Passing the torch: Mastering leadership transitions in family businesses introduction

Leadership transitions in family businesses are often fraught with challenges that test the resilience of both the business and the family itself. Drawing from my many years as a global expert in advising and mentoring family business owners and leaders across the globe, I have seen first-hand how these transitions can either become the foundation for a thriving future or a source of discord that jeopardizes everything the family has built.

The challenges

The former family head still gets involved in a lot of day-to-day operations: This is the norm, but it should not be. Smooth transitions require intentionality, clear boundaries and a willingness from all parties in the family to embrace change while honoring legacy. The inability of the outgoing leader to let go of day-to-day operations often stems from a lifetime of dedication to the business and a natural reluctance to relinquish control. However, this involvement can undermine the authority of the new leader and create confusion within the organization.

I have seen many cases where employees go to the former leader and the current leader to get the same sign-offs, just to cover their back, because the leadership roles and transition are not clear at all. In one case where a family business conglomerate requested the support of my consulting company, at the moment of signing the contract, the family was not even clear who should do it: the former leader or the current one.

This dual-command scenario can confuse family members and employees alike, and erode trust in the new leadership.

Lack of clear swim lanes for each family member: Without clear role definitions, responsibilities overlap, resulting in inefficiencies and misunderstandings. For example, if the outgoing leader is still making decisions on strategic initiatives while the new leader is trying to implement the vision, it creates a clash that stalls progress.

Family businesses are unique in that personal relationships and business roles are deeply intertwined. When these “swim lanes” are unclear, conflicts arise and family dynamics can spill over into business operations.

Imagine siblings vying for decision-making authority without a structured hierarchy or role clarity—the result is often a toxic environment that hampers both business performance and family relationships. Many cases of our clients come to mind, especially one where two siblings stopped to talk to each other, made their conflict public and the entire image of the family business conglomerate suffered. On top of it, this conflict of the two most powerful leaders within the group weighed heavily on all employees, lowering productivity, because it seemed to threaten the continuity and survival of the business.

My team and I had to establish clear swim lanes for both family leaders, a clear cadence of how often they would check in with each other and clear rules of engagement – including a “crisis control” check in for emergencies. The results? A business that kept losing money before now started to become profitable, employees’ productivity soared and at the time of this writing, the business is the national market leader in its industry.

Here are the solutions.

Establish clear swim lanes

To address role ambiguity, it is essential to establish clear swim lanes. This means defining the specific responsibilities of each family member, including the outgoing leader. For instance, the outgoing leader could focus on serving as a brand ambassador or advisor, while the new leader takes full control of daily operations and strategic decision-making.

Practical steps:

– Conduct role-definition workshops: Bring in a neutral facilitator and expert to help define roles and responsibilities for each family member. My team and I usually do this in workshop sessions with all relevant family members attending.

– Formalize roles in writing: Draft a family governance document that outlines each member’s role, authority and boundaries. Ensure that everyone signs and agrees to it. My team and I have seen again and again that it is key to get everyone’s full buy-in.

– Communicate clearly to employees: Share the updated roles with employees to avoid confusion and reinforce the authority of the new leader. From my global experience, I know that this can be done in a way that does not compromise family integrity, but rather serves as a springboard for productivity and a shared vision.

Establish a cadence of mentorship sessions

Regular mentorship sessions between the former and current head help maintain continuity and provide an avenue for the outgoing leader to share valuable insights. These sessions should have a structured agenda and be focused on strategic guidance rather than operational interference.

Practical steps

– Set a schedule: Establish a monthly or bi-weekly cadence for these meetings and make them a priority for both parties.

– Use an agenda: Create a standard template for each session that includes topics like challenges, opportunities and lessons learned.

– Encourage two-way feedback: Allow the new leader to share their vision and seek advice at the same time, fostering mutual respect and collaboration.

Example: In one family business my team and I consulted for, the outgoing CEO transitioned to a role as chair and scheduled bi-weekly one-hour calls with the new CEO. These sessions were used to discuss high-level strategic issues, allowing the outgoing CEO to stay involved without micromanaging.

Strengthen emotional bonds

Organize regular family gatherings with a clear rule: no business discussions. These purely social events reinforce emotional ties and ensure that familial relationships are prioritized, preserving unity and harmony.

Practical steps

– Set a calendar: Schedule quarterly family retreats or dinners focused on fun and relaxation.

– Incorporate activities: Plan activities like sports, cooking classes, or travel to foster bonding.

– Document memories: Create a family photo book or video to commemorate these gatherings and highlight shared experiences.

Embrace new leadership styles—and mistakes

My team and I have seen that most outgoing leaders have real difficulty in letting go. This includes the willingness to let the next generation make mistakes and do things “ their way”.

The outgoing leader must recognize that the new leadership team will bring their unique style and approach to running the business. While these approaches may differ from traditional methods, they are essential for the business to innovate and adapt to changing times.