Mon. Feb 6th, 2023

For many family businesses, one of the biggest barriers to long-term business continuity is whether and how ownership and leadership are transferred to the next generation.

Privately held or controlled family businesses have unique opportunities and challenges to ensure long-term success. Family businesses often adopt best practices from public companies for talent management, strategic growth, and organizational adaptation. However, if a family is to maintain control of the business for years to come, they must also be able to meet some challenges that public companies do not face, including managing family dynamics and conflict; developing talent and leadership within the family; and supporting new generations Family members find their own way to grow and contribute (whether within the family business or elsewhere). The latter challenge is rarely discussed and often tangled emotionally and psychologically. However, nurturing a resilient family business is critical – both for the family and for the long-term health of the business.

Tripwires, Negative Self-narratives, and the Road to Prosperity

Most new-generation family members agree that there are many advantages to growing up around a family business. The hidden stumbling blocks in this often complicated family situation are less obvious.

Understanding these common stumbling blocks and the skills needed to avoid or overcome them can help individual family members thrive and ultimately support the long-term viability of the family business. New research in the field of positive psychology, focusing on human strengths, suggests we can provide new generations with more ideal scaffolding to navigate their paths.

Tripwire #1: Lack of identity separate from family, family wealth or family business.

Personal identity is the fundamental organizing principle of personal development, and it continues to develop throughout a person’s life. While this is a lifelong process, the teens and 20s are a particularly important time to test ideas, explore interests, and learn to work toward meaningful goals.

Growing up in the gravitational field of an important family business can confuse the process. Young people working for their families may lack both a clear sense of personal attributes and a legitimate environment in which to test their abilities. Family peers who choose paths other than the family business may feel the weight of family fame and reputation, limiting their personal exploration. In both cases, these individuals may have a lack of confidence in their skills, leading them to question the validity of the feedback and wonder if a position or honor has been awarded, or simply the result of family influence.

Antidote #1: Actively build identity capital.

Identity capital is the personal collection of resources and experiences we gather over time that influences the way we engage in the world. It’s the result of the investments we make in ourselves—education, work, hobbies, travel. Rising stars with deep identity capital are more confident in their interests and abilities, and are more prepared to join the family business or pursue other careers.

Effective ways to build identity capital are: Attending college where you may not know your last name allows you to explore interests and talents more freely; Participate in developmental assessments of skills and abilities (e.g. VIA Character Strengths Assessment; Pro-D Assessment, Determine A person’s primary motivations, abilities, and personality style; or Gallup’s famous CliftonStrengths); or working outside of a family business before considering joining it.

One rising star member told me in a recent research interview that their family reputation may have played a role in their admission to prep school, college, or graduate school. On the other hand, passing the bar exam is an important identity capital-building experience: “That’s all I have.”

Tripwire #2: Great pressure to succeed and measure—with a corresponding fear of failure.

Growing up in a family with a thriving career, the bar for success is very high (and, often, the definition of success is narrow). Whether the standard was set by grandparents, parents, or any accomplished relative, the legacy of business success — and the fear of not meeting it — is a heavy burden for the emerging generation.

As a fourth-generation family member told me: “In our family, the average is not good enough. Each generation has done more impressive things than the last. What if I were just average? Or even just Above average? … the legacy is a pretty hefty weight.”

Antidote #2: Develop a growth mindset and perseverance.

Growth mindset and perseverance are important character traits that complement each other. They are both powerful, research-proven antidotes to the overwhelming fear of failure. People with a growth mindset believe that human traits such as intelligence, resilience, and perseverance are malleable and can be cultivated through hard work, good strategy, and thoughtful feedback. Fundamentally, growth-minded people see difficulties and failures as part of their learning path, not as a sign of their weakness.

Perseverance is defined as “enthusiasm and perseverance in the pursuit of long-term goals, despite the inevitable setbacks along the way.” Growth-minded individuals tend to demonstrate perseverance when learning new skills, while perseverance People can stay motivated to pursue long-term goals by adopting a growth mindset.

The keys to developing perseverance and a growth mindset include: seeking feedback; being willing to struggle as you learn the ropes and move into new roles; recognizing that truly constructive feedback is a sign that someone believes in you (not that you’re not good enough); and sticking with enough Perseverance for long new challenges to build real skills and a sense of accomplishment.

Tripwire #3: Momentum wanes due to unearned wealth driven by the successful business ownership of the previous generation.

Successful business creators do what few others can – turn ideas into gold. This process of turning human capital into material success is as impressive as it is heartbreaking because it can capture the attention, ambition, and energy of non-wealth-creating family members.

The long shadow cast by wealth creators can inadvertently create a “learned helplessness” for the new generation of the family — a state in which people realize that their efforts have not significantly changed their situation , so they no longer try to assert changes. Often complete common tasks for them. The lack of economic need for jobs may cast doubt on the need for jobs in humans. Motives falter.

Antidote #3: Learn to master.

Learning to master is the process of engaging in experiences that help demonstrate that you have everything you need to excel in a particular skill or field (think: athletics, art, music, computer coding). Inherent in the mastery process is the level of “desirable difficulty” – the difficulty of recognizing goals that are still worth pursuing. Consciously developing the ability to master experience and develop your ability to tolerate (or even embrace) hardship buffers you against a helpless downward cycle that can erode motivation. This, along with courage and a growth mindset, can build your confidence and motivation.

The road to resilience

Being a resilient family business inherently means that some key stakeholders are also family members – so success depends not only on management strategy, people, products, operations and balance sheets, but also on the deep personalities of being a family Relationships and mental space. Having a capable, confident and autonomous new generation to whom responsibility and the ultimate baton can be passed will help ensure the durability and prosperity of your family business.