Do I need to train the next generation in the family business?

According to the Institute for Family Business, Family businesses account for two-thirds of all firms in the UK

private sector, these are predominantly Small and Medium-sized Enterprises (SMEs).

According to the small business Survey in 2012, 60% of SME employers in the UK had arranged or

funded training in 2012. In some ways that could be seen as a positive figure, however on the other hand, smaller businesses were less likely to have arranged

training for their staff, and in family business we know that many of them are at the smaller end.

How prevalent is training, whether that’s formal off-job or on the job

training in family businesses?

How prevalent is training, whether that’s formal off-job or on the job

training in family businesses?

We can therefore extrapolate that approximately half of all family businesses are not training their staff!

Considering the special challenges of a family business, and in particular the importance of succession planning; the idea that half of the UK’s family business are not training their staff, the

long term prospects for these business is potentially bleak.

Recent research suggests that more than 50% of family businesses plan to transfer ownership and management to family members, however of these, 50% said that they had concerns about whether their successor has the aptitude

and drive to manage the business into the future.

In addition, training and talent management in family businesses is clearly linked to success. A report by

Ernst & Young in 2012 found that of the best performing family businesses, 23% considered talent

management important to their future success, where 16% of the worst performing businesses didn’t.

Why is training so important in family businesses?

Finally, the warning signs for family businesses are there: ‘Third generation syndrome’ is a common phenomenon in family

businesses, this is best described as:

“The first generation builds the business, the second generation grows the business and the third generation destroys it.”

Training and developing successors in a family business is vital...

Why is training so important in family businesses?

The Institute for Family Business has produced a report looking at one of the key challenges facing Family Business - ‘Engaging

with the Next Generation’

In the report, they look at ‘Inspiring the next generation without applying unfair pressure, allowing the next generation to set its own path and developing a parenting/management

style that fosters autonomy for the next generation.’

Engaging with the Next Generation

The report lays out a five point framework that the next generation need to be aware of:

• Joining the business should be a choice not an obligation

• They will need experience and self-confidence

• They will need extra skills than required in ordinary business, including skills required to address complex family business dynamics

• They will need credibility as well as competence – to earn the respect of non-family member employees

• They will need passion and commitment

Engaging with the Next Generation

Just reviewing this list highlights the level of skill required across multiple disciplines.

The report goes onto highlight two further key areas for engagement with the next generation in a family business – firstly, empowering them by providing training and career development opportunities, and the suggestion that a career development plan is needed to help shape the education and learning choices of the next generation.

Engaging with the Next Generation

With the requirement for training so acute within family businesses, how do you go about identifying and executing the right training so that the person becomes competent,

credible, respected and then has the skills and desire to lead the business in the future?

Define the key attributes required

In order to evaluate where training is needed, it is important to define which skills and competencies the individual will

need. In succession planning this may be a complicated picture, however in order to deal with competence and credibility, even basic skills may be the starting point.

Defining the Training Needs

Overall, you will need to look at: • Job Challenges – Specific challenges

that they will need to deal with • Organisational Knowledge – Knowing

the key processes and operations of the business

• Competencies – Self-awareness, leading others, motivation etc.

• Personal Attributes - Which personality traits are going to be important?

It’s important in this process that it is based on what the future leader of the business will look like, rather than on historical experience.

Defining the Training Needs

It’s important to have a clear view of your potential successor’s strengths and areas for development, this will help to define the development opportunities and training requirements.

Techniques to assess this, include:• Simulations or observation • Surveys of managers, peers, stakeholders • Behavioural interviews • Personality inventories – assessing key traits that may

help or hinder their success in the role

Assess the Candidates Strengths and Weaknesses

While some of these techniques might seem difficult to do for your family members; they are key in involving them in the business and giving them the best chance to be successful.

Assess the Candidates Strengths and Weaknesses

Now that we have outlined what the leader of the business will need, and then assessed the candidates strength’s and weaknesses’ we can outline the gaps and areas for development.

Identify Development Opportunities

Again, these fit into:

• Job Challenges: You may set an internal challenge that needs dealing with, such as implementing a new system.

• Organisational Knowledge: Identifying areas where they have a weakness – If they are a qualified accountant, do they understand marketing?

• Competencies: Can they coach and mentor other members of staff?

• Personal Attributes: Exercises that bridge gaps identified previously

Identify Development Opportunities

This process will be an intensive one for the potential successor, on-going feedback coaching and support for the work they are doing will be important, so they continue their development towards excelling in and then leading your business.

Monitor and Support

For More Information

Pathway Group, work with family businesses across the Midlands, helping them understand the training needs across

their business. We can help you plan and deliver training to give you confidence in the ability of your family members to

continue to grow and steward the business into the future.

For more information:Visit: www.pathwaygroup.co.uk

Call: 0121 707 0550