Identifying the next business leader

In the dynamic world of family businesses, the question of succession is both a critical and challenging one. In our latest report, we delve into the complexities of leadership transitions across 5 Asian markets; Hong Kong, Taiwan, Singapore, Mainland China, and India. With 78% of entrepreneurs expressing a desire to keep the business within the family, yet 52% having not determined a successor, the need for a strategic approach to identifying the next business leader is clear.¹

Understanding the leadership landscape

The first step in identifying the right leader is understanding the current landscape and the options available. Many families assume that their children will naturally take over the business. However, as families evolve, it may become apparent that an external candidate or a different family member is better suited for the role than first thought. This decision should be based on expertise and the ability to drive the business forward. Taking a step back and critically considering the options available can ensure long-term success. 

Checking assumptions

Family dynamics are often complicated, and assumptions can lead to missteps. It's crucial to have open conversations about individual goals and desires. Surprisingly, many families do not discuss these topics, leading to potential conflicts down the line. Clear communication can prevent misunderstandings and ensure that everyone is on the same page regarding expectations.

Aligning ambitions

Not all family members may be interested in playing a significant role in the family business. Our report highlights that 50% of multi-generational entrepreneurs felt compelled to take on the family business without the option to pursue their own interests. In India, this sentiment rises to 59%. Engaging in honest discussions about ambitions can protect both the family's wealth and the business's future.

Navigating hierarchies

Recognising and addressing personal and business hierarchies early on is essential. If you envision your daughter leading the family business, but other family members will still be involved, it is important to clearly define how joint ownership, co-management, co-control may look like. Transparency in these roles can minimise surprises. 

Recognition and governance

Deciding on the level of involvement, access and entitlement for each family member is another crucial aspect. How could we recognise and balance the interests between family members actively contributing in the business versus passive shareholders? Establishing a governance structure that acknowledges these dynamics and offers a transparent communication system, can pave the way for family unity without anyone feeling disadvantaged.

Assessing skills and readiness

It may seem that the next generation is not ready to take over today. However, with the right training, opportunities, and support, they could become effective business leaders. Developing skills takes time and should involve family discussions that include multiple generations. These conversations can help instil the founder's passion and drive in the future leaders.

Exploring alternatives

It's important not to assume that all family members wish to maintain the current business interests. Asking the right questions, such as whether they want to continue the business, can provide clarity. Consider alternative roles within the business or opportunities that align with their interests, such as leading a new venture or supporting philanthropic ambitions.

Identifying the next business leader in a family enterprise is a nuanced process that requires careful consideration and open dialogue. By understanding the leadership landscape, checking assumptions, and aligning ambitions, families can navigate the complexities of succession planning with confidence.