Developing Leadership In A Family Business

Developing leadership in the successor generation is important to the survival and growth of family owned and managed businesses.

In order to successfully make the transition from one generation to the next, family businesses must design a process of grooming and developing the successor generation of the family into skilled leaders who can guide the business through the inevitable crises, changes, and growth of the competitive future.

Knowledge of Industry

Leading an organization today requires the leader to have four knowledge and skills attributes. In the first instance, the successor leader should develop a clear understanding of the industry in which the business competes. In other words, the incumbent leader should know who the competitors are, where the money is in the industry, and who the other leaders and important contacts are in the industry. Moreover, the incumbent should have a good understanding about the history of the industry in order to anticipate needed changes and future trends.

Technical and Business Skills

It is also imperative for any future leader to understand all aspects of the business. The incumbent leader should have a thorough understanding of the mission and philosophy of the organization.

What is the product or service being offered?
How are the products made and the services provided?
Who are the major vendors and suppliers?
How does one effectively sell the product or service to the clients?
Who are the key customers and clients?
Who are potential customers and clients?
How is the business financed?
What is the latest technology available to the business and how can it be utilized to make the business more effective?
Who needs to be recruited or retained in the business?

In short, the incumbent needs to understand the nuances and details of how the particular organization and its systems function.

Influence Skills

Leadership involves the willingness to take responsibility for the direction of the business and the associated risks. It is the ability to develop a vision and communicate it effectively to others, to transfer energy and enthusiasm, to listen with empathy, to build consensus and to make decisions. It requires the capacity to motivate people, to align interests and to form coalitions of people for the purposes of achieving goals for the organization.

Self-Awareness

Self-knowledge and understanding is the foundation for leadership. The most successful leaders have acquired a clear understanding of their own strengths and weaknesses. They have developed the flexibility to lead and to be led, to be tough and compassionate, and to combine confidence with a healthy humility. Becoming comfortable with one’s self contributes significantly to the quality of one’s leadership abilities.

Conclusion

It is important for the controlling generation to focus on the skills that are crucial to the successful leadership of the family business.

What knowledge is one expected to possess in order to be considered eligible for leadership succession?
How must one behave in order to be considered a leader?

When clear criteria have been established a leadership developmental plan can be created to meet them.

This article has been partly extracted and modified from Foster, A.T. (1994). Developing Leadership in the Succession Generation. "Proceedings of the 1994 Family Firm Institute Conference", October 5-8, Scottsdale, Arizona, USA.

George Tanewski is Senior Research Fellow in the AXA Australia Family Business Research Unit at Monash University. Dr Tanewski writes extensively on family business issues and also sits on the board of a prominent Melbourne family business. For further information please contact George Tanewski on 61-3-9903-2388 or george.tanewski@buseco.monash.edu.au
First published: 16 May 2001.
Last updated: 6 October 2005.