they aren’t interested in joining the family business? How would you navigate that conversation? 

(GM): Business owners often have an emotional attachment to their business and see it as an extension of their family, so it’s natural in many ways to want to see their children steward this legacy forward. But not all children are destined to become active members of a family business, and nor is it productive to presume that children will assume the mantle of leading the business into the future. 

The biggest challenge with family-owned enterprises is the blurring of lines between the family circle and the business circle, and the inability to compartmentalize what is best for each. As a business owner, we would rarely seek to employ someone who did not have the desire or skillset required to excel in the business. And as a parent, most would never suggest to their child to pursue a career path based on someone else’s needs and objectives. Navigating a conversation around employment in the family business needs to be viewed through these two sets of lenses: what’s best for the family and what’s best for the business. 

(JD): Joining the family business can also have various meanings. It really depends the role each family member is willing to play within the family system. For example, a sibling can decide not to be involved in the business but would contribute to the family legacy by being involved in the family foundation. The Next Generation may play an active operational role in the business, while also being an owner. Siblings might be part of the ownership but focus solely on strategy and the vision of the enterprise. Each role is as important as the other. What is imperative, is for families to properly define these roles and to respect the interest, contribution and expertise of each member. 

On the flip side: if they want to get more involved, but haven’t been given an opportunity, how should they approach this topic with their family? 

(JD): Each family dynamic is different and there may be reasons why the family has not yet involved the Next Gen in the business. If the Next Gen has an interest in the family business, they can show initiative by gaining further education; they could also pursue a career in the industry in which the family enterprise operates, prior to joining their family business. This way, they then bring a new and valuable perspective to introduce to the family business when the timing is right. 

(GM): Because of the complexities of family and business, many parents may feel reluctant to bring their children in for fear of spoiling their relationship, or they may feel that their child lacks the necessary skill set. If the Next Gen wants to get involved, the first obstacle may be to convince parents that this is the right path forward. To temper this concern, find ways to spend time in the business and learn the fundamentals. By being able to identify specific roles or interests, owner-parents may be more willing to have their kids participate and provide first-hand learning opportunities. Having a clear understanding of what role to play and where they believe they can contribute may help parents (and/or siblings) appreciate where a contribution can be made. This also helps define what skills may be needed (more school or experience?) and how compensation is to be determined. This comes back to the need for a clear Family Employment Policy – one that is understood by all the family members and non-family executives. If part of a parent’s concern is how having a child in the business will impact relationships, having a clear policy helps defuse some potential conflict. 

Differences of opinions can escalate into conflicts and family divides. What’s the best way to avoid conflict before it starts? 

(JD): Entrepreneurial families are highly complex since family members wear different hats at different times. For example, the founder of the business sometimes wear the “Dad or Mom hat”, other times it’s the “Majority Shareholder hat” or “President,” while the kids wear the hat of the ‘children’, the ‘employee’ and the ‘minority shareholder’. All these roles are present in various situations and the results can be that various topics can become confused. Some conversations should just not take place while wearing multiple hats. 

Therefore, we highly recommend that families establish a code of conduct which starts by identifying the various roles played by each of the family members, and how they should navigate specific situations. This is part of the Family Governance structure and is key for intergenerational success. 

How can families try to resolve a conflict if does arise? 

(GM): The reality is that every family will have conflict – and avoiding conflict is not necessarily healthy for the family or for a family enterprise. While conflict can be an effective means of challenging ideas and encouraging creative thought within the group, it can become destructive if trust breaks down or when family members feel that their opinions or thoughts are not being heard within the collective. Trust within the family comes from having an equal voice and a feeling that one’s opinion is heard and understood. Not every family discussion will reach consensus, but in order to achieve collective buy-in, it’s imperative that all family members feel that they have been actively listened to and that their concerns are being legitimized within the group. 

Family forums are an effective way to facilitate effective, open communication and build trust within the family. We encourage families to adopt formal policies for conducting these meetings, too. Policies are intended to encourage broad participation among the family members, outline rules around conflict resolution and decision making, and formalize core values and principles that are to be adhered to. Given the blur between family, business, and ownership in a family enterprise, family forums are the best way to discuss issues that impact the family enterprise. At the same time, it is important for families to define forums for discussing issues relating to the business and respect these boundaries. 

A family enterprise is unique, and so too are the family members involved in it. Many have their own levels of experience and education. Beyond academia, how can the Next Gen prepare? 

(JD): Proper education and training are crucial for any career, but when it comes to a family enterprise, there are certain skills – both technical and soft – and concepts one needs to master. After working with so many families and hearing their concerns about the lack of preparedness of the Next Generation, we decided to put together the Financial Literacy Program. It’s 10 modules, based on key concepts such as tax and estate planning, cashflow and valuations, but also investments, philanthropy and family governance. The program empowers family members to understand the complexities of their wealth. At the end, participants feel confident building their own dashboards and financial overview reports. Guest speakers are our own Richter partners and professionals, meaning there is no agenda other than learning as it’s a strictly non-solicitation environment. It’s a well-rounded experience and is tailored to the knowledge level of each participant. 

What is the best advice you’d share with the Next Generation as they are beginning to assume leadership duties? 

(JD): Be humble and respectful about what has been built by the previous generation(s) while trying not to replicate it. Find a way to nurture and grow the enterprise or its vision. Be creative, curious and evolve the business by imparting your DNA as an entrepreneur. Be sure to share and communicate the family values and the Why of the Family Enterprise. 

(GM): Taking on leadership responsibilities within a family owned business can be challenging for a variety of reasons and ‘success’ for the business and the family is in large part dependent on perspective. For families to succeed working side by side, it’s imperative to understand the set of lenses they use to see the business and their roles within it. For example, one of the greatest challenges that family businesses face is the transition of leadership from the founding generation to the Next Generation. We spend a lot of time with families helping them understand some of the pitfalls to avoid. For example, strategies around growth and use of capital may create tension among incumbent generations who are content to pay capital out of the business, while the emerging generation may be keen to invest capital in the business. Even something as fundamental as work/life balance may become a source of tension as a younger generation seeks to use technology more effectively to balance time between family and work – something that may be foreign to an older generation who may not appreciate the efficiencies that new technology affords. 

The biggest piece of advice that I would give both emerging generations and incumbent generations in a family business is to understand each others perspective and to appreciate the different points of view that different generations can bring to the business. If family members can better appreciate the perspective that each brings, then conflict can be managed more effectively in the long term. 

Having an open dialogue regarding hopes and desires is a starting point. We would encourage families to do this early. Remember, the commercial business is not the only part of the family enterprise: there are other areas that contribute significantly to a family legacy that may present alternative ways in which the Next Gen can contribute. Passive real estate assets or other investments may need to be managed outside the business, or charitable programs, for instance. 

When children may feel pressure to “make their parents proud” and follow in their footsteps, it can make for an awkward conversation. It may not mean a leadership role within the family enterprise, but children need to find a path to creating their own wealth and their own sense of accomplishment. Helping everyone find a role that helps them thrive ultimately serves to support the whole family enterprise. 


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