To smoothly transition the family business, preparing successors is key, according to research by the Family Entreprise Foundation, the charitable foundation of Oakville, Ont.–based Family Enterprise Canada, which grants the family enterprise advisor designation.
While family business owners often focus on finances and tangible assets when they consider succession, the foundation said in a release on Thursday, human capital and preparing the next generation are required to secure a family’s legacy.
The foundation addresses those requirements in a report that presents five strategies to implement: fostering strong emotional bonds to the family business; training; mentorship; involving trusted advisors; and finding the right role for members of the next generation.
For example, based on the foundation’s interviews with families, most family members believed the next generation shouldn’t be forced to play a role in the business, the report said.
“[M]any believe that a member of the next generation should only get involved if they are aware of the responsibilities related to business ownership and are passionate about the opportunity to join or lead,” it said. “Family, business and ownership governance needs to play a role here in creating clarity and transparency.”