By Marina Vaughan Spitzy, founder of legacy planning firm, Tecolote Advisory, and fifth-generation family business leader
Events can catch us off guard, even if they are predictable or expected. A ‘grey rhino’ is a highly probable, high-impact occurrence ignored until it poses an immediate threat – even when the risk is evident and the event is foreseeable. This concept is comparable to succession in family enterprises, which represents a personal grey rhino for many families.[1]
In the evolving business landscape, women are increasingly assuming leadership roles and inheriting significant wealth. According to McKinsey research, women are set to inherit a substantial portion of the estimated $100 trillion wealth transfer from baby boomers. Recognising the pervasive challenges of family succession, a discussion between Ramia El Agamy, Meghan Juday, and myself led to a research initiative, “Women in Power – A Discussion on Gender Bias in the Family Enterprises.” We presented it at the Family Firm Institute in New York in October 2023.
Each coming from family enterprises, and with unique journeys into our roles, we discovered a shared experience of facing unanticipated succession challenges especially prevalent for women. Reflecting on my own path following my father’s death, I witnessed how succession often unfolds in ways we don’t expect it to. 25 years later, I realised it wasn’t just my mother who was unprepared to step into the role of a business owner as a 38-year-old widow – my siblings and I were not adequately equipped either.
Amid the ‘Great Wealth Transfer,’ family businesses are forced to confront a pivotal moment as the next generation assumes leadership. A notable issue emerges when examining access to leadership roles, particularly for women. The lack of preparation for women successors often results in challenges that reverberate across generations. Our research findings underscore that addressing these challenges transcends leadership; it’s about shaping the future trajectory of family businesses.
The statistics are telling. Among the 11 women we interviewed, only one experienced a planned succession, while five gradually climbed into leadership positions. The remaining five found themselves thrust into these roles unexpectedly. The commonality? A widespread lack of preparation. This should extend beyond nurturing future leaders; it is essential for all potential owners in family businesses.
One significant barrier faced by these women is unequal access to the business compared to their male counterparts. Regardless of education, theoretical knowledge proves insufficient when the practical aspects of decision-making and business dynamics are not explicitly explained. One interviewee lamented, “There were never any conversations about how you make decisions. There was no guidance on how to think as an owner or understand the various parts of the business.”
This limited access not only makes it challenging for women to envision themselves in leadership roles but also hinders their ability to make informed decisions and gain the trust and respect of those around them. The consequences are far-reaching, affecting the overall stability and success of the family business.
Furthermore, the messages women receive, both overtly and subconsciously, significantly impact their self-belief and leadership approach. The power dynamics around expectations become crucial: “There were no expectations of me”; “I wasn’t pushed”; “I didn’t require it of myself.” The delicate balance of expectations can either empower or limit the potential of women entering leadership roles in family businesses.
Succession planning emerges as a critical factor. Sudden deaths or incapacity leave unprepared successors in challenging positions, emphasising the importance of nurturing and preparing all potential leaders for the future. Successful transitions depend on effective communication, mutual understanding, and relationships with senior generations, with parents playing a pivotal role in fostering these factors.
Resistance and prolonged transition durations plague many women in family businesses, undermining their authority and affecting the stability of the business. This challenge transcends gender – it is a succession issue, where both women and men, despite being prepared for leadership, find themselves struggling for space to exercise their authority.
Addressing these challenges requires a multifaceted approach. Succession planning must be prioritised, not just for leadership transitions but to ensure that all potential leaders are adequately prepared. Unconscious biases need to be identified and eradicated, fostering a more inclusive and supportive environment for women in family businesses.
The imperative for change is clear. By fostering an environment that empowers women, family businesses can harness a diverse range of skills and perspectives. This, in turn, ensures a smoother leadership transition, increased stability, and a thriving future for the family business. The time is now to pave the way for the next generation of women in family enterprises, alleviating the challenges faced and creating a legacy of inclusivity, diversity, and success.
References
[1] The term ‘gray rhino event’ was coined by Michele Wucker in her book The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore, 2016 St Martin’s Press