There will come a time in the life of every next gen of a wealthy family where they will start to question, ‘Where do I fit in?’ to the running of the family business or managing their assets.
As many view their only way to be engaged as the traditional path to management, their answer to this question can sometimes be black and white – I’m either involved or I’m not. Each member of every generation has their own ambitions and aims in life and often they can feel they have to sacrifice their dreams to fulfil their obligations and role in the legacy and success of the family business.
This is this one of the reasons why despite ‘nearly 70% of family businesses would like to pass their business on to the next generation, only 30% will actually be successful.
Yet, with the importance of family governance gaining in awareness, many new roles and responsibilities are emerging that will allow the next generation to balance their aspirations with their desire to be involved in the family business in some capacity.
Engaging as a Responsible Owner
Even if there is the desire, there may be further barriers to the next generations involvement: as the family grows across generations, there may not be enough roles for every family member to be directly involved or some may not have the necessary skillset to contribute to the immediate needs of the business. Conversely, some next gens may choose a career separate to the family’s core activities.
No matter which path they take, the freedom to decide their own future should be embraced by the family; the next generation need to be empowered to pursue their own dreams and ambitions and to realise their full potential – rarely will a life born out of obligation lead to happiness or fulfilment.
Whether the next generation wants to, or is able to, work within the family business or not, there will always be the opportunity to be involved and contribute the family’s legacy by being a responsible owner.
Being a responsible owner is about having a deep understanding of the family’s business activities and the various structures in place, as well as having the ability to define the family’s strategic priorities and to know how to hire the right people to achieve this. There may come a time when no members of the family are working inside the business and so this responsibility, and the commitment that comes with it, can rival that of the CEO, a board member, or a wealth manager.
Involvement at Family Governance level
Alongside being responsible owners, the next generation can find purpose by taking on a Family Governance role on the Family Council, Board, or Committee. This responsibility for defining how the family interacts with their assets is fundamental for promoting communication and good decision-making. Only 47% of family companies have any kind of governance structure in place but these roles ensure that the entire ecosystem of assets is aligned with the family’s shared purpose and vision.
For a next gen, being involved on the family governance structure can put them at the forefront of involvement while allowing them the freedom to pursue their own career.
Driving innovation and creating new sources of value
Equally, the family should no longer view a next gen pursuing an independent career as negative; the well-known adage that family wealth doesn’t survive the third generation is often because of family dissent and complacency.
Alongside the existential challenges of today, whether they be climate change, disruption from pandemics, financial crises or geopolitical events, or technological advances, growth through innovation has never been more important. These issues will represent concerns of the next generation of customers and every business will need to adapt and evolve to survive. Next gens pursuing successful careers will bring a renewal of ideas, expertise, and new sources of value creation to the family.
The paths available for the next generation to be involved and engaged in the family have evolved significantly since the days of handing the company reins from one generation to another. It is no longer black and white and the many diverse opportunities for involvement should be embraced and nurtured. The more family members are engaged, the more robust the family will be to meet the challenges of today and survive for generations to come.
“Presenting management and leadership roles as the only ones to aim for can be detrimental to the family wealth’s future. And the roles available to the next generation should not be created solely by the previous generation inflexibly as “a space to fill”, but rather in coordination with the future leaders of the family, taking into consideration what they’re best at.” Maria Villax, Head of Family Strategy & Governance, Bedrock.
For further information about any of the insights shared above or to find out more about Bedrock’s Family Strategy and Governance services, please do reach out to:
Maria Villax, Head of Family Strategy & Governance – maria.villax@bedrockgroup.com.
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