This is so especially since family businesses are built on trust, loyalty and long-term goals. Without a firm foundation of intergenerational trust, succession risks unravelling family discords, which could jeopardise the very legacy families strive to preserve.
Trust can be understood as “a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another”. (Rousseau et al., 1998). In the UHNW family context, the intermingling of family and wealth indeed makes succession a complicated matter. Beyond financial gains, families have “socio-emotional” priorities like job security, social advancement for family members, family harmony, building reputation and cultivating social capital. In this environment, trust is paramount to the endurance of family business.
This article explores the key strategies for building and maintaining trust across generations for a smooth transition.
The real challenge lies in bridging the gap between different management philosophies and adapting to evolving times. The older generation needs to trust that the younger can effectively lead and preserve the business legacy, while the younger generation must trust that the older will eventually relinquish control and allow changes and innovation to take place. Yet, each generation uses different yardsticks to measure succession readiness, shaped by distinct generational experiences, making it difficult to build the mutual trust needed for a smooth transition.
Our research on family businesses undergoing succession, rooted in social exchange theory, revealed fascinating insights. Social exchange theory (SET) posits that human relationships are formed when people engage in interactions that are mutually beneficial, with such benefits being either tangible (e.g. money) or intangible (e.g. social approval). In a family business context, SET can guide our thinking on various dynamics that can help build trust:
Time and again, we’ve seen how families that actively work on trust-building fare better during transitions. Here are some key strategies that consistently contribute to fostering trust across generations:
As the saying goes, trust isn’t built overnight. It’s a continuous process that requires open communication, mutual respect, and a shared vision for the future. By focusing on building intergenerational trust, your family is not just planning for succession – you’re securing the long-term preservation of your family wealth.
For more information and personalised advice on multi-generational wealth management, visit itriom.com. Discover how our Family Office Wealth Management Platform empowers you to build a sustainable legacy your family can be proud of.
Matthew Millard-Beer is CEO & Founder, based in Itriom’s London Office.
Itriom is the global impact platform helping leading families shape a better world. Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter. Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in leadership, geostrategy, and sustainability benefit clients by developing strategies to engage and support the next generation in building a lasting legacy of which families can be proud.
Itriom’s leadership and resilience practice instils all-encompassing leadership in support of principals of leading families and the next generation preparing for family succession, transition and evolution.
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