How to Bridge the Generation Gap in Your Family Business

How to Bridge the Generation Gap in Your Family Business

The Woods brothers, second-generation heirs to an empire of food distribution nationwide, were facing their first crisis related to the transfer of their shared patrimony to the next and third generation. Charlie, Paul and Jean Woods, decided to get to work and make a plan to organize the succession, involving their children, a generation that had so far had shown no interest in participating in the company.

The first thing they did was understand they would be unable to tackle this situation without outside help. They required an experienced guide to provide them with clarity in the steps that would follow. They thought of their father as a possible candidate who now in his eighties was semi-retired or at least as much as a founder ever retires. He had after all been the architect of the family wealth. The second generation soon discarded this idea or the notion of involving any other person who could not guarantee the objectivity and impartiality they needed.

Finally, after evaluating some offers, an external consultant promised to help the Woods to create conditions that allow effective communication between the second and third generation, through a system of “family governance structures”. The center of decision-making would be a Family Council, a body in which the three siblings would meet to settle their interests related to the preservation, growth and transfer of their shared family wealth (a number of important assets generated over the last few decades, apart from the shares of the family business).

To regulate these decisions and provide a framework of agreements that would allow them to function properly, the Family Council decided to create a set of rules, named the “Family Protocol”, wherein the siblings agreed to regulate the most important decisions about the assets of the family, the succession planning to the next generation, rules for entering to the company, agreements on economic benefits and wages for family members, the family culture and values recognition, provide development opportunities for members of the family, ensuring the quality of communication and family harmony, and guiding the actions of family philanthropy.

Implementing such processes in the family business is neither simple nor free of setbacks, but success can be achieved provided two key conditions are fulfilled: First, all agreements must be consistent with the dream of the future (what is known as the “Shared Dream”). Secondly, all decision-making within a Family Council should be based on “consensus”, which, unlike “unanimity”, calms the debate and increases the group commitment.

For families facing this situation, the following question usually arises: “When are we going to engage the next generation into this process?” The answer is always “Whenever the current leader generation (their parents) is ready”. It is not possible to generate a program that prepares future owners if the current leaders are not clear about the objectives and rules of engagement for the next generation. Problems between cousins (third generation) usually stem from relationship problems between their parents (second generation). The best way to achieve a training plan for the second generation is having a Family Council that is cohesive in their decisions and clear goals.

Thus, through their Family Council, the Woods siblings managed to shape a forum adding and separating the functions of the family and the company leadership, which helped to strengthen the role of the Board of Directors of the family business, focusing it efficiently on their responsibilities as administrator of the company strategy. But all this was only possible through the creation of a dedicated space for conversation about family and heritage issues, based on effective communication, mutual respect, and recognition – with awareness among the siblings that their father‘s inherited leadership was now divided between the three of them. Due to the family governance structures, the next generation would soon, under the direction of the Family Council, have its own space for development, preparation and dialogue.