The Key to Family Enterprise Success: Don’t Leave Leadership Development to Chance

You will know all too well that leading a family enterprise is more than preserving what you've built—it's about continuously looking forward and planning for the future. It’s about intentionally cultivating the leadership that will propel your business to succeed across generations.

However, many family enterprises often overlook the need for continuous leadership development. They believe that the next generation of leaders will emerge from the pack and make themselves known. When this doesn’t happen, and family enterprises begin to identify and prepare next-generation talent for more senior positions, they often find it takes far longer and requires more effort than they initially thought.

In starting the process too late, the business faces two risks: one, the future stability of the organization is undermined; two, high-potential leaders may slip through the cracks. In our research, for example, we found that 71% of leaders in family enterprises globally say they are likely to consider moving organizations, with 36% citing career advancement as their primary motivation. In other words, your most talented family members might be walking out the door because they don't see a clear path to growth.

Based on our experience advising family enterprises globally, we explore how family enterprises can identify future leaders who have the potential to move through the ranks, and how you can develop these leaders to give them the best possible chance to succeed.

Hear Michelle Mion, a family enterprise advisor at RRA, discuss how to best nurture future leadership in your organization.

Align family stakeholders on the candidate Success Profile 

The first step is for family stakeholders to agree on what good looks like for the next generation of leaders at the enterprise. Gaining alignment is not always easy—and requires time. But when stakeholders collectively define a clear Success Profile, they mitigate potential conflicts, reduce bias, and create a more robust framework for leadership development. The process requires stakeholders to be open and transparent about the leadership qualities and technical skills they’re looking for, as well as their expectations on how the successful candidate will fit in culturally with the enterprise.

It's important to avoid the trap of creating carbon copies of the leaders you have today. Instead, the goal is to think about where your organization will be 5, 10, or 15 years down the road—and develop a Success Profile based on that strategic journey. It's also good practice to outline the culture and values that a leader will need to embody to secure the enterprise's legacy.

The world is changing fast—and there is no doubt that leadership needs to change with it. For this reason, it helps to ensure your Success Profile reflects the future needs of your organization, not today’s.

Assess for potential, not just experience 

Another trap some family enterprises fall into is assuming that only one or two family members have what it takes to rise into the executive ranks. But, by overlooking the importance of systemic talent development, the business risks letting promising leaders go unnoticed and undeveloped.  
 
The reality is that leadership isn't about a predetermined set of traits you’re born with. It's about systematic development and opportunity. For this reason, try to avoid making leadership development decisions solely on existing experience or current competencies, and instead aim to look at the potential of leaders to evolve, and embark on a continuous learning journey. This is only becoming more important given the volatile and complex world that family enterprises operate in today.   

At RRA, our Leadership Portrait approach allows us to understand the specific traits that determine whether someone is likely to thrive in a leadership role. And the good news? All can be developed, with the right interventions at the right time.  

1. Curiosity and adaptability: Leaders who exhibit this trait understand the need to foster a mindset of continuous learning. They can balance the tension between preservation and progress, are inquisitive, and are open to fresh ideas and new ways of thinking.
     
2. Drive and resilience: When under pressure from every corner, resilient leaders rally their organization and inspire confidence that they have what it takes to lead the family enterprise through hard times and come out stronger on the other side. They are motivated to overcome challenges and push beyond comfort zones. 
   
   
3. Social intelligence: Leaders who exhibit this trait can actively listen, read a room, and navigate the intricate interpersonal dynamics and relationships in a family enterprise. They can also flex their communication style based on who they are speaking to.  
   
   
4. Systems thinking: Leaders who possess this skill can synthesize a vast amount of information, connect seemingly disparate dots, and make informed decisions. They understand the web of complex relationships that define their family enterprise and can bring different stakeholders along on the journey.  

To assess leadership potential, it’s helpful to create rigorous assessment processes that go beyond traditional performance reviews—and remain open to surprising candidates who might not fit initial expectations. 

How to supercharge next-generation leadership development 

Invest in external coaching and mentoring 

Family dynamics can complicate internal mentorship. That's why we recommend seeking independent mentors and coaches who can provide objective guidance. These external perspectives can develop family members' skills, experience, and confidence without the emotional baggage of family relationships.

Give insiders an outsider's perspective 

While tempting, you don’t always need to look externally to get fresh perspectives. You can also nurture critical thinking and alternative points of view within the enterprise, for example, by exposing potential leaders to different companies in the portfolio, external work experiences, or exposure to other family executives. The goal is to provide plenty of opportunities for increasing autonomy and responsibility. It helps to let future leaders see all aspects of business operations and decision-making to build a well-rounded skill set.

Look beyond the next generation 

It's important to avoid only focusing on immediate successors. Imagine how talent might fit into the enterprise as it evolves and aim to build a strong leadership pipeline that starts early and leaves no gaps. This approach builds organizational resilience—and ensures the business is not caught off guard by unexpected leadership departures.

Cultural alignment is key 

Finding the right leaders isn't just about skills or competencies—it's also about cultural fit. Our research found that only 43% of family enterprise leaders believe their organizational culture effectively retains top talent. 

It's important to remember that the enterprise is not just filling a role. It's securing its future. The leaders that are developed today will determine the business's trajectory for decades to come. So, try to avoid seeing leadership as a birthright or a predetermined path. Leadership is developed, nurtured, and carefully cultivated. 

The enterprise's most valuable asset isn't its current balance sheet—it's the potential of the people who will write the next chapter. And that means embarking on a continuous journey of leadership development. Assess, develop, and believe in the leaders the business can create. 

Authors

Diego Esteban

Michelle Mion

Anupama Puranik