Two days before the year ended, I received a call from the shareholder and CEO of a billion-dollar, third-generation convenience store conglomerate. I could hear the weariness in his voice as soon as he started talking. It was something I had grown to recognize in my years of working with family businesses.
He explained that he had to face the hard truth that he was closing out another year of failing to engage his family’s NexGens, and the situation was becoming urgent. He was turning 60 in the new year, and both he and his cousins had to get serious about their legacy and continuity plan.
“We´ve done everything,” he told me. “We have a signed Family Protocol. We have our Family Council and our Board of Directors.” He had worked all this out with the aid of consultants many years ago when he was first appointed CEO. At that time, they also followed the consultants’ advice to reduce the number of family members operating the business. Today, the opposite problem challenged them: How were they going to elicit and maintain their NexGens’ interest and engagement? “I´m scared we went too far,” he confessed.
Some questions later, I learned that although the NexGens shared in the business ownership (albeit to different degrees), the family was geographically dispersed, and their career journeys were unfolding separate from the family business. Many NexGens hadn’t seen even their parents work within the organization, and most partially engaged with the business only during some of the Family Council meetings. Further, although the company remained 100% family owned, the majority of the board seats were held by independent directors. All these factors made it increasingly difficult for family members to find common ground, despite their mutual interest in seeing the business succeed.
Hearing the story of the shareholder and CEO, I agreed that—like many owners in his situation—NexGen engagement was a critical and urgent task. The 100% family ownership meant that many would face responsibilities within the business sooner rather than later.
Yet, I was compelled to ask one more question: “Have you asked for their opinion?” My experience has convinced me that the decision to continue business ownership into the next generation needs to be both conscious and voluntary. The reason why is found in the psychology and difficulty of engaging NexGens.
| THE PSYCHOLOGY OF ENGAGING NEXGENS
NexGens have two basic career choices: pursuing an independent career path separate from the business or taking an active role in the family business. An independent career path allows them to continue receiving dividends from the business while carving out a career path that reflects their self-designed hopes and dreams. Accepting a role within the family business is a much higher stakes proposition. First, failure means more than simply risking their jobs. Failure within a family business threatens the NexGen’s family relationships and the family business’s survival—and, with these, their fundamental human needs for love and livelihood. In other words, NexGens’ resistance to engaging in the family business is both natural and common.
Katy Milkman, award-winning behavioral scientist at University of Pennsylvania’s Wharton School, pointed out two additional factors that explain why NexGens resist taking the reins in family business. First, present bias means NexGens (like all of us) prefer choices that offer the thrill of new beginnings. In contrast, joining the family business is a long-term commitment with no apparent endpoint or exit—and seemingly no more new beginnings. Second, the planning fallacy means that we habitually underestimate the challenges and difficulties of completing a project. Add some bumps in the road, and we drag ourselves across the finish line much later than intended—if we stick with our commitment at all. For NexGens, these factors means that if NexGens do engage, it may be halfhearted or fleeting.
How to Change
Change comes most readily when you understand what's standing between you and success and tailor your solution to that roadblock...
We can help NexGens begin to overcome their natural resistance (R) to engage using Steve Cady’s Formula for Change (D × V × F × S > R), which suggests that NexGens need a strong desire (D) and vision (V) to pursue a career in the family business, plus concrete steps (F) and support (S) for moving into that career. If any one of those are missing, NexGen engagement falls flat.
| DIAGNOSTIC PROFOUND INTERVIEW SCRIPT
Reflections on the Business
➊ What do you admire about the family business?
➋ What could be changed?
➌ Are there any challenges related to the family business you want to avoid? Are there any you look forward to tackling?
Desired Future and Roles
➍ How do you see your future?
➎ Is this an organization you want to be part of? Do you want to be an owner with all the responsibilities it comes with?
➏ Besides an operational role, what other ways could you engage in the family business?
Family Engagement
➐ What can we do as a family and a business to engage you more?
➑ What are the agreements outlined in the Family Protocol as you understand them? What parts can you wholeheartedly endorse? What parts do you have concerns about?
➒ Have you had the opportunity to share your opinions?
➓ Have you considered others’ points of view?
| THREE STEPS FOR ENGAGING NEXGENS
Fortunately, the path toward engagement begins to solidify and widen when we practice three steps rooted in listening to and empowering our NexGens:
Ask questions and truly listen
To understand our NexGens’ resistance to engaging in the business, we need to ask questions that explore their perspectives, truly listen to the answers—and risk being changed by them. In my practice, we do this using Diagnostic Profound Interviews of Seniors and NexGens, conducted one-on-one within a safe and confidential environment. In these interviews, we pose a variety of questions about their reflections on the business, their desired future and roles, and their opinions about family engagement and intergenerational collaboration (see Table 1).
