The potential curse of the next generation in family-owned companies

Many of the companies who have been in business for more than 100 years are family-owned and Hoshi Ryokan, Founded in 718 AD, in Japan, Hoshi Ryokan is the oldest continuously operated family business in the world

Most people and the vast majority of the entertainment industry has a positive perception of the family as an entity where the members are engulfed in mutual love and affection. The reality, however, is often very different. Douglas Coupland’s book: “All families are psychotic” is worth a read if you need a more balanced view on what families can also be.

Gugin has worked with many family-owned companies over the past 20 years helping them facilitating the cultural change when a new generation is going to take over.

The main challenge in generation change of family-owned companies

The main challenge in generation change of family-owned companies is to secure continuity and introducing change at the same time. 

In each of these areas there is a potential for a fight that can damage the relationship in the family and potentially damage the company. It is often very difficult for the older generation to step completely back and let the next generation make the changes they feel necessary to make. The younger generation, however, often continue a strategic path they don’t support in order not to upset the older generation.

What does Gugin do help reach reconciliation in generation change?

Having an external mediator like Gugin has a lot of advantages. We not only listen to concerns and aspirations from both parties, we also interview people in the organisation to get their perspective on what they would like to see changed with the new incoming generation. Sometimes we also interview suppliers and customers to get a full picture of the company’s position.

We use all this information with the talks with the family members. In these talks the older generation often become more open to changes because the changes are not only required by the younger generation bot also by the employees, customers and suppliers.

Similarily, we also help the younger generation reconsider some of the drastic changes they often want to introduce by showing them how important the things they might want to change is to the employees and customers.

This is an iterative process, that requires a lot of time both from us and from the family. 

It is however our experience that this time is well invested because we get a transition that is accepted by most stakeholders and we avoid the common disaster where many, very valuable employees leave the company because they don’t have confidence in the new generation taking over. On the other hand you also need to let people go, who don’t support the new direction of the company or who just don’t like the new generation. It is always very emotional in family-owned companies, not only within the families, but often in the entire organisation. That is one more reason why it is important to have a company like Gugin on board in the transition process, to infuse some cultural intelligence in the strategy and decision processes.

Emotions are both blessings and curses

Some people say you shouldn’t mix feelings and business. In Gugin we don’t necessarily agree with that and in family-owned companies it is (fortunately) impossible.

You can’t have a successful business without passion, and passion is a feeling. But passion doesn’t come from nowhere. Passion is a result of a lot of other feelings playing together. It is dreams, fears, disappointments, aspirations and many more feelings. All these feelings are usually much more explicit in family-owned companies, and that is why a very different leadership style and leadership coaching is required than in a traditional company with external investors and the primary focus on pleasing the investors on an annual basis.

Please do get in touch if you have a family-owned business which is about to go through a generation change. 

All the legal and financial tasks are easy. It is the cultural change that will make your company either flourish or parish.