Everyone gets old, but not everyone becomes an elder.
Family enterprise leaders want to build a foundation that will last for many generations. But many forget that this can't happen unless they rethink their role as elders.
The traditional assumption is that the elders will own and run the business until the moment they hand the reins to their successors. The successors will take over with as little change as possible. The popular view is that this happens at the mythical time when the younger generation is “ready.” The reality is that achieving a successful transition requires many years of engagement and shifting of roles across the generations.
Every role shift requires each party to undergo a change in behavior and responsibility. If the younger generation is stepping up to new responsibilities, the elder generation must correspondingly step back. It's like dancing together; the two partners must each know their part.
But elder family members — especially if they are owners/managers/wealth creators — do not initially have a complementary counterpart. Elders dance alone, with their family as the audience. They do not need to consult anyone; it is their show. Therefore, the leadership transition actually involves an enormous journey whereby the elder moves from total control to sharing responsibility with others. Including others is a huge step for someone who has always been in charge. Let's examine what that looks like and how and why it is difficult.
Succession Is Not Cloning
Business leaders want to prepare their successors, but they often do it by the method of “watch what I do and copy it.” They believe that the business will face the same challenges in the future as it does today, and that succession should be tantamount to cloning. But succession without change is courting disaster. The future will be different from the past — likely very different.
The reality is that this transition requires the elder to assume a role that he (or, increasingly, she) has not experienced before. To prepare for succession, the elder must transition from being the sole authority to being a teacher and a learner. This means letting go of the assumption that you, as an experienced business leader, know everything and that your job is simply to transfer that knowledge to your successors. Elders must realize that the future is not a one-way street. They and their successors must look ahead and design a different path.
But business leaders often find that difficult; many of them do their best to avoid this. We hear the frustration of the rising generation: “Dad or Mom doesn't listen; he or she has no idea what it is like for us or what we are facing in the business.” This is the antithesis of an elder's role shift. You must stop assuming that history has taught you everything you need to know and begin to see that your successors inhabit a different world, much of which is foreign to you. After years of success, you need to prepare for the unknown. Your companions on this journey are the children you raised and educated. After years of being learners, they now become your teachers.
A Scary Transition
All of this comes at a time when many family leaders are getting tired. They could leave but feel they must remain because no one else can do what they do. Who could disagree? But they often forget how little they knew when they took over leadership, and how quickly they learned.
They have been in charge for many years, and over that time they have become accustomed to success and less flexible and open to new ideas. They have “been there and done that;” they don't need to change.
Ideally, however, the leader's role should shift from being the sole authority to being an alert learner, engaging with the new generation to consider what is next for the business and the family. The senior generation must adopt a mindset of inviting their successor to share their vision and what they have learned along the way and engaging them in considering the future path of the family.
This is not easy for leaders. They now must act in ways foreign to what they have always done. They are asked to let go of control and be open to new ideas. This is not just unfamiliar; it is scary. Many wealth creators have never experienced this. Some leaders take any suggestion as a rejection or criticism of their past success. Their hurt and anxiety leads them to make defensive, impulsive attempts to retain control forever. These usually backfire, as their successors rebel or retreat.
Many successful family leaders experience a subtle but constant shrinking of their environment. They go out less and, therefore, don’t meet many new people or get exposed to new ideas. Their advisors, employees, partners and even friends and relatives view them with awe and are loath to disagree or challenge them. Family after family notes that they don't talk about money and avoid disagreements in general: “We don't want to upset Dad.”
The family members in control are lulled by endless praise and little disagreement. If they are confronted, they often dismiss what they hear. Communication diminishes when it should be ramping up.
Just as they risk becoming stale and missing opportunities, leaders create a family and business environment where they are not looking ahead at how the business environment is changing. They work with estate planners to make sure their offspring are not empowered. Ironically, these leaders attempt to prepare their successors without allowing them to take risks or learn.
From Parents to Partners
But we are delighted to observe that an increasing number of elders are starting to explore new paths and possibilities. They are giving their successors roles that bring them into contact with other enterprises and allow them to experiment with new skills. They are asking up-and-coming successors what new ideas they are learning in graduate school and sending them to conferences or on site visits to learn what other family businesses are doing.
This shift is welcomed by the new adults. Elders in these families are stepping down from their role of infallible oracle to become a partner, looking at the future together with their successors. They are asking rather than telling, exploring rather than prescribing.
The rising generation in these families will see their parents as peers and partners. They'll feel pride that their parents want to hear from them and learn what they know. They will also be more open to learning from their parents. But it may take a few tries to really see that each generation has become more open to change and ready to look at alternative options.
Making the Shift
Here are some steps to help a business leader shift from a closed mindset to openness to a different future:
- Step out of the usual world.
Start by asking your family to consider the future. You want to make it clear to skeptics that you really want to hear their views, and that there is a real opening to explore new ways. Since this is new, it may take time for them to believe you.
You should make it clear that while you have ideas, you are aware that others do as well. You know there have been disagreements and missteps in the family, but you want to talk about what lies ahead, not the past.
- Find a guide you respect.
This journey involves acting in new ways after many years of success. It requires overcoming resistance and anxiety about change. Many business leaders have forgotten how to learn. They overvalue what they know and underestimate what they don't know. While helping their children get coaches and advisors to help them learn and grow, they don't see that they too need this support.
The elders should seek out a guide to help them see how their expectations can lead them astray, and how their anxiety about learning new ways can limit them. The guides can be contemporaries, such as networks of CEOs who are transitioning, or trusted advisors willing to tell them the truth. An open and aware spouse or old college friend might serve as a guide.
- Set a time and place for exchange.
The dialogue begins with ideas and possibilities, not decisions. Your family has had huge success and now has huge resources compared with the rest of the world. The question is what to do with them, and how to manage them in the rising generation.
This is a good time for family meetings. There may be different groups meeting at different times. For example, all family members, including married-ins and young adults, might look at the future of the family, while a smaller group might look at the future of the business or financial enterprises. The future is too important for quick decisions; the key is to explore options and take time to consider their impact, not to make hasty decisions.
- Send explorers on learning journeys.
Family members have a lot of ideas, but there are so many new possibilities that everyone needs to go out and learn. It's a great time for old and young family members to talk to friends, attend conferences and be open to what is possible. Seek out and visit other family businesses and family offices; even work for them if possible. When different generations share what they learn and talk about possibilities, the family enterprise expands its horizons and people become true partners.
Some families convene a rising-generation community to explore new possibilities and suggest what the family might do differently. This is where new ideas and investments arise that take the family enterprise in new directions.
- Envision the future and design experiments.
Some new ideas sound good; some sound far-fetched. But they are never clear. Instead of trying to answer a question, you might design an experiment. For example, a company might test two new product ideas or two marketing campaigns and compare the reception each receives. Or, a potential successor may undertake a risky but innovative idea to see how it works. That is a way for all family members to discover how to work together without an argument about who's right and wrong. This partnership is not a short-term endeavor; it may take place over several years.
- Name new leaders and expand the family.
As the family opens to change and experiments, a new generation of leaders will emerge. They can be named to boards, positions in the business and task forces, replacing the older generation.
What happens to the former leaders? Do they fade into retirement and vacation houses? One way that a family can overturn the generational hierarchy is for older family members to step into new roles that are not top leadership. They can initiate philanthropic efforts, become involved in the community and even helm new ventures. They can also step in as mentors and advisors — but they must resist the urge to take charge.