Family Business: The Next Generation Leadership


Joe Hice, Managing Director, Patina Solutions

According to The Family Firm Institute, only about 30 percent of family and private businesses survive into the second generation; 12 percent are still viable into the third generation; and only about 3 percent of all family businesses operate into the fourth generation or beyond.

In order to overcome these odds, family businesses need to do their best to develop family members to take on leadership roles successfully. Performance reviews and career plans are critical elements to all employees for growth and development.

The Harvard Business Review* also notes the tendency of family members “to specialize in the same aspect of the business, whether it’s finance, operations, or marketing.” According to the Review, “this can be problematic for several reasons. First, by staying in specialized silos, next-generation managers fail to gain the cross-functional expertise needed for executive leadership. Second, when close family members supervise one another, the personal dynamic can prevent candid feedback and interfere with coaching. Together these factors can create a leadership vacuum in the up-and-coming generation.” This makes an even stronger case for the need of performance reviews and development of family members and non-family employees alike.

As part of the annual performance review and/or assessment process, each manager, leader or coach should be asked to discuss specific career goals and objectives with the employee being reviewed.  The purpose of this discussion is to provide two-way communication between the individual and the coach or leader regarding (1) developing additional skills to improve performance in the current job and (2) enhancing/acquiring skills in anticipation of new and/or evolving job requirements.  The dialogue should be open and honest, with the goals being mutually set with the employee. 

The company, individual employees and managers each have a role in employee development. 

  • The Company is responsible for creating a supportive learning environment where the employee can maximize his/her career potential.   The Company will also assist as much as possible to provide the tools and support necessary to facilitate developing the individual employee’s career and personal growth.
  • The individual is responsible for planning and obtaining his/ her career goals or objectives. The Company encourages all employees to take the initiative to uncover off-site development experiences such as participating in classroom training, seminars, and reading books.  It is also important that employees take advantage of the on-the-job learning opportunities and additional responsibilities that exist in their current role.  Individual career expectations should be consistent with the Company’s goals and objectives.
  • Managers are responsible for assisting employees in assessing strengths and opportunities for growth. Managers are to encourage the person to pursue new levels or areas of responsibility, and act as an advisor to employees during this stage of the development process.   On-the-job learning has proven to be one of the most effective developers of people, because it teaches employees to deal with real world problems.   Therefore, it is very important that the manager challenges each team member to learn new skills both in their current role and to also prepare each individual member of the team for possible future roles and opportunities.

The Career Development Plan is another part of the performance appraisal and/or assessment to guide career development discussions.  The Company will use these conversations to identify people for various opportunities as they grow.  During the skills assessment and performance appraisal conversation, managers should document developmental goals and activities; create a plan and timetable to execute these goals; as well as, determine a method for continual feedback and monitoring. 

In a family business this feedback is crucial to ensure everyone is on the same page as the business transitions from one generation to another.  This also provides a road map for developmental conversation between family and non-family members in the organization.  

*Harvard Business Publishing is an affiliate of the Harvard Business School