Family-owned businesses are a vital part of the American economic landscape, providing a living to more than 60% of the U.S. workforce while accounting for 90% of all businesses in North America. However, fewer than 30% survive into the third generation of family ownership. This startling statistic was a key finding of Deloitte’s 2019 Global Family Business Survey, which also found that a “disconnect between long-term aspirations and short-term priorities can jeopardize the preservation of family tradition and legacy—as well as family capital.”

This disconnect often materializes due to a lack of succession planning in family businesses. Despite Deloitte’s finding that 68% of executives intend to keep the business in the family, only “18% of family businesses say they have a robust succession plan—that is, a documented and communicated leadership transition strategy—formally in place,” according to PwC’s 2019 U.S. Family Business Survey.

This disconnect exposes a fundamental flaw in how “succession planning” is currently defined by family enterprise. True succession planning is not just anointing the next leadership team; rather, it should be a comprehensive approach to how families educate, train and develop future generations of shareholders in order to collectively raise the financial baseline of the next generation while facilitating deeper self-awareness and stronger engagement with each other, the business and the family legacy.

According to PwC’s 2019 Global NextGen Survey, the next generation of family business leaders are eager to win their elders’ trust and thereby earn their “license to operate.” “NextGens want to be agents of change, yet feel their current leaders are not doing enough to help them prepare.”

I am fortunate to be part of a 6th generation family-owned business with active education and development programs in place, and I know first-hand the importance of making this commitment to invest in the emotional development and business understanding of next-generation family members. By making this commitment, families open themselves up to the possibility of achieving lasting success as a sustainable, multi-generational family enterprise that forges harmony and unity within the family while creating even greater wealth and opportunity for generations to come.

Incorporating this training and development mindset is critical to building long-term business and family success. According to the Association for Talent Development, companies offering comprehensive training programs have 218% higher income per employee than companies without formalized training. Additionally, a Dale Carnegie survey found that companies with engaged employees outperform those without by 202%. By working to establish a financial baseline amongst the younger generation and by giving them opportunities to discover themselves, next-generation members can become both effective and engaged shareholders, and therefore capable stewards of the enterprise and legacy.

That’s why I’m excited to be leading Pepperdine Graziadio’s Legacy Center for Family Business Leadership, designed to help families address next-generation talent development by combining personal development and business skills training with hands-on experiential learning and leading-edge applied behavioral and psychological research.

We believe lasting success is possible by redefining the scope of succession planning to incorporate a comprehensive education strategy clearly outlining the family’s next-generation training and development initiatives. Without a strategy in place, families risk leaving next-generation development up to chance. In order to achieve sustainability as a multi-generational family enterprise, incumbent generations must dedicate time, energy and resources towards developing competent, confident and conscious next-generation shareholders. Only then can families hope to ensure the next generation is well-equipped in diversity of thought, experience and background to weather any number of future unknowns that can – and will – arise. Our vision is that it is possible for family enterprises to achieve lasting, harmonious, multi-generational success that creates greater wealth and unity for generations to come, and that is why we are dedicated to the research and innovative programming to make this a reality.

Hunter Turpin is Managing Director of the Pepperdine Graziadio Legacy Center for Family Business Leadership.

Succession stock photo by StockEU/Shutterstock