Family-owned businesses, from global enterprises to local mom-and-pops, employ most of the world’s workforce and form the backbone of communities and economies. When they thrive across generations, they do more than sustain jobs; they create enduring legacies of leadership, stewardship, and shared purpose.

Preparing the next generation for ownership and leadership is central to that legacy. Drawing on stories inspired by our work with enterprising families, this article explores practical ways families can cultivate interest early, build confidence through meaningful experience, and develop capable future owners and leaders.

Cultivating Early Interest in the Family Business

The fourth generation (G4) president of a family-owned automotive component manufacturer rarely talked about work at home. On occasions when he did, it was about problems like the relentless pressure for cost reductions or union rules that slowed progress toward more efficient manufacturing processes. The kids were attracted to other opportunities during and after college. When it came time to plan for transition, none of the G5s were interested and the company was sold.

Preparing the NextGen is more than telling stories about challenges — it means also sharing the joys and accomplishments that benefit employees, customers, owners, suppliers, and communities. From a young age, parents and current leaders should involve children in family discussions about the business, and emphasize the importance of integrity, hard work, and commitment.

Building NextGen Skills Through Real-World Experiences

A family business CEO’s daughter joined Junior Achievement in high school, where she and her team developed a business plan to design, produce, and sell 3D Tic-Tac-Toe games. They raised startup capital by chipping in their summer earnings and offering suppliers a fraction of the action in exchange for supplies on credit. Marbles were donated by classmates outside the team who received stock certificates in return. The team drilled nine holes in each plexiglass panel in the high school shop, then packaged and sold the games door-to-door and through a couple of downtown retailers. At the end of the year, all investors earned back their money, plus an attractive return.

Parents can encourage children to pursue relevant experiences through sports teams, organizations like Junior Achievement, scouting and clubs to help develop leadership, problem-solving, and communication skills while building confidence and a sense of teamwork. Experiences that involve purpose and teamwork are especially valuable in building NextGen interest, confidence, and leadership skills.

Creating Early Exposure and Responsibility for Future Owners

When the NextGen turned 18, he secured a summer job in one of the family business’s distribution centers, applying and interviewing formally with HR and the center manager. His grandfather, who he revered gave him good advice: “Be the first to arrive at work and the last to leave. Keep a smile on your face. Listen. Be a good team member and do your best.” Years later, after college and several successful years elsewhere, the NextGen joined the family business full time. Employees forgot that he wasn’t very good at warehouse work, but they remembered his positive attitude and that he was always there when needed.

Summer jobs, internships, or part-time roles introduce NextGens to the family business at an early age. That helps them understand the commitment required, identify areas of interest and aptitude, and develop a sense of responsibility.

Annual family meetings that mix business updates with philanthropy, governance, and fun help build bonds that keep generations coming back.

Encouraging Career Experience Outside the Family Business

A large, family-owned construction company had prospered for three generations. In planning for ownership and leadership succession, the family agreed to require G4s to earn a relevant college degree and work elsewhere for five years, earning one or more promotions and demonstrating success. Then if there was an opening in the family business that matched the skills and experience of a NextGen, they could apply for the position. All else being equal among the finalists, at that point the family member would be hired. One branch objected, noting the founder never went to college and valued learning from the front lines up. But they ultimately went along with the majority.

There are many examples of successful leaders who didn’t earn a college degree. No doubt those who spend years, instead of just summers, working alongside front-line employees develop valuable knowledge and insights. Still, there are significant advantages associated with NextGens building full-time careers elsewhere before joining their family’s business. They bring new ideas proven in other settings that can be adapted for the benefit of the family enterprise. Their external success also builds organizational confidence in their abilities, showing leaders and employees alike that they earned their place.

Perhaps the greatest benefit, however, is for the NextGen themselves: the confidence of knowing they made it on their own and the assurance that they can succeed, whether in the family business or anywhere else. 

