Research from the world acclaimed US family business researcher, Joe Astrachan, points out that the success of a generational transition of family business rests first and foremost on a mixture of good corporate governance and proper family governance. Hence the three main key and foundational aspects on which a successful generational family business transition needs to rest upon are: family meetings, strategic planning and a competent & functional board of directors.

The latest research has found that by prioritising these elements, countless family businesses have found their way into new generations of successful leadership. I wish that ALL family business owners and leaders understand that the investment they do in family meetings, in strategic planning and setting an effective board of directors, actually pays off and these become critical for the future existence of the family business and in increasing the chances of having a smoother and successful generational transition of the same family business.

Such an investment not only helps the family business to grow, but makes sure that the commitment of the family and all stakeholders to the family business grows also. Having these forums, structures and mindsets setup allows the next generation to approach the family business with the much needed humbleness to learn and take on the baton, rather than having family business perish or forced to sell out.

So let me spell it out. I meet many family businesses who are at a loss of the steps they need to take to professionalise their business and prepare it well for a future generational transition. Below are the foundational structures I mentioned above in more detail.

1. Family meetings: Start simply by committing to regularly scheduled communication. Ultimately it is all about how often you talk, how long you talk and the depth of conversation. The most basic element is being consistent and providing a regular forum to communicate, stay aligned and ultimately resolve difference as they come up. At first such family meetings are far from perfect and they tend up to focus way too much on the business operations. This is why getting a professional to guide these meetings is so important. Such a professional would help you in traction in the transition itself while also educating you on best practices for developing strategic plans and the role of a proper board of directors. Such a professional would also push you to have a professional setting to such meeting, with a well prepared agenda, which enables everyone to bring forward information to help you understand what topics may be more important and sometimes emotionally challenging to discuss, so that these topics are discussed in the right way and also at the right time of the meeting. Most of all, many family business are victims of a common pitfall – the fear of conflict in meetings is what stops them from meeting at all. This is where a guiding professional becomes so important, as they would be skilled to keeping everyone engaged, allowing for conflict, navigate or solve the conflict, and unite the family long-term goals of the family and the business.

2. Strategic planning: Family business cannot be 100% operational, all the time. They need to find time to think of their future. Family businesses with solid strategic plans are well positioned as they not only pre-empty general market changes and are able to quickly adapt and build on opportunities but they are also to transition through generations. So what is strategy about? When family businesses talk and work on strategy, they are focusing on their orientation for the future – where are they going? What are they trying to accomplish? – and trying to articulate a good reply to these fundamental questions, whereby such replies are then developed into the overriding culture in the family business, meaning that everybody is working toward those goals. Ultimately, once a family business has a clear strategy, everyone can better understand how their role contributes to the goals of this strategy. Additionally, family businesses can use their strategic plans as a means of identifying future leaders. It is very often that family business owners have conversations with me about who they think should be the next leader. I often have to point out that it is the wrong place to start. What we would need to articulate is what we believe is needed from the next leader of the company to achieve the family businesses’ strategic goals, and once we’re clear about that, we can be more objective about who should be next leader or set of leaders and if they should be family or nonfamily members

3. Board of directors: The final foundational element for a successful generational transition is having a competent board of directors. The board of directors is extremely key. It should be the place where objective and experienced people come together and are able to see what is likely to happen round the next corner within the context of the family business strategy. The board can challenge assumptions, ask questions and share experiences. Even just having to articulate the family business strategy before a board provides accountability and is likely to allow the family business to think differently or at least see things from different angles and perspectives. A board is also helpful when it comes to generational succession. Ultimately if a family business has multiple next-generation members wanting to be considered for leadership, it’s much better to have an objective process with objective people, like independent non-family board directors, rather than just Dad having to make the decision.

All the above topics will be discussed at length during the next Family Business conference, to be held at the Malta Chamber of Friday 23rd May at 8:30am. This conference will discuss the latest results from a survey amongst 160 different family businesses, with regards governance, succession planning, how family business view training, the use of policies in family businesses and the priorities within family businesses, amongst other topics. Click HERE to register.