With the great wealth transfer ahead, the Family Enterprise Foundation shares some key strategies for enthusing the next generation
Family businesses are not just important for individual family fortunes, they play a key role in the Canadian economy.
But how can advisors help their clients prepare for the inevitable day when control of the family business – and the wealth it generates – must shift into new hands?
A new report from the Family Enterprise Foundation shares key strategies to get the next generations of family business owners involved in the business.
It says that around 60% of Canada’s family enterprises will be handed off to the next generation within the next decade, meaning huge potential risk from getting this transition wrong.
And it’s not entirely about finances or tangible assets, the importance of ensuring the right leadership and other human capital considerations is clear.
“Much is at stake, not only for the family business but for the family's wealth, reputation, legacy and family harmony… not to mention for the national economy" says Bill Brushett, president and CEO, Family Enterprise Foundation.
5 key strategies
In the report Preparing the Next Generation: A Family Business Roadmap, the foundation draws on extensive interviews with family business members about succession planning and transition of control.
It found five key strategies to get it right:
- Foster early involvement and emotional connectedness: Nurture strong emotional bonds to the family business through early exposure and involvement, which helps to measure and to build interest.
- Train and prepare: Create a comprehensive training and preparation program for the next generation. The program should feature both formal and informal learning structures and may involve experience gained outside the business.
- Encourage mentorship and peer interactions: Encourage peer interactions and mentorship to provide the next generation with a robust network to learn from and lean on throughout their career. Surprisingly, nearly all study participants received guidance from a mentor.
- Find the right role: Rotational programs are an effective way to help next gens find the right role in the business. However, most respondents believe the next generation should not be forced or expected to play a role in the business. They should only be involved if they are fully aware of the responsibilities of ownership and are passionate about the opportunity.
- Involve trusted advisors: External advisors are cited by participants as among the most desired and beneficial supports for family enterprises. Involve advisors who are specifically trained to work with business families to help maintain harmony by opening communication and improving transparency.
