In this age, where Generation Zs (Gen Z) are coming into the workforce as potential successors of family businesses, there is a need to close the generational gap between different generations.
This remains a challenge for many family businesses, where if succession is to happen smoothly, the new generation must first understand and be understood.
With the vision to continue the family business for generations, succession planning and execution remain an integral part of family businesses in achieving long-term success and sustainability.
As family businesses are often built upon the values and tacit knowledge of the founding generation, ensuring a smooth transition of leadership from one generation to the next becomes vital in continuing the family legacy.
By developing and implementing a well-thought-out succession strategy, family businesses can mitigate potential risks, maintain continuity, and harness the full potential of their legacy.
A key aspect of succession planning is the formulation of a clear strategy that aligns with both the family and the business's vision and goals. This strategy should address not only the selection of a successor but also the development of their skills, knowledge, and leadership abilities.
A strategic approach to succession planning increases the chance of a seamless transition, minimising disruptions, and ensuring the preservation of the family business's values and culture.
Effective succession planning also involves careful consideration of various factors. For example, the strengths and weaknesses of potential successors, their skillsets, and their educational background.
Other than the hard skills, it is also important to consider their career aspirations, when to engage them, when should they come into the business, and how long the process should be until they take over the managerial control and power.
Unlike previous generations, Gen Z is known as the most digitally connected generation, as they have grown up with smartphones, social media, and instant access to information.
This familiarity with technology has shaped their communication style, preference for instant gratification, and their world view.
Gen Z is also known to be more aware and vocal on social and environmental issues, as well as concerned about making a positive impact on the world. This can also be seen in many family businesses, where the Gen Z are the ones pushing for green practices and employee welfare.
Additionally, as Gen Z exhibits a greater emphasis on individuality and self-identity, they tend to reject traditional labels and societal norms, favouring authenticity and self-expression instead.
Gen Z's world view is also shaped by their exposure to a constant stream of information and opinions from a wide range of sources. Such background has shaped Gen Z to have a different view towards preservation of family value and family legacy.
Now that Gen Z is in the lineup for succession, how can the Now Generation (Now Gen) engage them and ensure a smooth succession in passing the baton?
In one of my research projects on succession in Asian family businesses with a PhD student under my supervision, we noticed that though generational gap exists, Gen Z’s love for the family is constant and plays a major role in their willingness to succeed the Now Gen.
In one interview, one of the Malaysian Gen Z successors expressed an emotional attachment towards the business, despite not being involved yet.
At the same time, she expressed her willingness to learn to be a successor of the business if there is an opportunity to take it further and provide a chance for her next generation to step in as well.
In another interview with a Gen Z successor from Brunei, he expressed his feeling of sadness if the business started by his grandparents from scratch was to close due to none from his generation taking over.
He shared that his grandparents would be sad to see their hard work and legacy come to an end. Therefore, he is ready to step up and takeover when the time comes.
In conclusion, bridging the generational gap and ensuring a smooth succession in family businesses are crucial for long-term success and sustainability, enabling family businesses to harness the full potential of their legacy.
It is more so in the current era with Gen Z being the successors, considering the unique characteristics, such as their digital connectivity, emphasis on individuality, and concern for social and environmental issues, Now Gen must engage them effectively to pass the baton and preserve the family legacy.
The commitment of institutions like Taylor's University, with initiatives like the Family Enterprise Centre, plays a significant role in supporting and addressing the needs of business families in this evolving landscape.
Armed with careful planning and understanding, family businesses can thrive across generations, preserving their values and creating a lasting impact.
Dr Feranita is the founding director of Family Enterprise Centre (FEC) at Taylor’s University, Malaysia. She is also a Senior Lecturer in the School of Management and Marketing, Faculty of Business and Law. Taylor's Business School is the leading private business school in Southeast Asia for Business and Management Studies based on the 2023 QS World University Rankings by Subject.