The “Soft Side” of Generational Transitions for Family-Owned Businesses

One of the most challenging and complex processes family businesses face is the generational transition when leadership and ownership are passed from one generation to the next. Yet, few manage it appropriately.

Both the “Hard Side” (financial, legal, estate, and tax aspects of transition) and the “Soft Side” (human and emotional aspects) need to be addressed. Most organizations focus almost exclusively on the Hard Side, but ignoring the Soft Side is at the root of the demise of many family businesses. A team of professional advisers with knowledge and experience on both the Hard and Soft Sides can help ensure a successful generational transition.

Transitions should follow a staggered two-track process to ensure the successor(s) can lead and manage the business. The 5 key steps in transitioning leadership are outlined below. Note: Many families end the transition process prematurely after Step 3.

  1. Identify and Develop a Successor. Use a professional assessment firm to administer data-driven assessments to identify the strengths and development areas of the next generation.
  2. Strengthen Governance Systems. Establish formal family meetings to provide a venue for sharing information, making plans, and resolving issues. These matters should not be addressed inside the business. Within the business, a Board of Directors with outside directors is a great resource to support the transition process. The Board helps the outgoing and incoming CEO and assures family members about accountability for the new CEO.
  3. CEO Transition. Leadership transition is most effective if designed as passing many small batons (rather than one large one). The sequence of the batons passed should be a function of the strengths and developmental needs of the successor.
  4. Unify Next Generation. It is paramount to unify the next generation around such issues as commitment to the business, endorsement of the new leader, the direction of the business, distribution vs. reinvestment of capital, and policies regarding family members. Unity is essential to prevent triggering buy/sell agreements and to keep the family out of court.
  5. Executive Team and Culture. The former CEO’s team now becomes the new CEO’s team and the culture will now be primarily driven by the new CEO’s direction and leadership style.

Only after all 5 steps have been addressed should ownership and voting control be transferred.

CMA has assisted family businesses make successful transitions for more than 45 years. For this and any other “Soft Side” issues, please contact us.

Join us for the 15th annual Family Business Speaker Series on April 23 at the Ritz Carlton. Click here to register for this free event.

By Jami Wolfe, PhD, SPHR, Kaitlyn Erb, PhD, & Lee Smithson Burd, PhD


  • Jami Wolfe, Ph.D., SPHR

    Jami is a Managing Partner at CMA Global, where she has been serving clients since 2008. Jami’s work focuses on areas such as: team development, organizational assessment, organizational structuring and development, leadership coaching and development, linking of executive performance with business strategy, talent management, and development of training programs to maximize workforce and leadership performance. She received her Ph.D. in Organizational Psychology is from St. Louis University.

  • Kaitlyn Erb, Ph.D.

    Kaitlyn is a Consultant at CMA, where she has been serving clients since 2016. She completed her doctorate in Industrial-Organizational Psychology at Saint Louis University, where she earned her Master’s degree in the same. Kaitlyn has developed a strong passion for family-owned businesses and entrepreneurship. As part of the fourth generation of her own family’s business and a former member of an angel-investing fund, she has a deep appreciation for the distinctive type of commitment these leaders make to their organizations. Kaitlyn uses her knowledge to help leaders position their businesses for success, especially during periods of growth or change—when norms, culture, and the way they do business are being established for years to come.

  • Lee Smithson Burd, Ph.D.

    Lee is a Senior Consultant at CMA Global. She received a Bachelor of Arts degree from Vassar College, where she graduated Cum Laude. Her Ph.D. in Clinical Psychology is from Palo Alto University, and she completed a Post-Doctoral Fellowship at The Menninger Foundation. Lee draws on her expertise in personality and behavior to partner with executives to optimize their leadership and to build effective teams. With twenty years experience as a management consultant, Lee enjoys helping executives to achieve their business objectives.