Image: Carissa Rogers Image: Carissa Rogers

Family businesses looking to the next generation to take over need to prepare themselves for unexpected events, according to the University of East Anglia (UEA).

The university recommends that family businesses open themselves up to collaboration and external expertise, rather than trying to protect themselves from the outside world.

UEA called on businesses to prioritise equipping all members of the fmaily for the "unexpected, the erratic and the external", rather than for the pursuit of longevity and amicable internal relationships. The authors of the report argue that this mindset is particularly important when dealing with rapid, social and economic changes outside of the business, such as Brexit.
As part of the worldwide STEP (Successful Transgenerational Entrepreneurship Practices) project, they investigated how entrepreneurial family values, knowledge and resources emerger or were transferred from the founder to subsequent generations.
Where once they were taught 'on the job' from a young age by the older generation, younger members now network with external stakeholders and peers to bring with them new skills and knowledge. This can often involve working elsewhere in a different or related industry before joining the family firm. And finally, some younger family members use their external experience and their own participation in the business to better inform how to reproduce its values.
Lead author, Dr Bika, associate professor in entrepreneurship at UEA’s Norwich Business School, said: “When the change taking place outside the business is fast, your new experiences and the way you experience the context become very important.
“Events such as Brexit could make family businesses concerned about succession, the older generation might think the younger generation can deal with it better and bring forward succession. For a business to adjust to something like Brexit could take years, but some businesses will only have had months.”
Dr Bika added: “While an entrepreneurial mindset can be ‘nurtured’, that is gradually developed over time, or ‘transmitted’ through traditional socialization processes, it can also be nurtured organically through peer interaction and experiential learning.
“Instead of departmental boundaries, ground rules and training tools, we suggest that modern family businesses need more open spaces and collaborative events bringing together diverse stakeholders and recognizing a range of personal experiences, shifting roles and emergent strategies in a flexible and changing context.”
The authors say the findings have implications for family business planning training, which should no longer be seen as an internal process revolving around systematically transferring values and knowledge from the older to the younger generation, but rather include peers, mentors, minority shareholders, professional advisers and non-family managers, who may not be driven by shared objectives or constitute a successor team.
They add that where change is rapid the older generation can benefit from ‘re-socialization’.
“This study provides a rationale for introducing more formal re-socialization training and mentorship for family business leaders,” said Dr Bika. “The younger generation can teach the older family members what they need to know and do in the new business context. Indeed, in times of rapid change, attitudes, knowledge and skills of the older generation, conscientiously passed on to their children, may be active contributors to business failure.
“In our case study, re-socialization has become a conscious strategy in the business. A fast moving board of family and non-family directors, a less self-sufficient growth strategy, a proactive approach to the creation of entrepreneurial opportunities, such as a new induction and other tailored programmes for apprentices, and adoption of new ‘modern’ managerial practices, such as new open plan offices, are among a raft of recent changes that have reversed years of more traditional family management practices.
“This is best illustrated by attempts to involve shareholders more in the running of the company, requiring many to reconsider and abandon older cherished assumptions.”