Second-Generation Family CEOs: The Bet to Success

With family businesses being the dominant business type worldwide, the emerging second-generation CEOs is becoming a critical mass of leaders who demonstrate distinct behaviors and characteristics:

1. Most of the new generation leaders come from male-dominated businesses, given that overall, very few women in the past were even allowed to start their own business – in the USA the Congress passed the Women’s Business Ownership Act in 1988!

The social exclusion of women from entrepreneurial activity followed by feminist movements, and the movements against racial discrimination, has developed a more sensitive second-generation of CEOs who have also acquired a more inclusive pattern and a less discriminatory behavior, towards people and employees in the organization.

2. Tolerant to criticism: most of first-generation CEOs and leaders are very strict with their children and occasionally they take advantage of their familial role and power to impose decision making. The second-generation CEOs usually have been overcriticized from the parent/s as business founders and they have eventually developed a very disciplined behavior and the strength to struggle to implement their strategies and point of view.

3. Stamina and patience: these people have been over-challenged for their mistakes, and they have experienced resilience and patience as a virtue, coupled with very strong work ethics only to prove that they are also passionate about their goals and vision.

4. The second-generation leaders strive to overcome nepotism, given that occasionally they are surrounded by people who have been appointed to various positions in the business, by enjoying a family or friendly relationship with the founders. This culture of nepotism which occasionally is negatively related to productivity has led second-generation CEOs to establish more clarity and justice for the selection and promotion criteria of people in their organization.

5. The chair of the CEO is not given but earned nowadays, and people will trust and value the impact of the new leaders for the value that they bring in the organization. Thus, the new leaders have acquired a very high sense of respect, and they have learned to be judged by the result and not by the name tag on their desk.

6. A need to balance personal and professional life given that most of the second-generation CEOs were born even after the family business was born, and their family business is interwoven in their lives.

7. Highly insightful of the sector of the firm’s business: Second-generation CEOs have experienced the transformation of the sector throughout the years, and they accumulated a very good understanding of the cyclical behavior of that sector. This experience and knowledge provide them with very valuable insights for the formulation of the firm’s strategy. However, the problem, in that case, is that they are very focused in this industry and they need to acquire more exposure and insight from other sectors and industries.

8. Organizational flexibility: the second-generation CEOs have learned to take decisions with a higher degree of flexibility, given that the structure of a family business may even have the size of a multinational but the flexibility of a startup. The implication of this structure is that decision making may be very fast but eventually the growth of the business is not adequately supported by a qualified board of directors.

9. Inconsistency in the delivery of the vision: Sometimes the second-generation of CEOs are only sharing the vision of their parents and they acquire more focus on short-term and midterm thinking. The problem, in that case, is that there is no consistency in the delivery of the vision which fails to be adequately communicated to the organization and which does cascade successfully to strategy and goals.

10. The heart of the business: Second-generation CEOs experience the force of “family gravity” and they put one thing in the business that non-family employees can rarely bring in, and that is their heart and love for the family business.

The challenge of the position of the second-generation CEO is not a choice and sometimes the children of successful CEOs prefer to not even follow the family business and to rather pursue their own goals and dreams. This is also due to the fact that 43% of family firms do not have a succession plan and only 12% make it to the third generation (Family Business Survey, 2016)

Exit is also a plan, and unfortunately, this is the worst-case scenario since usually second-generation leaders may be forced to exit by either the founders or the organization. The majority of the new CEOs though strive for their success, and to them winning this game is also a personal bet.