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The task of preparing next-generation family members for leadership responsibilities in the family business is too important to leave to chance. There are 17 million family businesses in the United States, and they generate half of the nation's GDP. Family-owned or controlled businesses produce three-quarters of GDP in most other countries and comprise over 80% of businesses in the world's free economies, including a fifth of the companies in the Fortune Global 500. Despite their importance, the survival rate for family enterprises through multiple generations of family ownership is low. Only 30% survive from the first generation to the second, 12% from the second to the third, and 4% from the third to the fourth. Weak next-generation leadership is one of the top three threats to long-term family firm success. Next-generation family business leaders face a set of challenges unique to family-owned businesses. Not only must they meet the challenges of sustaining a successful business, they must also negotiate the complexities of the family and ownership systems that are integral components of family enterprises, often while living in the shadow of a successful entrepreneur who happens to be a father, mother, or other close relative. While there is general agreement in the family business literature about the importance of next-generation leadership, there is a lack of rigorous research on how future leaders are developed in family firms. This study employed an integrated sequential mixed-methods approach to address that gap by identifying and exploring relationships among factors that influence the effectiveness of next-generation family leaders and the degree to which they are positively engaged with their work in the family business.Three phases of research were conducted. The first was a qualitative study of 37 leaders of privately-owned, mid-market family businesses in the United States and Canada. Early leadership learning experiences, emotional and social intelligence, job assignments with real responsibility and accountability, and personal reflection were identified as factors that promote next-generation leader development. Obligatory or entitled motivations for joining the family business, being shielded from risk and/or the consequences of failure, a family environment characterized by unresolved conflict, and being promoted to positions without necessary qualifications were identified as impediments to the acquisition of leadership skill by next-generation leaders. The qualitative results informed by leadership, intentional change, and family systems theories were used to develop a conceptual framework that guided the two quantitative phases of the study. Data was collected from 100 next-generation family firm leaders and 350 family and non-family leaders and employees with whom they work. The first quantitative study found that the degree to which next-generation leaders assumed personal responsibility for their actions and decisions was strongly related to their display of emotional and social intelligence competencies, which in turn, was the major driver of their leadership effectiveness. Next-generation leader acceptance of personal responsibility was also strongly related to the degree to which they were held accountable by others, which positively affected their engagement with work in the family firm. The climate in the business-owning family affected next-generation leader effectiveness and work engagement through its influence on the level of personal responsibility assumed by the next-generation leaders. A family climate characterized by open communication, intergenerational attention to the developmental needs of the next generation, and cognitive cohesion increased next-generation acceptance of personal responsibility. A family climate characterized by an autocratic senior generation that exercises unquestioned authority decreased the degree to which next-generation leaders accepted responsibility.The second quantitative study found that next-generation leaders who were provided with challenging work assignments, meaningful mentoring relationships, and opportunities to receive candid feedback on their leadership behaviors were more likely to become self-aware, effective leaders who derive positive energy, inspiration, and fulfillment from their work in the family firm. Open communication in the business-owning family increased next-generation leader self-awareness and positively affected the expression of emotional and social intelligence competencies in their leadership behaviors, which drove their leadership effectiveness.The study contributes to family business and leadership theory by identifying mechanisms through which the climate of the business-owning family affects next-generation leader development. It also suggests that a family climate characterized by an autocratic senior generation may contribute to the low survival rate of family firms through its negative influence on the acquisition of leadership skills by next-generation family members. The study contributes to family business practice by demonstrating the importance of balancing a focus on the business with a focus on the family, and by identifying ways business-owning families can help next-generation family members develop the skills they need to be effective, engaged leaders of the family enterprise. The study's final, and perhaps most important, message is for next-generation leaders. Ultimately, their leadership effectiveness, as well as the benefits they derive from working in the family firm, is up to them.
