{"id":4922,"date":"2019-05-29T06:19:28","date_gmt":"2019-05-29T11:19:28","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=4922"},"modified":"2020-12-20T22:08:12","modified_gmt":"2020-12-21T03:08:12","slug":"the-21st-century-dilemma-preparing-the-next-generation-for-succession","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/the-21st-century-dilemma-preparing-the-next-generation-for-succession\/","title":{"rendered":"The 21st Century Dilemma: Preparing the Next Generation for Succession"},"content":{"rendered":"

Family businesses<\/a> did especially well in riding the rising tide.\u00a0 Family businesses were the particular beneficiaries of three decades of \"\"favorable global economics. Propelled by fast growth in the emerging world, the share of family businesses in the global Fortune 500 grew from 15% in 2005 to 19% in 2013.\u00a0 Five years ago, founders or their families owned 60% of emerging-market companies with sales of $1 billion or more. By 2025, an additional 4,000 companies may join the list.\u00a0 Family-owned businesses would represent 40% of the world\u2019s large enterprise.<\/p>\n

However, despite the growing power and influence of family businesses, executives and investors have a poor understanding of the unique attributes providing the edge.\u00a0 It is difficult to parse the DNA of family businesses. It is a complex mix of family, management, and wealth creation, all overlaid with a rolling ownership dynamic that claims all but 30% of them.\u00a0 This 30% is claimed by the 3rd<\/sup> generation.<\/p>\n

The number one worry of family owners is the challenge of developing the next generation as motivated and responsible shareholders.\u00a0\u00a0 Addressing this concern is critical to the long-term sustainability of family businesses<\/a>.\u00a0 It calls for both technical and interpersonal focus.<\/p>\n

First Things First<\/strong><\/h2>\n

Maintaining an entrepreneurial edge is becoming evidently critical for long-term survival. Creative destruction constantly churns the rankings of companies in the S&P 500 index of the largest US companies.<\/p>\n

However, as family businesses grow through the generation, barriers to entrepreneurship and innovation<\/a> creep in. \u00a0Maintaining the entrepreneurial spirit of the next generation of family leaders is essential. But developing, engaging and motivating them is the biggest challenge.<\/p>\n

Family owners want to keep the next generation involved. This is to maintain the business as a source of family pride and to preserve the founder\u2019s legacy to keep it within the family.<\/p>\n

Successful generational succession<\/a> can be achieved. Family Businesses just need to take on 3 important principles.<\/p>\n

Preparing the Next Generation: The 3 Important Principles for Succession<\/strong><\/h2>\n

\"\"<\/a><\/p>\n

    \n
  1. Build emotional connections.\u00a0<\/strong>A common problem in a family business is fostering communication across generations and borders.\u00a0 It can be difficult but essential when building emotional connections.<\/li>\n<\/ol>\n
      \n
    1. Develop responsible stakeholders.\u00a0<\/strong>Based on the McKinsey Family Business Practice survey<\/a>, the next generation family members are willing to take more responsibility in running the family business. Yet, only 30% feel that they are confident about making decisions involving Family Businesses.<\/li>\n<\/ol>\n
        \n
      1. Establish clear rules and career paths.\u00a0<\/strong>A leadership position is not the only role for members of the next generation.\u00a0 There are several important roles to be played above and beyond full-time employment.\u00a0 A critical need is to develop a path and make family members understand how they can embark on those paths.<\/li>\n<\/ol>\n

        Having a good grasp of the 3 important principles will pave the way for effective Succession Planning<\/a> in family businesses. When these are in place, the very fundamental foundation of the family business is established and ready for the 21st-century challenges.<\/p>\n

        Interested in gaining more understanding of Family Business Succession Preparation<\/a>? You can learn more and download an editable PowerPoint about Family Business Succession Preparation<\/strong> here<\/a>\u00a0on the Flevy documents marketplace<\/a>.<\/p>\n

        Do You Find Value in This Framework?<\/h2>\n

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        “FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight \u2013 it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”<\/p>\n

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        \u2013 Omar Hern\u00e1n Montes Parra, CEO at Quantum SFE<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

        Family businesses did especially well in riding the rising tide.\u00a0 Family businesses were the particular beneficiaries of three decades of favorable global economics. Propelled by fast growth in the emerging world, the share of family businesses in the global Fortune 500 grew from 15% in 2005 to 19% in 2013.\u00a0 Five years ago, founders or… The 21st Century Dilemma: Preparing the Next Generation for Succession<\/span><\/a><\/p>\n","protected":false},"author":111,"featured_media":4924,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[408,85],"tags":[1597,1598,1562,1599],"class_list":["post-4922","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-management-leadership","category-organization","tag-long-term-sustainability-of-family-businesses","tag-successful-generational-succession","tag-succession-planning","tag-the-3-important-principles-for-succession"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/111"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=4922"}],"version-history":[{"count":8,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4922\/revisions"}],"predecessor-version":[{"id":8135,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4922\/revisions\/8135"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/4924"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=4922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=4922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=4922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}