Good practices in family well-being: Embracing the rising generation
Whether an adult son or daughter is eager to understand the ins and outs of the family business or a curious grandchild expresses passion for creating a difference in the world using impact investing strategies, a family’s rising generation needs opportunities for development and leadership more than ever. There are many ways for the rising generation to find a voice and engagement within their family enterprise.
In his book The Voice of the Rising Generation, James E. Hughes Jr. explains not only the strength and power of a founder’s original dream to steer a family’s success but also its capability to elude future generations. He calls this phenomenon the “black hole” because of its unexpected tendency to create silence and uncertainty in families of wealth. When a wealth creator’s intentions are unclear or go uncommunicated, challenges often occur when members of a young and curious rising generation seek to create and grow individual legacies within their family upon entering adulthood.
Developing the rising generation
In many families of wealth, the rising generation is eager to get involved and shape their identity within the scope of their family’s business. Families with strong cohesion are typically well-positioned to make better financial decisions. It is imperative that the next generation be prepared for a successful transfer of wealth through coaching and skill development.
Money and wealth generally aren’t easy topics for parents to discuss with their children, especially at a young age. Sometimes these conversations never even occur, which makes succession planning and understanding the intentions of the wealth creator very difficult.
Knowing these pain points, parents and grandparents can implement an alternative strategy: To avoid stumbling through a tough conversation that leaves everyone feeling emotionally drained and dissatisfied, instead choose to engage the rising generation in the family business and develop leadership skills early on, especially when younger members express interest in getting involved. As future leaders of the family and its wealth, rising-generation members need an opportunity to grow and develop in ways that will prepare them for a successful leadership and stewardship role down the road.
Improving family engagement
Unintended consequences can occur when families experience life changes or begin to transfer wealth. When their family engagement is minimal or expectations are misrepresented, emotions can run high and create barriers to good communication between generations. Families run the risk of damaging relationships and harming the family system when one generation is misrepresented or a disconnect exists between generations. These situations are often much harder to untangle once they’ve hit a breaking point than if they were to be avoided altogether with proactive strategies.
Strong relationships between generations begin with good communication and transparency around intentions and expectations, especially for older generations. Families must embrace the rising generation in appropriate roles that can empower and equip them with strong leadership skills. When I describe engagement for parents or grandparents, I don’t mean increasing trust distributions or naming them CEO of the family office. Engagement is created through increased opportunities for younger family members intended to develop and expose them to experiences and responsibilities that will benefit them later in life. This could be through experiential learning, junior boards, family foundations, philanthropic activities or leadership roles in the family meeting.
For example, if a family finds ways to give together, it often becomes a contagious practice that will open conversations around what each family member and generation is passionate about. It also offers an opportunity to discuss purpose around transactions and emphasize the meaning of what the original creator intended for the family’s wealth.
Giving together is one example of the many opportunities available to teach the rising generation about stewardship, responsibility and humility through a meaningful experience. These exercises in experiential learning are very successful at prompting conversations about family values and wealth, particularly between generations.
The importance of learning and leadership
Families should work together to model a “learning family” approach that enables them to evaluate new ideas and foster an open culture on an ongoing basis. Adopting learning as a core value will position the family for well-sustained succession. A strong willingness and openness to learn — for every family member — is vital for a family’s long-term health.
Learning is also an important pillar in leadership. Kelsey Meyer has written in Forbes about leaders as full-time learners: “I respect leaders who are continuously learning because I know they’re challenging their own assumptions and bringing more knowledge to the table each time.”
It’s no coincidence that increasing leadership experiences for young professionals in the workplace is trending as businesses learn to embrace today’s rising generation. According to a Pew Research Center study in 2018, millennials now make up the largest generation in the U.S. labor force. They are quickly ascending into management and leadership roles, constantly adapting to change. Growing up alongside the fast pace of technology has enabled them to thrive in a state of constant transformation. Organizations are urged to be fluid and challenge traditional hierarchical decision making to embrace the purpose-driven and fast-paced habits of millennials.
This mirrors the strong desires of millennials in family firms to find purpose, clarity and flexibility in their family governance structures. Creating systems and opportunities to empower them is a proactive way to embrace their involvement. For example, families can provide opportunities for their young adults to coordinate and produce educational and leadership programming specific to their needs. Especially with larger families, young adults can serve on a committee tasked with creating relevant and interesting programming for rising-generation members.
A speaker could be invited or a workshop conducted to expose the rising generation to hands-on leadership skills. Committee members will not only benefit from the material presented in these programs, but also gain experience working together. The committee might be asked to provide the larger family with a summary of their learnings and successes. Having dedicated resources and structures in place to embrace the rising generation’s involvement is a great way to introduce conversations that may otherwise seem uncomfortable or difficult.
Some family offices can provide a dedicated specialist with experience in education and training to enhance the learning opportunities and leadership development available to a family and its rising generation. This usually falls under the role of a family education specialist who can function as a facilitator or coach. Having a chief learning officer is a new and increasing trend in the family office space, especially for larger families.
Another way to embrace learning as a family strategy is to appoint a committee of young family members tasked with creating their own development strategy, perhaps with help from a facilitator. Integration is more systemic and sustainable over the long term if the rising generations are involved in setting part of the family meeting agenda or developing programming. This allows the rising generation the runway to vet ideas and propose interests within the parameters of the family’s governance and values.
A comprehensive strategy like this can help the family communicate, make better decisions and build stronger trust with one another.
Takeaways for families
A successful family business doesn’t automatically translate into a successful family system. Families don’t grow through transactions and revenue, as businesses do. Each family is different, with unique situations and success factors that often can’t be measured, and each generation must understand how to make decisions and communicate effectively with other generations.
A family needs guidance in creating structures around empowering the rising generation in their family system. A family’s well-being is strengthened when learning and training are a regular part of each member’s development. Going back to Hughes’s “black hole” analogy, the solution is to establish clarity about family values and intentions.
Family meetings and facilitated discussions can provide valuable opportunities for each family member to express passions, purpose and intention. Practicing key communication and facilitation techniques can make a difference in the outcome of these meetings.
Families that continue to educate themselves will adapt faster to challenges and position themselves for long-term success. Today, that could mean incorporating the millennial generation’s search for purpose. Tomorrow, it might be engaging Generation Z, who never experienced a time without cell phones and iPads.
Families should see the rising generation as future leaders and decision-makers in the family system. By putting structure in place, a family can create unique development opportunities no matter a generation’s habits and tendencies. This is what makes a family sustainable over generations. When families build trust and refine their skills, they are likely to make better and stronger financial decisions.
Jeff Strese is chief talent and learning officer at Tolleson Wealth Management (www.tollesonwealth.com).
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