Developing NextGen Leadership and Succession Plans

A NextGen in a G3-owned manufacturing company entered the business as a marketing manager. An outside coach was hired to listen to people in the organization and help the NextGen and her supervisor create development plans. Strategies included regular touch points with stakeholders as well as top leaders inside and outside the organization. A quarterly accountability process involving her supervisor and others was established. Annually an anonymous 360 degree survey helped the NextGen and other family and non-family leaders in the organization give candid feedback to help her continually improve. After ten years of developmental progress and promotions, she was elected CEO.

It can be difficult for family leaders to develop within their family businesses. Ideally NextGens report to non-family leaders who are good mentors. No matter the circumstances internally, a talented outside coach can facilitate effective development. An anonymous 360-degree evaluation process can help uncover candid feedback that is a good foundation for continuous improvement.

It’s important that developing NextGen leaders have roles with profit responsibility where they and the organization can celebrate success or learn from a manageable failure. (In other words, a hit above the waterline that does not sink the ship.)

Compensation can be a sensitive and important part of developing NextGen leaders. Linking compensation to clear performance goals and market rates helps NextGen leaders earn credibility and motivates continued growth. It also signals to the organization that family members are held to the same standards as non-family employees.

A well-thought-out succession plan can outline the process for identifying and developing future leaders, the timeline for transition, and the roles and responsibilities of current and future leaders. All stakeholders, including family members, employees, and advisors, should be involved in the planning process to ensure transparency and buy-in.

Defining Ownership Roles and Governance Pathways

NextGen owners of a technology integration business were pursuing other careers. Their parents retired, and a non-family CEO led the business. Through a series of facilitated meetings, the NextGen owners discussed the firm’s cultural values and crafted a vision for an even better future. They agreed upon goals for business growth and expected returns along with parameters for risk, reinvestment in the business, and owner distributions. To best represent their interests, they elected independent directors to serve on their fiduciary board.

NextGen owners or beneficial owners have an important role. Through communication and an owner’s council, they can speak with one voice to the board of directors about vision, values and expectations for business performance. The owners elect the board.

Family businesses with boards that include three or more independent directors perform better in the long run. High-performing family business boards typically also include qualified family members. Ideally, family board members will have C-Suite experience in their own and/or other family-owned enterprises and will add strength in areas important to the company’s future. Even without C-Suite experience, a family member with strong cultural insight and strategic perspective can make a valuable contribution.

For a qualified and interested NextGen, working in family business leadership is an opportunity, not an obligation. A NextGen can choose to be only an owner. Those who decide to be an owner enjoy the regular interaction with extended family and the pride in seeing the business prosper for generations.

A qualified NextGen owner not interested in family business leadership might want to be involved in governance, a family council, an owner’s council, or the board of directors. Typically, there are multiple paths for productive engagement in the family enterprise short of actually working in family business leadership.

Strengthening Legacy Through Purpose and Community Impact

A medium-sized family enterprise regularly contributed to projects like Boys & Girls Clubs, Junior Achievement, United Way, and schools in the communities in which they operated. They realized that the profits they generated could be used not only to reinvest in the business, but also to serve their communities and beyond.

NextGens value the history and contributions of prior generations. Celebrating milestones while adapting to new markets and technologies builds continuity, pride, and resilience.

What will people remember about a successful family enterprise? As employees, that they were treated fairly, had the opportunity and responsibility to participate, shared in successes and failures and grew personally and professionally. As customers and suppliers, that they were treated fairly, with mutual respect and a sense that when the company wins, everyone wins. Communities remember not only the company’s financial generosity, but also the investment of time by owners and leaders.

Preparing Today to Secure Tomorrow’s Family Enterprise

Preparing NextGens is a lifelong process of instilling values early, then encouraging outside experience that builds independence and confidence.

Becoming a leader in a family enterprise is an opportunity, not an obligation. There are also opportunities for qualified owners to be involved in family or business governance through a family council, owner’s council, or board of directors.

Preparing future owners and leaders secures an enduring family legacy. When family enterprises thrive across generations, they make a lasting difference for employees, communities, and the world.

About the Author

Rob Sligh is a senior consultant with The Family Business Consulting Group Inc. He spent 33 years in multi-generational family business leadership, including 17 years as G4 Chairman & CEO, where the fiduciary board had a majority of independent directors.