Family-owned businesses form an integral part of the global economy, yet they are not immune to certain unique leadership challenges, especially when it comes to succession. Many believe that leaders are born and heirs with “success in their blood” or those identified as having “the right stuff” early on, will naturally become successful next-generation leaders for the organization.
There is no disputing that some individuals naturally exhibit leadership traits from an early age. Still, identical twin studies estimate that just over one-third of leaders are born (i.e., genetic factors play a role in accounting for certain innate leadership personality traits) while the majority are made.
Therefore, it is vital for those involved in the family business to embrace talent management best practices and commit time and resources to identify and develop leadership potential within their organizations before selecting future leaders. Doing so offers a variety of benefits not only to those involved but also to the business, often preventing a myriad of complex issues further down the line. Here are three steps to consider in getting started.
Identify potential
According to a leading global expert on talent and leadership, Claudio Fernández-Aráoz, in a volatile, uncertain, complex and ambiguous world, potential is the best predictor of future success. Leadership selections should not be based on current abilities or competencies or even the experience of key family members but rather their leadership potential.
Fernández-Aráoz notes that leadership potential is characterized by four hallmarks – curiosity, insight, engagement and determination. These traits should be assessed independently to identify those with stronger abilities to learn and grow. From this, plans can be devised to engage, motivate and develop these individuals.
Identifying high potentials in family-run operations can often be a delicate process due to the number of family members involved and the tendency towards leniency or bias. For this reason, Fernández-Aráoz suggests implementing a rigorous assessment process for future generations. He notes that while starting early is optimal, it’s never too late to start and family members across the age spectrum should all be involved and evaluated.
Given the sensitive nature of these types of assessments, it is often advisable to have these conducted and managed by external experts in this field. This ensures that the process is fully understood by all participants and does not alienate those not directly selected for leadership development paths. Instead, empowering them to identify areas of strength in which they too may develop.
Develop prospective leaders
Once those with high potential have been identified, implementing a strategic plan is necessary. This should involve the evaluation of the extent to which each individual’s development is possible within the organization as well as the specific, relevant path to which this should apply.
Not everyone with high potential is created equal and everyone’s capacity for growth and development is different. It is, therefore, critical to identify the unique personal potential in selected family members. From this, opportunities to be strategically engaged in business activities that provide the practical experience necessary to grow and develop competencies based on their high potential traits can be facilitated. For example, those displaying high curiosity and insight may be given opportunities to be mentored and involved in strategic decision making, planning or investment roles. At the same time, those who are engaged and driven may be afforded opportunities to be mentored by the company’s team and change leaders and gain hands-on experience by leading teams of their own.
Allowing for this type of experience enables the current generation of organizational management to evaluate each members’ potential in various areas and roles. It also affords the selected individuals to gain a better understanding of their abilities, strengths and weaknesses as well as insight into where their interests lie.
Evaluate, collaborate and position
Once the first two steps are complete, the final step is to share management’s perspectives with the selected high potential individuals and identify areas where further development and experience may be required. This also provides an opportunity to gather feedback and assess their motivation to fill specific roles. The latter is critical as aptitude doesn’t always lead to interest and engagement and some members with leadership potential may wish to exercise their talents outside of the family firm.
For those wishing to remain within the family business, identity issues, personal preferences and even family circumstances may all play a role in the selection of positions and the degree of commitment to the company. Some will naturally gravitate towards full-time executive roles, while others may find greater fulfilment in making limited, yet essential, part-time contributions.
Honest, open discussions about each person’s motivations and the realistic possibilities that exist or could be created around these within the business are critical to all involved. Such discourse also empowers the incumbent leadership to identify the roles which may need to be filled by non-family members who may then be subject to the same assessment and development processes and evaluations.
Identifying, developing and positioning the next generation of family leaders within the company based not only on their potential but also on interest, engagement, and personal proclivity is one of the most potent strategic steps towards individual and organizational success that a family business can take. As such, it should not be overlooked as a fundamental part of both operational and succession planning.
By: Francois Botha
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