We analyze the collected information to identify areas of agreement and disagreement and then provide tools for negotiating needed but difficult conversations and implementing subsequent steps for change. The conversations, mutual respect, and resolutions created through this process blossom into new pathways for cross-generational understanding and engagement. Over time, these conversations become normalized, further strengthening the desire, vision, concrete steps, and support for change that make NexGen engagement a reality.
"NexGens don’t need superhuman family heroes surrounded by legend; instead, they need family contenders who had successes and encountered failure. Including the whole story in the family lore, as well as confronting the realities of human nature creates the trust NexGens need to risk their future in the family business"
Embrace the whole picture
Ivan Landsberg, Lansberg & Gersick Advisors Co-founder and Academic Director at the Center for Family Enterprises at Northwestern’s Kellogg School of Management, emphasized that family stories—both the good and the bad—are important for business continuity. NexGens don’t need superhuman family heroes surrounded by legend; instead, they need family contenders who had successes and encountered failure. Including the whole story in the family lore, as well as confronting the realities of human nature creates the trust NexGens need to risk their future in the family business. To assess the whole picture, we explore NexGens’ views of trust and respect, family interactions, and the impact of these on their genuine desires to take part in the business.
Create periodic new beginnings
Many families we take through these steps realize they have not revisited their family agreements in decades and that their NexGens have had no voice in their assigned responsibilities—or whether they wanted to continue as owners at all. With each generation, these problems become increasingly diffuse and complicated as the family’s size grows. People naturally resist supporting things they haven’t created.
Therefore, engaging NexGens must begin with intergenerational review and renewal of family agreements, governance structures, ownership, and the family council. Although this takes time, the payoff is genuine NexGen curiosity and support as well as recognition and confidence among Seniors that they can safely pass leadership to the NexGens. These actions also importantly signal a new beginning where change is happening and NexGen contributions are actively recognized, invited, validated, and built into the business’s future. Central to this effort is educating NexGens on all matters of the business and its landscape so they can be accountable owners capable of providing strategic direction to support continuity. Moreover, this process needs to be repeated every 5 to 8 years to keep the business fresh and representative of the family members who have staked their futures on it.
| COMPREHENSIVE FAMILY CLIMATE ASSESSMENT
Mutual Trust and Respect
➊ What behaviors do you admire in the current leaders and your family peers?
➋ What has increased family members’ trust and respect in the current leadership? What has reduced these?
➌ In what ways, if any, have the current leaders or family peers demonstrated respect for you?
Family Interaction
➍ How would you characterize the leadership style practiced in the business? How does this benefit the family and the business? In ways, if any, does it pose challenges?
➎ How is information about the business disseminated to family members? In what ways is this effective? In what ways could it be improved?
➏ How do you see love, unity, and collaboration demonstrated in the family?
➐ How does the family address envy, competition, and power?
➑ How does the family manage conflict? In what ways is this constructive? In what ways is this destructive?
Impact of Climate on NexGen Engagement
➒ To what extent do you feel a sense of belonging in the family business?
➓ To what extent do you feel you want to engage in the family business?
| WHERE TO START
The steps above offer a needed counterpoint to traditional NexGen engagement narratives, which center on the senior generation controlling and designing how the NexGen gets involved and what activities they carry out. Instead, true and long-term NexGen engagement requires truly listening, building mutual trust, and collaboratively creating the conditions for them to participate—ranging from fully taking on a leadership role or not taking a part in the business at all. After taking the shareholder and CEO through these three steps, he realized where his own efforts had fallen short. He began conducting diagnostic interviews and resolved to create genuine dialogue and build trust and respect throughout the family. He also designed a plan for NexGen education and set the dates to engage the entire family in redefining their agreements.
The choice to participate in the family business as an owner and especially as an operational leader comes with palpable ancestral pressure and intense scrutiny from family members and shareholders. This daunting responsibility should not be taken lightly or imposed upon NexGens. True NexGen engagement requires a process of logical deliberation rooted in dialogue, consideration of the entire picture, and collaborative design of a new era in the business.
Dunia Guzman
CEO & Senior Partner, Akator Consultores.
akator.com
