Frequently, they go on to list the many qualities that they see lacking in younger family members: drive, discipline, a balanced lifestyle, resilience, a long-term outlook, an entrepreneurial mindset, humility and conservativism being the most cited. As a result, many of these incumbent family business leaders are ready to hand their leadership responsibilities over to non-family professionals.
Upon hearing this feedback, most next-generation family business members rush to point out that their seniors are just having a hard time letting go of the reins or that they are apprehensive of the potential disruption caused by a changing of the guard.
In our experience, both of these perspectives are true, which also means that neither generation is solely to blame. Moreover, as family leaders struggle in the present to address this gap, we find that they are overlooking the root cause of the problem, which lies in the past.
Looking back: Pressures on Young To-be-successors
So why is it hard to find good successors? We believe that the root issues occur much earlier in the lives of these next-generation family business members and are linked to their experiences of their family’s wealth and legacy during adolescence and early adulthood. Research in this area has revealed that young people from affluent families are far more likely (when compared to young people from less affluent and poorer families) to suffer from different forms of anxiety; if unmanaged, these can lead to depression, substance abuse and other harmful lifestyle choices.1 These anxieties manifest in different ways, caused by a unique set of factors specific to each family.
We have highlighted four areas, which from our experience are commonly linked to anxiety among young people in family businesses.
A) Self-esteem: In families of wealth, next-generation members often face the immense pressure of having to conform to certain standards of conduct and behaviour. Unable to cope at a young age, many end up feeling misunderstood, not good enough, and undeserving of the legacy and wealth. As young adults, they lack confidence in themselves, and fear committing to difficult tasks and avoid taking risks, as it may lead to failure.
B) Belonging: Besides being expected to behave a certain way, next-generation family business members can face the additional pressure of having to perform and measure up to standards set by the previous heroes of the family. Those unable to hit the mark can feel like outsiders who do not belong in the legacy. As young adults, they do not aspire to be part of the family firm and thus find it challenging to fit in and commit to any role within it. They may even opt to exit, thus rejecting the system that rejected them growing up.
C) Purpose: Adolescents are curious explorers, drawn to subjects and activities that allow them to express their natural abilities. In the course of their child’s exploration, parents can sometimes feel compelled to intervene and course-correct. Youth, who find their passions rejected, lose enthusiasm for trying new things and feel out of place in what they are confined to do. As young adults they can lack purpose, ambition, refined skills and ultimately fulfilment. They are unable to contribute to the family enterprise in a material way as they are on a path not befitting their natural desires and abilities.
D) Trust: It is common for parents to want to shield their children from the “corrupting” influence of money; however, typical efforts often create more problems than they solve. For example: To prevent any attachment to wealth and feelings of entitlement, it is common for parents to avoid discussing wealth and position with children and even to withhold money. These efforts often lead to young people feeling like they are not to be trusted with money and are incapable of handling it. As they grow into young adults, they find themselves lacking the confidence and skills to make healthy financial choices. They are likely dependent on others to make those decisions, making them vulnerable to exploitation in the long run.
To protect them from exploitation, concerned parents might also teach their children to have their guard up with outsiders. This can cause habitual suspicion about people’s intentions, leaving next-generation family business members unable to fully trust others, which causes social adjustment issues.
Bridging the Divide: 7 Keys for Family Leaders and Parents
We find that most affluent parents here are not oblivious to the issues above; nor are they, contrary to popular opinion, neglectful or overindulgent. However, their strategy to nurture their daughters and sons relies heavily on applying lessons from their own life’s journey. In doing so, they fail to acknowledge that wealth has dramatically changed the context of their family entirely.
Family leaders who are serious about creating a culture of nurturing robust next-generation talent must adapt their parenting approach to include this context, embracing their wealth as a tool to wield in their efforts. They must take a proactive approach by focusing on understanding and addressing next-generation anxieties when they arise, and on creating structures that support and develop these younger family members.
Below are 7 keys for family leaders to incorporate into their family business culture:
1. Depressurise the Home
Suniya Luthar, Professor Emerita at Teachers College-Columbia University and a PhD in clinical and developmental psychology, is known for her studies into adolescents in affluent families. In an interview about this topic, she said, “Our research consistently found if there is one thing related to problems of all kinds, it is being highly criticised by your parents. It is one of the most powerful risk factors.”2
So, where does this pressure come from? Listen to the stories of successful founders and you will hear several examples of them overcoming great odds and tremendous pressure to succeed. They wear these moments as badges of honour, and thus can easily fall into the trap of wanting the same for their children. They rationalise that as in their own journey, only heat and pressure can create the diamond.
Alas, this approach is contrary to good nurturing. Simply put, parents should teach children to deal with pressure rather than pressure them to live up to standards defined by their own journey. Pressure should come from outside the home; resilience should be built inside of it.
