Defining leadership in the family business

2017 Wisconsin FamilyBiz


The success of a family-owned business lies in the hands of its leader, and it is widely quoted in family business research and literature that one must possess a certain skillset to be effective.

But what are these skills? What does it take to successfully lead a family owned business?

The Feast of St. Nicholas, by Richard Brakenburg, 1685, Dutch painting, oil on canvas. Interior in which a family with children celebrating Christmas. (Shutterstock)
The Feast of St. Nicholas, by Richard Brakenburg, 1685, Dutch painting, oil on canvas. Interior in which a family with children celebrating Christmas. (Shutterstock)

First of all, a family business leader must be self-aware. He must not only know his own strengths and weaknesses, but also know the strengths and weaknesses of his fellow family members and of his employees. He must know how to leverage the capabilities of these individuals to create high-functioning teams.

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A family business leader must have the ability to motivate others – both family and non-family employees. The leader of the family business is not just a manager. She must have a vision for the direction of the organization and the family, and be able to inspire and get buy-in from key stakeholders. She requires solid decision-making skills, and not just in terms of business results and the bottom-line. She must also keep the goals of the family in mind, and be able to implement successful strategic and business planning to get there.

Strong communication and conflict resolution skills are absolutely crucial in a family business leader. Family dynamics, inter-employee tensions, and differences in personalities are all at play, and frequently need to be diffused. Family business leaders need a very high level of emotional and social intelligence, as well as the ability to manage relationships. The family business leader also needs to be able to confidently and effectively communicate the vision and plan she has for the family and for the business.

On top of all of this, a family business leader must also possess a robust set of business skills, including wealth management, tax planning, strategy development, financial understanding and estate planning. He needs to understand the rights and responsibilities that go along with family business ownership, his company’s products and markets, and be able to target key customers, competitors and suppliers.

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Developing these family business leadership skills takes time; it is a process, a journey. To better ensure a leader’s success, consider these practices:

  1. Start early. From a young age, get the next generation involved in the business through family meetings, business visits, etc. Consider forming a family education committee.
  2. Set clear expectations for entry into the business well in advance. What level and type of formal education is required? What kind of work experience needs to be gained? What types of soft skills are most important?
  3. Create structure and policies for support and transparency. Develop an effective governance process, both between generations and for the company overall. This will also help level the day-to-day playing field for high-ranking employees who are not family members.
  4. Hire family members into existing jobs with real responsibilities. Give them a chance to make mistakes and practice decision-making skills before they become leaders of the business.
  5. Be sure the skills of the leadership candidate align with the needs of the business. Use formal training, educational resources to fill in the skills gaps.
  6. Plan one generation in advance. The current generation should initiate the preparation process.
  7. Communicate! Keep communication open early and throughout leadership development and succession.

Leadership development is vital to the success and continuity of the family business. It does require a unique set of skills to run a family business, and potential leaders must be given the time and support to develop these skills. The long-term benefits of leadership development are worth the investment of time and resources, and will prepare the family, the business and its leaders for future success.

-Sherry Herwig is a professor at the University of Wisconsin-Oshkosh and director of the University of Wisconsin Family Business Center.

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