There will come a time in which the management of the existing family wealth and businesses will transition to the next generation of the family. No matter how well you have documented how this transition is to occur, its success will depend on the business relationships you have built between your children.
Active Knowledge Question:
How are you actively developing the business relationships that exist between your children?
In succession, wealth built in one generation can be lost by the third generation. This is expressed in different ways in various cultures – and it’s true in many cases.
In these instances, I believe we have missed a key message. This being that the wealth of the first generation was built by family members getting their hands dirty and running a business that became successful. In this, there can be a glue that binds the family.
I believe family wealth is preserved when there exists an active business that continues to build wealth within a family group. By ‘active’, I mean a business that is trading (in whatever form that may be) and is not simply living off a passive portfolio of assets.
An active business brings the family together around a common table in which the growth and performance of the business may be discussed and decided. Even though these discussions may become heated at times, there is a unifying theme, which is the success of the business. Yes, family members may well buy and sell their interests in the business, but there is a core team and asset that are creating wealth in the family.
A passive portfolio generally lends itself to discussions of simply dividing ‘the business’ up and everyone going their own way.
To support a continuing business and growth of family wealth, there is a critical role that the existing family leaders must undertake. That is to build working business relationships between the next generation of family members. They may be family, they may have grown up together, they may even be good friends – but can they sit around a table to decide and agree upon the future of a business? This is a very different dynamic than that which is often built between siblings and cousins.
In a recent blog, I spoke of the importance of involving the children in a growing business. In it, I provided a range of suggestions as to how parents can actively involve their children in supporting its growth. But, more importantly, how that may provide their children with invaluable life lessons otherwise lost.
I believe the evolution of that engagement is to then build the dynamic of an active business partnership between the children. One in which they are equipped and comfortable with having the sometimes difficult discussions with each other about the business and money.
This communication capability will go a long way to underpin the continuing growth and strength of the family businesses, wealth and harmony. It should ideally start no later than when your children are teenagers, so that it may mature as they do.
An entirely new level of performance.
Want to become a part of the Entrepreneurs+ Community and learn how to make your business competitively fit? Join now.
All the best in the success of your business,
Richard Shrapnel
