As many shop and jobber owners approach retirement age, thought needs to be given to how to bridge generational divides, prepare successors and build emotional connections, a new report highlighted as keys to success.
“Given that ownership of more than 60 per cent of family enterprises is expected to be handed off within the next decade, this is a crucial moment for the generations on each side of the transition,” said Bill Brushett, president and chief executive officer of Family Enterprise Foundation. “Much is at stake, not only for the family business but for the family’s wealth, reputation, legacy and family harmony… not to mention for the national economy.”
While financials and tangible assets are often the primary focus of a business that’s in transition, it’s preparing the next generation that is the primary cause of concern. In other words, even though financial considerations should always be part of the larger picture, the future of a family’s legacy will depend on its human capital and the effective preparation of the next generation.
Here are five strategies the foundation recommends:
Foster early involvement and emotional connectedness
Nurture strong emotional bonds to the family business through early exposure and involvement, which helps to measure and to build interest.
Train and prepare
Create a comprehensive training and preparation program for the next generation. The program should feature both formal and informal learning structures and may involve experience gained outside the business.
Encourage mentorship and peer interactions
Encourage peer interactions and mentorship to provide the next generation with a robust network to learn from and lean on throughout their career. Surprisingly, nearly all study participants received guidance from a mentor.
Find the right role
Rotational programs are an effective way to help next gens find the right role in the business. However, most respondents believe the next generation should not be forced or expected to play a role in the business. They should only be involved if they are fully aware of the responsibilities of ownership and are passionate about the opportunity.
Involve trusted advisors
External advisors are cited by participants as among the most desired and beneficial supports for family enterprises. Involve advisors who are specifically trained to work with business families to help maintain harmony by opening communication and improving transparency.
“This research drove home the vital importance of early preparation and frequent, two-way communications to the succession process and family business longevity,” said Richa Arora, family enterprise advisor and practice leader in family dynamics and governance at the KPMG Family Office with KPMG in Canada.
“Both generations working together to chart a path forward will ensure the family is best positioned to manage the stressors of the transition and enable the business and family legacy to thrive over the long term.”