As the climate crisis accelerates, we see a changing set of realities, norms, and values emerging – also within the family wealth space. The next-generation is particularly attuned to these changes and placing increasing demands on family business leaders to act.
Irrespective of these mounting pressures, the leadership transition is often a challenging time in the family business journey – with only 13% making it to the third generation. Among the factors which are critical to their long-term survival is the ability to develop a distinctive and robust entrepreneurial orientation (EO) within each generation – defined as the ability to reinvent the business with each generation and seize new opportunities inside and outside the family setup.
By bringing in family governance specialists, family businesses can identify the emotional ownership barriers that deter the next generation from continuing the legacy. Emotional ownership refers to a range of factors that affect whether the next generation will join the family business – these being a duty to the family, desire for leadership, and the affective identity factor. The duty to family relates to whether the desire to continue the family business is intrinsic or extrinsic. Some members of the next generation may hold a genuine desire to be involved, whereas others might feel pressure from family members to be involved and therefore be driven more by the fear of disappointment.