Developing Leadership and Choosing Successors
in Family Business
Last year alone over 2000 books and articles were written
about leadership, repackaging everything and everyone from
Attila the Hun to Jesus to Dorothy in the Wizard of Oz. ("She
was small, meek, and young but she took a guy with no heart,
one with no brains, and one with no courage, and created a
successful team that accomplished its mission.")
What is leadership?
Simply put leadership is the ability to inspire others to
get the job done, whether it's increasing the bottom line,
climbing Mt. McKinley, leading a reconnaissance mission, or
bringing family members to consensus on a by-laws issue. Several
ingredients are necessary for this to be accomplished: trust
between the leader and the followers, leader's credibility,
a shared vision, and plan of action.
The Leadership Triad:
Leaders and followers working together to achieve results!
Why is leadership a particularly important issue for family
There is a serious failure to plan for leadership transition
in family businesses. Typical requests that come to Key Resources
sound like this:
- "I always thought my son would run this company but
I just think he can't. He's very good with numbers but not
with people. What should I do?
- "I worked hard to build this company, working 20
hours a day and now I want to take it easier. I have three
kids in the business. How do I pick one to replace me? It's
a different place and time than it was when I started."
- "I know this is important but I've ignored it for
so long, it's almost too late to choose anyone."
Here are some facts about the lack of leadership planning
(from the Mass Mutual/Raymond Institute study of 2003):
- 88% of family owned businesses plan to stay in the family
- 47% expect leadership to change in the next 5 years
- 42% have not yet chosen successors (of the CEOs 61 years
and older, 55% haven't yet chosen a successor)
- 13% of the family members said the CEO would never retire;
34% said they were not aware of the successors intentions
- 20% have not yet completed estate planning
Are leaders born or made?
True leaders have a combination of both 'nature and nurture',
that is, they are born with a talent that is nurtured along
the way. It is not inherited like eye color, but, early on,
'natural leaders' show leadership traits, such as being in
the leader of the gang, speaking up, initiating games, and
sometimes even challenging authority. Martin Luther King,
early on took up the cause of the civil rights movement. Leadership
to some extent can be taught and the best chance is to start
early. Parents and teachers can unwittingly inhibit early
leadership traits, like challenging authority, wanting to
be in charge, taking risks, being tough, and persistent which
can sometimes be annoying!
What are the special skills of a leader?
Leaders most importantly give energy to others in order to
get a job done. Is there one of your kids who was the one
to say, "This is what we can do" or "I have
a way to get that done". They are the 'energizers', not
the 'drainers', of their worlds. They are the individuals
who draw others to them; they have an ability to network and
make connections. They are often the center of their family,
social and work worlds. (We also know leaders who have used
these traits to manipulate and control, for their own benefit.)
What are the special challenges for family businesses?
Family businesses have several challenges:
- Seniority, rank, and gender are sometimes confused with
- Children in family businesses are often raised in a culture
of wealth and entitlement and don't have to face challenges.
- The second generation has often been raised by entrepreneurs
who don't encourage leadership development and are not good
mentors or patient teachers.
- There is often the desire to 'clone' the next generation
to be just like the first, even though very different skills
are needed to run an older stage company.
- Often family roles and birth order get in the way of developing
leadership skills. For example the youngest who may have
the most potential may be treated "like the baby"
even as an adult.
- Brothers and sisters are often reluctant to grant authority
to their siblings and sabotage their sibling leader.
What's the difference between entrepreneurial and leadership
||Usually above average
||Not necessarily above average
||Moderate to High
||Fair to poor
||Average to fair
||Average to Good
||Greatest between 20 and 30 years
||Develops and grows over time
||Average to fair
to Take Risks
||Moderate, High in crises
||Moderate; can delegate
||Poor to great
||Good to great
How can you develop leadership?
Teaching leadership within the family should begin early.
Although it is an ongoing process, here are some tips and
tools for particular ages:
||Don't have all the answers;
provide situations that require hard decisions. Help them
to do the right thing and, when they don't, to 'own up
to it' and learn from it.
||Have an employment plan for
the next generation. Don't interfere with their decisions.
