Are you ready to take over the family business?

We know that the current generation running the family business has usually done so for a number of years, and with that comes an emotional attachment. There’s often also high expectations of the next generation’s business acumen, financial and industry understanding, ability to lead and inspire, and capability to overcome hurdles.

Next generations are itching to take over, but are they ready?

In almost all cases, taking over the family business is a process that spans across a number of years, and can be separated into succession of management (that is, responsibility and authority), and succession of ownership. These are two discrete matters.

So when can the next generation expect to take over?

Future leaders should allow at least three to five years to demonstrate their credibility and develop leadership skills. In order to meet this timeframe there are some practical actions that the emerging generation can take to demonstrate their readiness to lead the family business.

How can the next generation influence the incumbent generation, and fast track their own ascension?

Education, training, and learning are critical for future leaders to build their leadership case. Generally, a blended approach of on-the-job experience, exposure-based activities, and education (formal or informal) – with the majority of the focus being on the job experience – will provide the best result.

While it’s recognised that practical ‘on-the-job’ experience is critical to the success of the next generation of leaders, there are differing opinions on whether future leaders should gain experience outside of the family business, or serve their apprenticeship entirely within the family business. In our experience, both have their merits: the important point is that the next generation acquires the right technical knowledge and business acumen to run the business, and develops effective leadership capabilities at the same time.

In terms of education, there are a variety of courses and degrees available through associations, universities, colleges and TAFEs. Family Business Australia, for example, has a number of courses and forums that cater specifically to family business members and can equip emerging generations with the skills and knowledge they need.

Next generations also need to consider the role of advisors and coaches – who can accelerate readiness by providing guidance and support, and reinforcing learning. There is often a balance to be struck between utilising the same advisors and coaches as the incumbent, due to their knowledge of the business and the family, and finding your own representation and a network that you want to work with throughout your professional career.

Future generations also have the opportunity to take a very active role in driving the succession process. Incumbents are often aware of the need for a successor, but may need some prompting to initiate the process. Research from Grant Thornton and Family Business Australia’s Family Business Survey 2021 tells us that incumbents perceive their key issues as the availability, capabilities, and level of interest of potential successors. Armed with this knowledge, future leaders can take positive steps to initiate a discussion with the incumbent, and address each of these items.

Some other considerations for the next generation to keep in mind are:

• Industry – demonstrating a sound understanding of the industry in which the business operates, including knowing your competitors and building profile in the industry and with suppliers and customers.
• Business – ensure knowledge of, and alignment with, the business strategy and culture.
• Family – to what extent does the succession of management impact the role of the successor in existing family dynamics and governance structures.

Working with clients

Families who are looking to transition management of the family business to the next generation can benefit from external assistance in developing their plan. Grant Thornton’s FREEDOM Framework helps families elect a successor, and provides guidance on the education and support required.