The complex role of building capabilities for success in family business leaders

Family business adviser and Strathclyde Business School alumna Mairi Mickel, discusses the role and importance of HR in family business.  

Succession planning is the biggest single anchoring topic in the field of family business studies and where I spend most of my time practicing as an advisor to Business Families. With percentages that show us 30% then 13% and then 3% is the likelihood of successful transfer from generation one to two, two to three and on to generation three and four, it is no surprise this is a well-researched field.

In the 1990s the focus on succession planning was mostly on the succession process, the role of the incumbent, factors that help and hinder succession, management versus ownership transition, and gender issues.  However, the current focus has shifted towards building capabilities for success of family members (human, social, financial and entrepreneurial) in members of each subsequent generation. It is in this area in which HR professionals play a special and complex role.

What makes succession planning in family businesses so complex for HR professionals and what tactics can be deployed?

Family Businesses are complex places - They are really two organisations, not one. The first is the business with an organisation chart like any other business and the other is the family organisation - the owners, tomorrow’s leaders and the other emotional stakeholders who are not in the business but can have a great influence over it. Although it is the typical role of HR to successfully identify, prepare and retain the next generation of leaders, HR professionals in family businesses must also have a broad set of collaborative based skills to further build capabilities for success and they have to work hard to gain credibility and trust from existing and future family leaders.

Passing the baton

Statistics show us that 71% of UK family businesses don’t have a written succession plan. Much of the dropping of the baton of transition can be prevented with better planning and better processes, and HR has a key role to play here. Enterprising families with ambitions to grow and create value across generations use HR professionals to be highly disciplined about following systematic career development paths for their next generation of family and non family members. They have clear rules of entry and career progression paths laid out for all key positions. HR professionals must help leading family members develop this progressive mindset to build capabilities:

• Facilitate an approach to better consider talent within the younger family members
• Create a programme of education
• Assess organisational and family culture and the impact of this on joining family and non-family members.

Perhaps there is also a need to help the family to consider boundaries so that family issues aren’t addressed in the workplace.

Building trust

 Without trust in the HR professional by the myriad of relevant family members, they may be marginalised and not allowed to fully address family succession and role clarity issues. Succession and role clarity are often the issues thought of as “for family members only - others by select invitation”. It’s only through trust and mutual respect that conversations on successor’s ‘suitability’, ‘readiness’, ‘roles’ and hidden issues can be explored.

Mentoring

 Don’t shy away from engaging with the family members, incumbent and junior, on what they really need. Homogeny of skill set inter-generationally means juniors are unlikely to be mentored by their own older generation; do they need someone from out with the organisation to help mentor and coach them?

Listening to outside voices

 Also be aware of non-family leader frustrations - interestingly, family business in which outside leaders were chosen to run the business fared significantly better than those that didn’t - their voice must be heard and their capabilities woven into leadership planning. HR professionals are often the conduit of these voices.

In summary, HR professionals must be truly trusted advisors, considering themselves as an agent for change in building capabilities for success in the complex and challenging place that is family business.

What do you think are the biggest challenges facing family businesses? Let us know in the comments below.