Developing Leadership in Family Businesses

Developing Leadership in Family Businesses

The University of Connecticut
by Bonnie M. Brown, Ph.D.

Nurturing a family business’s vision, the sense of purpose shared by its present owner/managers and employees, is perhaps one of the major challenges and responsibilities of its leader. Without careful attention to its vision and purpose, a company will eventually lose the capacity for sustained organizational excellence.

A family business is particularly susceptible to loss of focus during periods of top management transition, when leaders who helped articulate the vision are replaced by others who may or may not possess similar values, abilities, and drives even when successor candidates are family. Hence, establishing an effective leader succession process is critical to the survival of the organizational vision and to the survival of the family business as it moves through the transition of ownership and management from one generation to the next.

Although research highlights the traits and styles of effective leaders, it tends to ignore the processes by which they develop. As a result, so-called “succession planning systems” are often little more than staffing systems. Clearly, it does not matter how well a staffing system can select the “best” person from among a pool of candidates if none is ready for leadership. Unless successors are sufficiently shaped and challenged by developmental experiences during their careers, the company will run the risk of losing its most critical resource, effective leaders.

The “biological inevitability” of succession in many family businesses makes the issue of leadership development a more immediate and on-going concern.Leadership ability is not genetic. Just because a father or mother has been a terrific leader doesn’t mean that the next generation will necessarily be good leaders. Leadership development doesn’t happen throughosmosis. Nor do leaders emerge fully formed from leadership training classes, executive education seminars, or work assignments.

The mastery of challenging and difficult work assignments is thought to be the most effective mode of executive learning, and the diversity of work experiences appears to matter more than the depth. Here are some common approaches to promoting depth and diversity in the leadership development process:

  • Formal Coursework(for technical and financial management skills).  
  • Temporary Special Assignments(particularly those involving decision-making andstrategic planning processes).  
  • Superior/Subordinate Relationships(tutoring, mentoring, supervising and sponsoring, including regular goal-setting and performance evaluation).  
  • Job Rotation(across functions, divisions, departments and countries).  
  • Employee Exchange.  
  • Job Redesign Project.

However, when on-the-job learning experiences are not planned in advance, their lessons can be easily missed.The most valuable assignments are those that engage the individual in major management processes or decisions, such as participating in the strategic planning process. The most difficult challenges family business owners and their successors face are related to the owner’s need to “let go” and the successor’s need to prove himself/herself worthy of theresponsibility being handed down.A well-developed and implemented leadership development process will help them meet those challenges effectively.

Dr. Brown, Director of the Institute for Family Business at Baylor University and a pioneer in family business reserach, led our May 11 Seminar: “Diagnosing the Needs of Your FamilyBusiness” (Call us at 203-486-4483 for more info).