Next Generation Leaders Don’t Just Step Up, They Step In

As a consultant and family council chair, I have heard many times the senior generation’s mantra: “We are just waiting for the next generation to step up.” There is a problem with this attitude toward succession. Often, there is no room for the next generation to step up because what the senior generation is doing today isn’t a relevant role for a next generation family member. If the younger generation steps up, there has to be room for them at the top of the ladder.

One of the biggest challenges families face is developing successors to the current leaders, and creating meaningful opportunities for the successors to actually lead the family and the business.

To use my family as an example, the next generation was wrestling with succession and transition. We heard the senior generation’s step up mantra countless times. This was frustrating for the next generation, since many of the next-gens were actively trying to figure out what the senior generation meant by “step up”. The next gens were at the meetings, they were doing work, they volunteered for any assignment that was offered, but there was still the perception that the next gens hadn’t stepped up.

It wasn’t until the family took a drastic step that the step up conversation stopped.

In order to create successors that have something real to do, the older generation really needs to step back. They need to step away and provide opportunities for the next generation to step in to real work.

Stepping back means looking at the broader scope of what the family and next generation are trying to accomplish over the next ten years, and then tasking that next generation with the work that needs to be done to get there.

Some families who are stuck in a holding pattern have taken a drastic step that allowed them to move forward. An example of this is having the older generation agree to suspend the family council for a year. Then the next generation reformulates the family council to be more relevant to their generation and the rest of the family. This gives younger people real work to do to move the family forward. This also has the added benefit of learning how to work together as a next generation, build a governance model that is relevant for the complexities of the family and business today, and get beyond the powerful and influential voices in the senior generation.

The next generation might surprise you. They may be more successful than the older generation at creating a family governance model that’s relevant for the whole the family. For example, if the younger generation is asked to put together a task force to accomplish a specific goal, they’re unlikely to only appoint people within their own generation. They’re likely to ask the older generation to participate, and the task force will approach its work with the goal of helping the next generation and the family move forward.

The problem occurs when the older generation is trying to create successors in their own image, to replace themselves. You’re not handing over a job only to replace like for like. The younger generation is valuable precisely because they’re different, because they present an opportunity to help the family move forward. As the younger generation finds their path and their unique contributions, they will also find a way to carry the family along with them.

The Ten Year Vision

Ten years is half a generation—a long enough time frame that a ten-year vision will help guide families through major transitions, but a short enough time frame that it still allows for planning and accountability.

A lot of families think about their vision in terms of a much longer or shorter horizon—100 years or 3 years, for example. If you’re trying to achieve a vision that’s 100 years away, who is going to hold you accountable? A shorter-term vision is also not very useful. You’re not going to get your family to do anything of significance in only a few years, because it’s too hard to make changes. A short-term vision won’t help you anticipate or plan for any big transitions or changes in leadership.

When you project where you’re going to be in 10 years, you need look at it through three lenses at the same time—what the business is going to be doing, what the family is going to be doing, and what the board is going to look like as it pertains to family director development.

If the business is going to double in size in the next 10 years, and your family will need to put a new family chairman in place or hire someone from the outside—those are really big transitions.

Big transitions will go more smoothly if you have a plan. How do you need to grow your family’s capabilities in order to be good stewards of a changing business 10 years from now? And how can you position your family to be good stewards of their own relationships as the family itself becomes more complex over time? How do you prepare family directors so that they can be active participants on the board of a much more complex business?

If the family, the board, and the business are likely to become more complex over time, the family needs to have the tools to understand that.

There are three elements to consider when creating a family vision: family, business and board. Each of these entities will be in a different place in 10 years. The business may be double in size, the family may have quite a few more active members, the board will have more complex duties and perhaps different members in order to provide guidance to a company and family of increased complexity.

I’ve found that a 10-year time frame is just right. It gives you enough scope to think about what’s happening both with the family, the business and the board.

