The next generation can support their enterprises in these difficult times by using their skills, adding value and acting as change agents.
- The next generation has valuable digital skills and an understanding of their generation of consumers and employees.
- To carve out a role in the family enterprise, the next generation must earn the trust and respect of their predecessors.
- Family offices offer the potential for personal and professional development.
These are both challenging and exciting times for the next generation of family enterprise leaders. As family enterprises continue to navigate an extremely volatile trading environment, next-generation leaders have a real opportunity to step up and help their businesses to operate, innovate and reframe their futures beyond the COVID-19 pandemic.
While opportunity exists, it can be difficult for the next generation to position themselves within the family enterprise in a way that enables them to use their skills, add value and act as a change agent. They may face resistance from other family members, as well as other barriers that prevent them from gaining the personal or professional experience needed to progress within the enterprise.
In a series of virtual sessions attended by the EY NextGen Network of family enterprise leaders, we explored the biggest issues facing the next generation today and examined how they can find their place in the family enterprise, have a voice and drive impact. These sessions were hosted in partnership with the Hong Kong University of Science and Technology, London Business School and Northwestern University’s Kellogg School of Management in the US.
Family as both a strength and a weakness
Our discussions highlighted that the family itself can be both the greatest strength and the greatest weakness of a family enterprise. Family enterprises typically benefit from their agility, people focus, long-term perspective and enduring values, which often date back to the family members who founded the business. Yet they also can be associated with bitter conflicts, ingrained views, interpersonal politics and even toxic cultures.
Within the enterprise, succession is an issue of particular concern. In fact, leadership succession was cited as the top challenge by nearly one-quarter (23%) of the NextGen respondents polled during one of the virtual sessions. Interestingly, the problem often is not an absence of suitable future leaders, but the reluctance of the current generation of family enterprise leaders to hand over the reins — or even overlooking talented next generation members.
This overlooking of talent can result from the current generation having biases around gender and birth order, or it might be related to strained relationships between different generations. However, it can also arise from next-generation leaders not seeking out opportunities to develop themselves or not managing to articulate how they can use their expertise and skills in ways that benefit the enterprise.
Ultimately, the combined forces of destiny, drama, deliberation and development are shaping the next generation of family enterprise leaders.
Stepping up and finding purpose
The next generation of family enterprise leaders understand their generation of employees and consumers. They also appreciate the importance of social and environmental issues. They will need to capitalize on this knowledge when trying to carve out a role for themselves within the enterprise. They are also more likely to find their place within the enterprise if they know their own purpose and how it overlaps with that of the business.
Anyone who wants to take on responsibility within their family enterprise needs to earn the respect and trust of previous generations. To do this, it is vital to act authentically, display empathy and use logic when discussing the challenges faced by the business. Another way to earn trust is by taking on the unglamorous tasks that no one else wants to do — whether that’s sweeping the floors, working night shifts or managing difficult projects. Doing the tough jobs allows the next generation to prove they can handle challenge and don’t view a role in the family business as their birthright.
The family office opportunity
The next generation can also play a crucial role in shaping the development of family offices. Around the world, the concept of the family office is gaining traction as families use them to preserve the family’s wealth, harmony, legacy and values. Next generation family enterprise leaders have a range of skills and experiences that can be tapped for the benefit of the family office, regardless of whether the office is managed by third-party professionals or by family members themselves.
Next generation leaders will be more likely to contribute effectively to the family office if it has a formal governance structure that supports fair and transparent decision-making. The family office should also encourage next generation members to apply their digital skills in ways that support the office to achieve its goals. Internships can help the next generation learn from the existing managers of the family office.
Bridging the generational divide
The next generation of family enterprise leaders has often known far greater financial security than their predecessors. They have also grown up in a different world — one that is more connected and transparent than before due to technological advances. As a result, the next generation typically has different aspirations from previous family leaders and a different perspective on global challenges. If not properly managed, these differences can morph into tensions and even outright resentment, which could be detrimental to the future prospects of the family enterprise.
Family enterprises must find ways to bridge this generational divide if they are to keep thriving in these difficult times. That requires both the current and the next generation of leaders to listen to each other and to empathize with the other’s point of view. On both sides, there must be a willingness to compromise — in the hope that compromise will bring both diversity of thought and more of a consensus approach to running the business, which should enable the enterprise to keep prospering over the longer term.
There is no quick or easy way for next generation leaders to find their place in their family enterprise. They are likely to be more successful in their quest, however, if they have the support of a network of friends, peers, mentors and professional advisors.
Today, next generation leaders have a real opportunity to step up and help their businesses to operate, innovate and reframe their futures beyond the COVID-19 pandemic. They can do this by capitalizing on their knowledge of their generation of consumers and employees and applying their digital skills. They can also take on challenging projects and get involved with their family office. Communication is key to fostering good relationships between different generations within a family enterprise and ensuring the prosperity of the enterprise over the long term.
The article was first published here.
The EY NextGen Network exists to help next generation leaders unlock their ambition and become the drivers of change and innovation who will ensure the continued success of their family enterprises — not just during the COVID-19 pandemic, but over many more years to come.