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Ignite the Spark – Preparing the Next Generation for Governance

This article is provided by Institute For Family Business (IFFB) 


In a recent family retreat and strategy session reviewing future opportunities for business-owning families, a second generation business leader probed. He wished to know the best manner he could engage the next generation on family business governance, and the most important developmental experiences the next generation leaders should have.  As straightforward as the question seemed, it raised critical issues. Since the preparation of the next generation for governance responsibility in family-owned enterprises was such a critical undertaking. So much so that, it occupies an important place in the attention of key decision makers in a family-owned business.  Besides, it also ensures the family-owned business retains a steady flow of skilled lifeline for board level positions as well as growing “bench strength” and depth of local knowledge and skilled family business managers. 

 

Family-owned businesses potentially have a significant advantage over their private non-family counterparts in this area. This advantage can 0nly be maintained if the family manages to develop, and harness the energy and entrepreneurial spirit of the next generation. They need to direct (the energy and entrepreneurial spirit of the next generation) inwardly, to the family business as they prepare them for ownership and leadership. Starting early, and growing within the family-owned enterprise, this next generation could then act as the innovation engine for the business.

 

During the session, the facilitator shared six specific areas of knowledge and experience, and discussed how family-owned enterprises can provide these experiences in preparing the next generation.

 

  • Intimate knowledge of the enterprises’ day-to-day operations: to be an effective strategist, set to drive change in the family-owned business, one requires an incisive and deep seated broad understanding of the operations.  A “hands on, home grown experience” gained by rotation through various functions of the business would be ideal. This enables the family member understand the business “back-to-front”. Furthermore, possession of outside exposure, previous education and experience notwithstanding, this needs to be done – to ensure they gain depth in their knowledge of the business.
  • Struggles in “over-your-head situationExperience gained from exposure to extremely difficult situations is important in instilling self-confidence. The experience of being alone in such situations, and assuming responsibility for making decisions is crucial for developing emotional intelligence.  It is therefore desirable that all designated successors possess several “over-your-head” experiences. Standing alone in tough situations is a valuable, mistake-making and confidence building experience.
  • Internship in “Role Model” organization: Working in other organization which possesses best practice provides a benchmark for future use.  It fortifies and validates concepts and theories acquired during formal education, and provides for a “practical opportunity to explore what has already been learnt” and to see it in practice.
  • International exposure:  access to diverse international outlook is important for creative strategic thinking.  The facilitator encouraged, where possible, to arrange for an international exchange with a family-owned business possibly in the same business, in another part of the world.
  • Board information knowledge; Sharing the agenda or minutes from board meetings with the next generation builds an appreciation of openness and opens communication lines. The process is enhanced, if a knowledgeable member of the family (i.e., a board member or the board chairman or even an independent director) is available to respond to any concerns from the next generation age set. Such meetings can be intentionally held just before official board meetings or may be arranged as an annual review of board activities for the past year. They could reproduce management presentations, and involve highlights of issues discussed, and appropriate background information.
  • Continuous learning: Families can encourage family members to attend educational seminars on governance and boards or invite knowledgeable director in family or family business consultants to conduct workshops and training.

 

From the forgoing, it is undoubtedly important (for the survival as a family-owned enterprise) that families undertakes a structured and deliberate effort of engaging succeeding generations in preparation for board service.

Copyright © 2016 Institute For Family Business (IFB). All Rights Reserved.

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