Family

With the family, you need to look at the generation currently in leadership, the generation that’s getting ready to rise into leadership roles, and the youngest generation. Where will each of these groups be in the next ten years? Some may be retired, some may be ready to come in to the business or family governance. Each of these groups will need a plan. In the case of retirement, succession planning is needed. In the case of aging in to the family council or family assembly, there will need to be a program in place in the next few years to get them ready for “active duty”. And then there is that middle group – those who need to prepare for succession. You will need to put in a leadership and development program for these individuals so that they can be prepared.

If your family’s youngest generation is between the ages of 5 and 13, you’re probably not even thinking about them right now. But in 10 years they’re almost all going to be eligible to be part of your family governance structure. You need to anticipate that transition now, and think about what needs to be in place to make it a smooth one.

Business

Understanding where the business will be in 10 years allows the family to prepare family members to understand and be good stewards of that business. If the business is going to grow in complexity, the family needs to have a plan to grow in capabilities along with it. This statement in the family vision, will provide guidance to the family governance to implement a development and education program, for example. This may also provide new and exciting employment opportunities for the next generation. Ensuring that the next generation is exposed to these exciting opportunities could be a way of ensuring continued family employment in the business.

Board

In 10 years, the board will likely be very different from what it is today. The business will be much more complex and the directors will be required to make a very different contribution, including family directors. As the business grows, so must the board. The family vision may include a statement about the performance and readiness for next generation family directors. This will then direct the family governance to implement a director readiness program.

The ten-year vision helps the family grow to be ready for what’s ahead, and to develop a deep bench of qualified leaders within the family. It sets the context for all the things that will happen over the next 10 years, and tells you what you need to plan for.

Why Families Should Compensate Their Family Council Chairs

Many family councils are struggling to address the challenges they’re facing. Many feel pulled between competing agendas—managing all the short-term and long term work of the family council.

For a family council, short-term work includes planning events like retreats for the family and the annual family council meeting.

But long-term projects are equally important, and often get pushed to the side when the family council is faced with the immediate need to find a venue for an important meeting happening next month. Long-term agendas require thinking strategically about where your family needs to go, how you’re going to develop the next generation, and how you’re going to manage the succession of the board and other leadership positions.

Often a family will get good at the short-term immediate agenda, but they never have time to address that longer-term issues.

The dangers of under-investing in the family

There are a couple reasons why this is difficult for families. First of all, not having long-term strategic conversations built into each year’s agenda makes it difficult to make it a priority.

But the biggest problem is that family businesses often under-invest in their families. They’re not investing as much in the family as they do in the board.

A common mistake is not paying somebody to oversee the agenda. If the family council chair is squeezing in unpaid work for the family council around other commitments, he or she ends up not having time to take a step back and focus on strategy. This is not a job that you can do part time after you get home from a 40 or 50 hour a week job.

Family council chairs have some pretty unsavory responsibilities, including managing disgruntled family members and responding to them in a professional way. There’s also increased accountability if you’re getting paid for the work, and the family has some recourse if you’re not getting your work done or you’re not attending well enough to the not-so-fun tasks.

If you do compensate your family council chair, then the family can rely on that individual and not feel guilty that they’re doing all this work and not getting paid.

Benefits of paying a salary to the family council chair

  • The family is better able to meet short and long-term agendas
  • The family council chair can be held accountable
  • You have a point person to do all that hard work
  • You’re able to be more strategic as a family
  • Nobody feels guilty that you have one person doing it because they’re being fairly compensated

How do you decide how much to pay somebody?

Step back and look at the scope of the family council chair’s responsibility. Don’t look at the specific task they’re doing. Look at what they’re responsible for. If you haven’t been paying them up to this point, what they’re doing may not reflect the full scope of their responsibilities.

Look at all the things that need to be done to address the short-term agenda, the annual list of tasks necessary to hold smoothly-run meetings, implement policies and so on. Step further back, and think about what you have to do strategically as a family to be a good partner with a growing business. For example you need to develop a Next Generation program, or you need to cultivate a deep bench of family directors. Overall, you need to increase the stewardship capabilities of the family.

