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Business Observer Thursday, Aug. 5, 2021 4 months ago

How to build trust as the successor in a family business

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Outgoing leaders must clear a path — with candor and communication — for the next leader.
by: Denise Federer Contributor

I have written much about the advice I give family business owners as they seek to transition their business to the next generation. Often, the focus is on the process surrounding the business founder’s decision on picking their next successor and the response of their family to these choices.

But transitions aren’t successful the moment the leader concludes, closes their laptop and hits the beach. What comes after ultimately decides the fate of the business. The new leader — be it a family member or an outsider — may have been given the blessing of their predecessor, but to truly lead, they must first earn the trust of the team. Legacy employees — many of whom may have known the new family leader since he or she was a child — are often reluctant to have blind faith and trust in them. The same goes for newer staff members who may have little to no connection to the new leader. Trust is earned, not given.

But how does a new leader earn the trust of their employees? A study at Northwestern’s Kellogg School of Management called “The Trust Project” identified three characteristics needed to gain trust:  competence, honesty and benevolence. In short, your team wants to know you have the skills, integrity and empathy to do the job, make decisions that are best for the company and support your team.  

In my experience as a family business consultant, making assumptions a “known” individual will be implicitly trusted is erroneous. Being a known quantity, in fact, can work against a new leader. When the team has been around this person for several years, they have seen their setbacks, failures and warts. While it may be hard to trust an outsider, an insider can’t be complacent. They must be intentional in demonstrating their abilities and leadership presence, proving to the team that despite their failings, they are the right person for the job.

Laying the groundwork for trust, however, starts long before the transition. So, let’s rewind a bit.

Before a new leader can earn trust on their own, the right environment must be set by the current leader before his or her departure. Naming a successor is only the first step. Paving the way for them to succeed is the most important job of the outgoing leader. The process should start early — months at least, but years in a perfect world (especially in the case of a family member being groomed for leadership). Of course, gaining trust will mostly be the responsibility of that new leader, but paving the path for them to succeed is essential, and boils down to four major concepts:

Communication

Once a leader has chosen a successor, openly communicating these intentions to the team is key. Don’t underestimate the anxiety created in a company when there are numerous closed-door meetings, or when the owner is around less frequently but no one in a leadership role is being transparent as to what decisions about the future are being made. If employees think you are hiding something (and they can sense it, trust me), they will become suspicious of the new leader. After all, if you trust this person to take over the business, what’s to hide? You must find the “right” time to tell the team. Too early, and some might jump ship. Too late, and it will seem like you’re pulling the bait and switch. The situation for each business is different, but make sure you make the announcement with enough time for the team to get accustomed to the change before it happens.

Empowerment

Prior to the transition, it is imperative that the incoming leader be given leadership responsibilities. This will give them a chance to demonstrate their worth, and a buffer zone to allow for learning and development. Additionally, it will allow the team to get used to the new leader making decisions, rather than an abrupt change.

Respect

The team ostensibly trusts you, the current leader, and will look to you for acceptance of the new leader. Treating the incoming leader with respect will go a long way to ensure the team will respect and trust them as well. Lead by example.

Honesty

The chances that the incoming leader is already perfectly set up to succeed are slim to none. As the predecessor, you must give them honest feedback so they can learn and grow and be prepared when the time comes. Many of my clients have a difficult time with this since the new leader is often their child. But without this respectful but “tough love,” you are essentially setting up your child for failure, something no parent, and no business leader wants to do.

Leaders aren’t made, they are grown. As the outgoing leader of a company, you must do everything in your power to foster that growth and clear a path for success.

 

 

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