When it comes to family business succession, the next generation often struggles to maintain the business’ success. In fact, the transfer from generation one to generation two is usually about 30% successful, while the percentage of successful transfers between generations two and three sits around 13%. The reasons can run the gamut from the next generation being ill-prepared to lead the company, to the business just becoming no longer viable. But what if the problem is that the next generation just doesn’t want the family business? Or what if there is no next generation?
In China, this is a problem for more than half of traditional private family businesses, according to Jean Lee, co-director of the Center for Family Heritage at China Europe International Business School.
“There are theories and (real) factors that limit the willingness of the second generation to get involved. First, it is about the tide of industry,” Lee told Forbes. “Most of these family businesses are rather traditional … Second, most went to college, and some of them went overseas and then came back … and want to set up their own company. Some of them will even choose to work for others.”
So, what’s the solution? In the end, you must let the members of the next generation make their own decisions. When there is support, love, and respect given to the next generation, there is a chance that those family members may eventually come back and take over the family business.
When Adopting New “Family Members” May Be a Necessity
What if there’s no clear successor for a family business but the company wishes to continue on? Or, what if a successor is struggling to run the business well? Then it might be time to consider bringing in managers and leaders from outside the family. Family members may still sit on various governing boards, but the running of the company may need to fall to a non-family CEO.
Take the example of Hartmut Jenner, a non-family member who serves as CEO of the cleaning technology company, Karcher, which has been family-owned since 1935. Under Jenner’s leadership, the company has grown financially, and its products have evolved both visually and technologically. After fifteen years of working in the company, Jenner stated that he was starting to feel like one of the family. “Yes, the company becomes part of the family,” Jenner told Die Presse in 2014.
There Are Always Options
The fact is, not everyone in the family may be the best fit for the company, and even obvious successors may not be ready or right for the job. This is why transparency is key, so that leadership can be taken over by whoever is most capable, not necessarily the most traditional.
As a family business owner, apart from accepting that the next generation must make its own decisions regarding the family business, or welcoming an external manager to run your family business, if you want your family business to stay in the family, there are effective solutions available. Take the time and appropriate steps to nurture and prepare the up-and-coming generation so that they not only feel welcome but will also be aware of what “taking on the family business” will truly involve.