Does the family council chair’s job look familiar? In many ways, the council chair of a family business performs similar functions to a human resources person at a corporation.

When you scope out all the work that’s being done and that needs to be done, you can then estimate how many hours a week it will take to get this accomplished. Look at the HR department in your company to identify a position with a similar set of responsibilities, and use that person’s role as a benchmark for the family council chair position. Now you have a reasonable estimate for what a fair salary might be, and you can reduce it if the chair is not working a full 40 hours a week like a comparable HR employee might.

Running the family council in a successful family business is a job. Having a dedicated professional in this role is crucial to the success of the business and to ongoing harmony within the family. If you want the family’s needs to be that person’s top priority, why not compensate them? Your return on investment will be immense.

Are You an Influential Voice Within Your Family?

Would you like to have more influence, or would you like to see some of the less powerful members be listened to a little more?

According to an April, 2014 PWC research paper , the senior generation tends to overestimate their talent and capabilities, while underestimating those of the successor generation. “This sort of impasse can slow down decision-making, and lead to the phenomenon of the ‘sticky baton’, where the older generation hands over management of the firm in theory, but in practice retains complete control over everything that really matters,” the paper concluded.

Even when a family member isn’t the true patriarch or matriarch, members of the senior generation can still influence a discussion without meaning to because of the depth of their experience and the respect they command in the family. This is another example of the ‘sticky baton’. The influencer can impact decisions and their acceptance into the family and business without even having to say anything. Body language can shut down a new idea just as fast as a questioning remark, or more blatant subterfuge.
There are several ways of managing this influencing voice without making the person leave the room every time a discussion gets started.

In order to include the whole family in decisions, the decision process itself may need to be handled a bit differently. Changing the decision making process to encourage more styles can greatly improve the overall contribution of the family and increase the number of voices contributing to the discussion; and create a stronger, more unified collective voice. This increased voices lead to greater overall credibility of the family in the influencer’s eyes, and increases the buy-in on the decision. Many families pride themselves on their quick decision-making, but this can backfire as the family gets bigger.

An influencer may have become so because they are fast thinkers, and others may hold back because they need more time to think about the different angles of a decision. Slowing down the decision-making process allows different types of thinkers to participate in the discussion. For example, if a decision is broken down into steps, it creates space between information, decision and action. Introducing a topic over e-mail, creating a task force to research the topic, sharing the research with the family over e-mail and through a webinar, soliciting feedback through e-mail, holding conference calls or one-on-one conversations, gathering all feedback and incorporating it into a final recommendation—all of these steps prepare the family for a decision that incorporates as many voices as possible. Then the decision can be approved by the whole family either at a meeting or over email.
A slower, more methodical decision-making process may drive the family’s quick decision-makers crazy, but they will soon relax when they realize that involvement and healthy debate has gone way up in the family.

Some families find that slowing down the decision-making process actually increases the family’s overall efficiency. It becomes easier to make decisions without needing to have great debates on the smallest topics.

Another way to make decisions easy is to have a set of guiding principles, or values, upon which the whole family can agree. These values can be used as a measuring stick for every decision. The family should also have a stated mission – why they are working together for a common goal. This helps remind everyone when decision-making does get tough, that there is a reason to stick it out and see the decision to its final end. Also, the family needs to have an agreed upon vision. Any decision can be easily approved if it is shown to support the overall vision of the family and carries out the values.

Don’t forget–it’s critical that the influencer fully endorses whatever decision or change you are trying to implement in the family. In one family I work with, the family council chair checks in with 3 people before any major decision or implementation. They are all influencers (who often don’t agree with one another) and the chair needs to make sure that they are all on board, understand the history and background of the decision, and the recommended course of action before anything goes out to the family. This may seem like preferential treatment, but following this model has made it possible to implement change where before there was impasse. Some of the influencers in that family require weekly calls; others are ok with periodic emails or phone updates. This is the kind of commitment it takes to ensure that all of the influencers and the rest of the family are working together for the desired outcome.