Preparing the Third Generation: Beyond Succession

The statistics are sobering. Only about 30% of family businesses survive into the second generation, and a mere 12% make it to the third. While much attention focuses on succession planning for top leadership positions, sustainable multi-generational success requires more than just preparing heirs for the CEO role.

Many third-generation family members may not want, or be best suited for, traditional leadership positions. Yet their engagement, talents, and perspectives remain vital to the family enterprise's continued success.

Understanding Today's Next Generation

Third-generation family members often have:

• More diverse educational and professional experiences

• High value on purpose and impact, not just financial success

• Digital fluency and awareness of rapidly changing markets

• Witnessed work-life balance challenges in previous generations

• Different expectations about career paths and contributions 

Moving Beyond Binary Thinking

Traditional planning often presents next-generation members with limited options: join the business operationally or pursue an entirely separate path. A more nuanced "contribution spectrum" might include:

• Core Business Leadership: Traditional executive roles

• Project-Based Involvement: Leading specific initiatives aligned with personal strengths

• Governance Participation: Serving on family councils or boards

• Entrepreneurial Ventures: Creating new businesses within the family enterprise ecosystem

• Family Capital Stewardship: Managing family investments or philanthropy

• External Ambassadorship: Representing the business in community initiatives

• Knowledge and Network Contribution: Sharing insights from outside careers

Practical Strategies for Next-Generation Engagement

•  Create early exposure opportunities
  Develop age-appropriate ways for young family members to learn about the business.

• Establish education programs
  Offer family business education, financial literacy training, and industry-specific learning.

• Develop mentorship beyond parental relationships
  Connect next-generation members with non-parent family leaders or external advisors.

•  Support entrepreneurial initiatives
  Create mechanisms for next-generation members to propose new ventures related to the enterprise.

•  Leverage digital fluency
  Invite younger family members to contribute to digital transformation initiatives.

•  Create reverse mentoring opportunities
  Establish forums where younger generations can share insights on emerging trends.

•  Build meaningful governance participation
  Develop paths for increasing involvement in family councils or boards.

By engaging the next generation as partners in evolution rather than merely recipients of a legacy, family businesses can tap into fresh thinking while maintaining core values. When families expand their thinking beyond traditional succession to embrace multiple pathways for meaningful contribution, they dramatically improve their odds of beating the third-generation survival statistics.

To learn more about the Academy of Family Business, our curriculum and our coaches, please email us at: info@myAFB.org