Encourage appropriate risk taking.
||Help them dream; inspire them;
listen; articulate your own dreams. Provide a variety
||On a regular basis, family
in the business should articulate goals and vision for
about others and achieving goals; passionate
||Teach them to care; nurture
talents and choices; build self-confidence.
||Encourage each of the next
generation to 'pursue their dreams', inside or outside
the family business.
the humor in situations
||Laugh, celebrate. Expose to
arts, and music.
||Create rituals for celebration
||Set appropriate limits; expect
responsibility and accountability at every age; teach
patience. Have age appropriate allowance and teach good
||Each job should have a formal,
written job description and regular performance reviews,
for family and non-family.
||Teach reading emotional clues
in others and identify own emotions/feelings; give accurate
and honest feedback regarding how they come across to
others; discuss social situations; expose to literature
and the arts.
Choose non-family mentor for next generation who can give
honest feedback. Develop human resources; pay attention
to care of the employees.
of intuition and analytic competencies
||Teach problem solving and decision
making; help them follow through on hunches, learn to
pay attention to 'gut feelings', play 'what if' scenarios,
games, travel. See patterns and relationships in people
||Practice 'what if' scenarios
at work. Challenge opinion: 'What would you do in this
situation?" Make head of a task force looking at
trends, patterns which will affect company's future.
||Teach respect, accountability,
honesty, forthrightness, charity, and humility. Family
discussions re; right decision, the 'greater good'; foster
spiritual development. Develop the ability to trust and
|Encourage and be an example
for honesty and ethical behavior. Create a board with
independent directors; address mistakes early and openly.
Trustworthy and honest.
How are the Leadership Styles of Men and Women Different?
Women's ways of conceptualizing and organizing to do work
are essentially different from men's. Women tend to have a
keener understanding of relationship dynamics and are better
at 'trusting their gut feelings', most likely a product of
both nature and nurture. Women tend to put relationships before
tasks, and are less hierarchical. Men tend to put tasks before
relationships and are more hierarchical. Women are better
at multi-tasking and men use more of a focused lens on their
job. Their complementary skills are both needed for success.
An interesting recent study Center for Women's Leadership
at Babson College indicated that female owned family businesses
- Improved productivity over male -owned counterparts by
a factor of almost two. The women-owned family businesses
had average annual revenues of $26.9 million in 2002 with
26 workers. By comparison, the male owned firms had average
annual revenues of $30.4 but had a median of 50 workers.
- Less Debt
And in the 2330 Mass Mutual/Raymond Institute Survey:
- 30% said they would consider a female successor, up from
10% in 1998, 12% in 2000.
- More daughters are coming into the business with degrees,
eager to take on leadership roles.
What leadership style is needed for what stage of the business?
Different leadership styles are appropriate for different
stages of a company. Too often first generation family business
leaders seek clones of themselves without considering what
the company needs going forward. Leaders should be able to
take the company where it needs to go and the choice of a
leader should parallel a strategic initiative of the company,
which answers the following:
- Where do we need to go in the next 5- 10 years?
- What kind of a leader can take us there?
- What are the important skill sets of our next leader or
- If we are objective, is the best leader for the company
in the family or do we look outside the family?
- Who in the next generation has the skills of the best
leader to take us where we need to go?
- What is our road map for the succession process?
The following chart describes the type of leadership style
that is best for the stages of a company. Of course, the best
leaders do not rely on only one style; they use most of the
all in any given week, depending on what the situation calls
-"I'll tell you what to do because I'm the boss".
- "We'll all meet and discuss it until everyone agrees
on a decision"
- "I'm not sure how I'll decide or react; it depends
on my mood."
- "We will all discuss but remember, harmony is most
- "We don't have to sit around and talk about it, just
do it. I'm too busy for that."
*This is adapted from Goleman "Leadership that Gets
Results", HBR, Mar-April, 2000 and Growing Pains, by
Rent the movie, The Endurance-Shackleton's Legendary Antarctic
Experience' and, with your family, use the following as guiding
questions for a discussion:
- What did Shackleton do to keep up his crew's morale?
- What was his vision and how did he inspire others?
- What did he use as rituals to lighten things up and burn
- Did he accomplish his goal?
- How did he encourage the team to work together?
- What could your family business learn from this movie?