According to research, the largest 500 family businesses are growing faster than the global economy – at nearly twice the rate of advanced economies and around 1.5 times the rate of emerging market and developing economies.

The companies collectively generate a revenue of $8.02 trillion and employ 24.5 million people worldwide. The significance of family businesses to the economy cannot be overlooked. On a macroeconomic scale, family businesses are essential engines of growth, contributing substantially to job creation, innovation, and overall economic resilience.

Their ability to adapt, innovate, and thrive in challenging environments is crucial for the sustained prosperity of communities and nations. Their resilience and longevity are paramount, not only for the families they represent but also for the health and vitality of the economy at large.This raises a vital question on continuity and how the next generation owners are prepared for succession.

Over the years, we find that business owners have spent time and resource formally educating the Next Generation and ensuring they possess the qualifications that make them academically suitable for the role, however, little or no time have been spent on other qualities that would equip them for the responsibility of sustenance.

Apart from an academic qualification, some of the additional competencies that would be required to effectively prepare the next generation for succession will be good emotional intelligence, ability to take good decisions, adaptability to change, interest in the business, financial literacy, familyvalues, secret to the family’s wealth etc.

Preparing the Next Generation for success is a process that should begin at an early age. It is not sufficient to assume that children will naturally be interested in and possess the necessary skills to effectively manage a business they have no prior connection to. While there are instances where individuals may graduate and develop an interest in the family business later, this is not always the case. It is essential to take deliberate actions to guide and shape the mindset of the next generation towards the family business, laying the groundwork for their future success.

Formal education is essential as it plays a vital role in building our intellect and knowledge in specific areas. However, that in itself is not sufficient to run a successful business.

How can we equip the Next Generation for wealth ownership?
Communicating and imbibing the family values
Values serve as the foundation upon which family legacies are built. Identification of the values that are most important to the family and consciously teaching and encouraging those values amongst family members is very crucial. The values could form part of the family’s vision and mission statements. It is also important to understand that some of these values could form part of the identity of thefamily. Tasks could be assigned that will require the display of these values to evaluate how much of it has been imbibed and the applicability of the values.

Early introduction into the business
Early familiarisation with the family business is essential for next gens as it allows them to start gaining understanding of the company’s operations, culture and values, hence preparing them for future leadership roles. Children and grandchildren could be given opportunities to make guided visits and interactions with the business as required. This could help develop some initial interest in the business.

Assigning projects to test specific skills
Next-Gen members could be assigned to time-framed projects that will develop specific skills and a report on the project presented to the family. Depending on the size of the family, individuals could be grouped into teams and the best team recognised for the efforts and result delivered. For example, involvement inphilanthropic and social impact activities could also be implemented as a project to help instil a sense of social responsibility while encouraging teamwork, empathy and development ofboth leadership and decision-makingskills.

Experiential learning
The Next Generation could work within different teams in the company. This allows for them to gain practical experience of how things run in the business and the connection within the teams.In some cases, families may determine that it is beneficial for the Next-Gen to gain additional skills and insight by working in external organisations before returning to the family business. This allows individuals to develop a robust understanding of different work environments and ultimately contribute to the success of the family business.

Educate the entire family
The entire family may not be involved in the business, some may just be shareholders. However, an understanding of how the business runs and other nuances can keep them connected to the business. The periodic family assemble could be an avenue to generally discuss the business and keep everyone abreast of things. It is imperative to carry everyone alone as the obvious or preferred may not be the most suitable for the transition.

Programmes around building the minds of the young ones to embrace hard workas an important tool for success and building a desire for self-fulfilment and accomplishment may eradicate an entitled mind.

Financial Literacy and independence
It is important for the next generation family members to be financially literate. There should be trainings around investment, financial planning, budgeting etc. individual members should be encouraged early to take little investment decisions that would yield returns or projects that generate revenue to help build independence and fulfilment that comes from self-generated income. This process helps to shape the mind and helps evaluate the individuals.

Educational programmes and workshops
An exposure to programmes that will practically teach them about leadership and managerial styles. It is important that everyone is exposed to these trainings and developments as this may unveil some hidden talents in some members of the family that do not seem like the obvious successor. Other programmes and learnings around financial literacy, emotional intelligence etc can also apply here.

Embracing technology
The world is evolving, speed, accuracy and digital transformation are the order of the day. Technology helps make you and your business more efficient. This is an important tool for the Next-Gen as it engages them and makes learning more accessible. While technical skills are very crucial to understanding and running the business, the other skills are essential in sustaining it.
Lijofi is an Advisor at the Meristem Family Office.