2. Embrace the Different
Parents commonly fall into the trap of wanting (and pushing) their children to be like them, only upgraded (“my child should be better than me”), which often leads to self-esteem issues. Instead, they should support their children to be the best versions of themselves. This starts by appreciating and embracing diversity in the family dynamic, including different personalities, perspectives, approaches, and communication styles. We should note that many families tolerate diversity as a compromise, i.e., they allow it in the room but ignore it to move forward. Embracing diversity drives a special family culture where differences are encouraged and celebrated, thus ensuring younger members feel worthy and accepted.
3. Ground with Values
The most proven way of ensuring the next generation do not lose their way in the presence of wealth is to instil them with a strong values system. Values-based parenting focuses on developing a foundation of meaningful family principles which guide both attitude and behaviour. These values are written by the family through collaboration, based on its history, its identity, and its aspirations. They are formally adopted by the family and serve as a cornerstone for the behaviour and decisions of each family member and the unit as a whole. They even guide decisions outside the family sphere, including business, investments, partnerships and so on.
Family values, once adopted, are taught to children from an early age through consistent demonstration and application by family members and through family activities and education programs. These values are refreshed from time to time, usually prompted by the younger generation who wish to add their imprint on the family culture. Affluent families commonly use values like responsibility, humility, and charity to highlight the positive side of wealth, which serves the next-generation members well as they grow into future leaders.
4. Lower the Shields
As noted earlier, isolating youth from wealth can have negative, lasting consequences. Instead, parents should incorporate this context into the family dynamic. This starts with open and honest communication, appropriate to the child’s age, about the family’s wealth and position. These conversations present the family’s wealth as a privilege and a tool of responsibility (means) rather than a goal to be achieved (ends). Success is established as a mastery of skills and effective actions linked to goals and values, rather than the attainment of further wealth.
The next generation should also be taught about money and how to responsibly manage it. As young adults they should be introduced to potential career paths and succession policies within the family enterprise. This will spark a deeper reflection on their own ambition, and what they must do to have a seat at the table.
5. Encourage Failure
Parents who demand success actually instil a fear of failure. The child feels they only matter if they succeed. On the other hand, parents who encourage failure cultivate resilience and an entrepreneurial spirit. The child here feels supported and worthy even if they fail. They are excited to try new things in pursuit of a passion to master, and as they grow and encounter other failures, their resilience motivates them to keep trying, instilling ambition and drive. Listening to and supporting new ideas from young adults, whether in family or business and supporting them through potential failures further empowers and strengthens their resolve. Resilient leaders are essential when the family must pivot, diversify, or face down a crisis, and thus critical to the long-term sustainability of the enterprise.
6. Cultivate Social Bonds
Parents in affluent families should encourage their children to nurture trusted social bonds from a young age, ideally with people from all walks of life. This will support healthy integration within different societal contexts and allow for lasting and fulfilling relationships. Honest conversations about and associations with families of lesser means are also important to impart social context while giving them a glimpse into lives where struggle is key to fulfilment. Participation in the family’s philanthropic work from a young age will further enhance their sense of responsibility towards both society and their wealth, inspiring a balanced lifestyle and a deeper purpose.
7. Parent in Teams
Like everyone else, parents also come in all sorts of shapes, sizes, personalities, and abilities. Thus, it is not surprising that very few parents we come across can master all the keys listed above. Most of them need help to cover their bases and ensure the next generation is thriving. To make this happen, parents need to think of parenting as a team sport.
They should seek support from both within the larger family group (seniors, relatives, etc.) and from skilled outsiders such as teachers, mentors, coaches, experts, and advisors. The approach should be tailored to each child and balanced across multiple areas: natural abilities vs family priorities, soft skills vs hard skills, and individual effort vs teamwork. The team should keep an eye out for any issues, such as the anxieties listed above, and deal with them collectively.
Leaders of successful family enterprises will be the first to tell you that their family’s riches are not their money and assets, businesses, factories, and investments, nor their charities and foundations. Instead, their riches lie in their younger generations, in whose hands ultimately rest the fate of their legacy. Thus their charge must be to safeguard these riches by nurturing the next generation so they can become resilient and productive members of both family and society — worthy guardians of the family legacy.
About the Author
Bob Kohli ’08 is a Director and Senior Advisor at Soul Family Business Advisors. He has 15+ years of experience in global advisory & consulting, including 4 years at a leading strategy consulting firm Bain & Company.
Bob is an expert in family enterprise governance, family constitutions & councils, conflict resolution, next-generation coaching & development, and succession planning. Bob also specialises in business turnarounds and transformations centred around robust governance and change management systems, developed in close collaboration with family owners, board directors and business executives.
Bob holds an MBA from Columbia Business School. He has obtained his Advanced Certificates in Family Business Advisory and Family Wealth Advisory from the renowned Family Firm Institute (FFI) in Boston.
References
1Luthar, Barkin, and E. J. Crossman; “’I can, therefore I must’ : Fragility in the upper-middle classes,” Development and Psychopathology 25 (November 2013), 1531
2Ron Lieber, “Growing Up on Easy Street Has Its Own Dangers”, New York Times, Jan 10 2015