Preparing Your Heirs for Success in a Family Business

Discover tips for developing the rising generation into business leaders.

young businesswoman and mature businesswoman

Podcast Transcript

Host: Dave Specht, National Development Manager for Family Dynamics, Wells Fargo Private Bank

Guest: Natalie McVeigh, Family Dynamics Consultant, Wells Fargo Private Bank

[Dave]:

In the United States, we are in the midst of the largest wealth transition in history. Much of the wealth will transition in the form of an operating business from one family generation to the next. So what are the current generation of owners doing to prepare the rising generation to be successful in their new roles?

I'm Dave Specht, National Development Manager for Family Dynamics for Wells Fargo Private Bank, and this is Your Financial Journey, a podcast series that explores questions that families of wealth commonly face. Today, I'm joined by Natalie McVeigh, a Family Dynamics Consultant with Wells Fargo Private Bank.

Natalie, as our listeners think about preparing the next generation for the responsibilities of increased leadership in a family-owned business, where do they start?

[Natalie]: 

Well, Dave, the first thing is communication, especially communication regarding the career development plan that many of these owners already have in their head. When we do not communicate our well-intended thoughts to others, it can feel more random than rational. The next generation is looking for opportunities and a plan for themselves within the organization. The most effective plans are known, transparent, and predictable.

[Dave]:

I like the idea of transparent and predictable. Often we expect our children to be mind readers. For example, we may hear our business owner clients complain that their kids won't take more responsibility, but when we talk to their adult children we hear "my parents are responsible for all the major decisions."

[Natalie]: 

Exactly. Let's start with this quote by Lewis Carroll from Alice in Wonderland

Alice asks the Cheshire Cat, "Would you tell me, please, which way I ought to go from here?"

The Cheshire Cat responds, "That depends a good deal on where you want to get to."

Then Alice says, "I don't much care where."

The Cheshire Cat responds, "Then it doesn't much matter which way you go."

This is the same with families who own businesses. Creating a plan for the next generation involves more engagement and coordination than a plan for non-family members since their path may end in succession or ownership. Agreement and clarity from both the current owning generation and next generation is key. For example, start with the current and next generation having a conversation about where they want to go and how it is aligned and then map it to the needs of the business. The rising generation wants to know what they are responsible for in their job, how they can grow; they like feedback and want to know what opportunities exist for them to progress in leadership.

[Dave]:

So a clear development path and regular, honest feedback are crucial. That seems like a reasonable request. 

[Natalie]: 

It is a reasonable request, and sometimes the lack of communication and these standards can feel personal. It helps to create a process that allows for predictability and depersonalization.

[Dave]:

Interesting, so what other tips might you suggest for developing the rising generation?

[Natalie]: 

I would also say that a deliberate mentorship program is crucial. As the next generation's responsibility within the business increases, they will need to learn and develop additional skills. Formal mentor relationships can really accelerate that development. A robust mentor relationship starts with building a shared understanding of mentoring followed by the development and implementation of a program that follows established best practices.

[Dave]:

Would you suggest that these mentors be family members?

[Natalie]: 

Not necessarily. The ideal mentor is often not a family member and may be an employee or professional who has the specific skills or attributes that the individual may need for their new role in the family business. These mentor relationships are often temporary but are transformative. 

[Dave]:

So what does a successful mentorship program look like?

[Natalie]: 

I would say there are three keys: First, both parties agree to work together and challenge each other to grow — meaning that the learning and relationship is reciprocal. Second is to define skills or attributes that are aligned with the goals of the individual being mentored, specifically focused on helping him or her to advance in the family business. Third is regularly scheduled meetings and progress check-ups.

[Dave]:

That is great counsel. Do you have any other thoughts to share with our listeners about how they can get the rising generation prepared to succeed in their expanding leadership roles? 

[Natalie]: 

Absolutely, the question is do we have enough time. The most successful multigenerational families attribute their success to the emotional ownership of the enterprise. 

[Dave]:

Emotional ownership, what does that mean? Can you expand on that? 

[Natalie]: 

Sure, Dave. Emotional ownership empowers people who may not be owners yet to start thinking like an owner, which can result in decisions and emotional connections that sound a lot like:

  • I care about the family business.
  • I feel as if I belong to the family business.
  • The family business is an important part of who I am.
  • I identify with the family business.
  • What happens to the family business matters to me.

Creating this connection is a process, not something that comes from one conversation or one single point in time. One of the most effective ways to help the next generation to build an emotional connection is to help them understand and engage with the future vision of the company. 

[Dave]:

So in order for our listeners to help the rising generation to reach their potential they need to create a clearly defined path, mentor relationships, and develop emotional ownership for the business. Those are great tips. 

To learn more about how Wells Fargo Private Bank's Family Dynamics Team can help you create a successful next generation of leaders in your family business, contact your Wells Fargo Private Bank Relationship Manager who can introduce you to a Family Dynamics Consultant. Thank you, Natalie, for sharing your expertise and thank you listeners for joining this podcast today. 

Image created from iStock

What can Wells Fargo do for you?

Entrepreneurs, family business owners: Wells Fargo Conversations shares insight from specialists in succession planning and business management.

Wells Fargo & Company and its affiliates do not provide legal advice. Wells Fargo Advisors is not a legal or tax advisor. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

This information is provided for educational and illustrative purposes only.

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