“Next gens”—the up-and-coming generations within a family business or a family office—represent the future of those enterprises. Yet, all too often, families don’t invest enough time in engaging with them, involving them and educating them, until it’s too late.
“Next gens are so important because they offer such a fresh and diverse perspective that can help pivot legacy businesses into new generations, to new directions, and into the next century, while also helping develop entirely new business lines,” says management consultant Rebecca Finley-Schidlowsky of Calgary-based Finley & Associates. But harnessing the value and contributions of next gens requires these enterprises to make the effort to overcome seven major challenges that next gens commonly face.
1. Experiencing significant anxiety about their future roles
“They feel they can’t really fill the shoes of those that came before them, especially if they’re in a family office that’s into the second, third or fourth generation,” says Finley-Schidlowsky. “There’s a massive legacy on thier shoulders, and I quite often feel they don’t think they can ever live up to that.”
2. Lack of basic financial literacy and business training, especially governance
Next gens may find themselves owning several companies, without an understanding of what they own, how those businesses operate, and how they fit into the overall structure of family holdings.
“Families should take more time to really help their next gens learn those ropes,” Finley-Schidlowsky says.
3. Lack of transparency around the family's wealth
While some families are very transparent with their next gens at an early age regarding family inheritances, Finley-Schidlowsky has encountered the other extreme as well.
“They’re not told anything and kept completely in the dark until suddenly the patriarch or matriarch passes away,” she says. “At that point, they’re completely overwhelmed with the magnitude of the responsibilities they have to take over. This leaves them particularly vulnerable and susceptible to being taken advantage of.”
4. Lack of engagement early in life
Finley-Schidlowsky sees this as a missed opportunity for building capacity in next gens.
“Families don’t really think meaningfully about how younger members can contribute to the current family structure,” she says. “They may look at a 15- or 16-year-old and think, ‘what could they possibly do within a family office?’ But there are a lot of opportunities to engage them and to start building those leadership skills early on. A family foundation can be a great starting point to teach both philanthropy and governance in a safe environment.”
5. Lack of trust in others
According to Finley-Schidlowsky, next gens are often skeptical of others. “Next gens are aware that people know they have money. They’re worried about who they’re going to work with. And they’re concerned about being taken advantage of.”
6. Lack of connections or networks
“Just because their parents are well connected does not mean next gens have these connections themselves,” says Finley-Schidlowsky. “They may want to foster their own networks, but don’t know how, exactly, to do that.”
7. Not spending enough time thinking about their “ikigai”
Ikigai is the Japanese concept of one’s reason for being.
“If you’re given this life of immense privilege, what are you doing when you wake up in the morning?” Finley-Schidlowsky asks. “What are you really doing to give back and help society move forward? Next gens really need guidance on how they can best impact the world.”
Annual planning retreats are among the strategies employed by sophisticated family offices to create greater engagement with next gens. “These retreats focus on informal and formal activities mixed together,” Finley-Schidlowsky says. “They include multiple days where family members of all ages and backgrounds come together. They could involve skills-building activities, external speakers on specific topics, or opportunities for next gens to present the business case that they’re working on to their family members for feedback or possible investment.”
Next gens aren’t given enough credit for how thoughtful they really are
Other families have created investment councils to get next gens engaged in learning about investing in different kinds of companies, start-ups and the stock market. Family foundations can also be used to build skills, by allowing next gens to chair, understand how a board works, and providing an opportunity to gain governance experience.
“Next gens aren’t given enough credit for how thoughtful they really are,” Finley-Schidlowsky says. “They’re increasingly passionate about ESG (environmental, social and governance), and they really want a lot of corporate transparency. They want diverse boards. They want to hear those voices that have been previously excluded at decision-making tables. If you give them a chance, it will really surprise you where they can take you.”
Listen to the full interview with Rebecca Finley-Schidlowsky here