Peter Smith: Setting the Next Generation Up for Success

In a surprising and somewhat inspiring twist of fate, I’ve had more conversations with clients in recent weeks about their transition plans for their next generation than I’ve had in years. 

The conversations have come up organically as we catch up about how the year ended and their plans for 2026.   

On reflection, I’m struck by how differently parents view their roles when it comes to transitioning the family business to their child or children.  

Some take a hands-off approach, allowing them to develop at their own pace, and others assume more responsibility, believing they should lay out a structured plan to best equip their sons and/or daughters to ultimately take over the business.  

Others adopt a “no strategy at all” posture, hoping for the very best but unsure, beyond the obvious teaching moments that surface organically, what they should do.  

What can be assumed is that all the parents looking to pass on a family business have a burning desire to set their offspring up for success.  

As important as a preserved legacy for the business might be, they also want their children to be happy. However, there can be a fine line between tough love and unwelcome friction.  

If that business transition includes multiple children or other next-generation family members (nieces, nephews, etc.), the complexities are even greater. 

I’ve seen many transitions through the years, and I have no illusions about how difficult they can be. 

I’ve witnessed businesses thrive after the next generation takes over, and, regrettably, I’ve seen businesses close within years of a transition. 

Moreover, I’ve seen families disintegrate due to mismanaged successions. In some instances, the next generation leaves the business completely, as a promised transition is really nothing less than a parent driving the business from the backseat. 

The transition can be even more challenging if the older generation started the business. They may struggle emotionally to take the necessary steps to exit the leadership role, even as they logically know that it needs to happen. 

While there is no foolproof playbook for how to successfully transition a business to a family member, understanding the nuances of human wiring and motivation can shed important light on some of the challenges. 

I was giving a talk in Palm Springs, California, some years back when I decided to take a little risk in real time. I asked a group of about 100 retailers to stand up if they had two or more children with the same biological parents.

About 60 people stood up.

I then asked that group if they would remain standing if they could reasonably assert that their children had the same personalities, more or less. 

What I was exploring was the impact of parenting and environment on kids raised in the same household, with the same parents, and with similar exposures—educational, diet, cultural, religious, etc.

As I watched all but one of the standers sit down, the impact of the exercise became clear to the entire room. 

Despite all manner of similarities, biological and environmental, we are all born different, and we don’t become any less so with the passage of time just because we are raised in the same home with the same parents. 

In “Psych: The Story of the Human Mind,” Paul Bloom wrote, “The research suggests that what doesn’t seem to matter very much, at least for the traits of personality and intelligence, is family environment. 

“To put this in a more radical way, once the moment of conception is over, and the parental genes have been fused into the zygote, then, for certain important aspects of how children turn out, parents just don’t matter that much.” 

Bloom is not inferring that parents have no impact on their children or that environment—education, diet, communication, etc.—and all the myriad elements of a loving home don’t matter; far from it. 

He is, however, suggesting that those important things don’t change the innate wiring and personalities of our offspring. 

All of us, without exception, exist on a continuum of psychology’s Big Five traits.

That means our individual degrees of Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism play a huge part in shaping our personalities, and our personalities determine how happy we will be in a given life situation. 

As much as we’d like our children to be mini versions of us, that just doesn’t happen, no matter how hard we wish it so. 

In “Me, Myself, and Us: The Science of Personality and the Art of Well-Being,” Brian Little wrote, “The better the fit between a person’s biogenic traits and the characteristics of the environment, the better the consequences for well-being.”  

What Little argues, and what the research shows, is that your kid is going to be much more successful if they do something they love, because what they love usually aligns with their wiring.  

In the most extreme scenario, that might mean they would be better off pursuing a path outside the business.  

In all instances in which they are excited about a career under the family banner, their success and their happiness will be greatly enhanced if they lead the business from their strengths, not their weaknesses.  

Trying to make your kid into something they are not is a bad idea.  

Rather than trying to fix their shortcomings, hire around those limitations so they can do more of what they are good at.  

If that means they want to lead the business from the back of house, hire a strong front-of-house sales manager and business driver.  

On the other hand, if they are strong in front of house, allow them to do that without stressing their shortcomings in finance, operations, or administration. Hire a strong operations person for that aspect of the business. 

There’s a big difference between facilitating a base level of understanding in all aspects of the business and trying to turn your son or daughter into the second coming of you.  

They may not have the wiring or interest in doing the things that define you, but they could well be much stronger than you in other areas. Not to mention, they are likely to have more skills in dealing with younger clients, without which your business has no future.  

The pressure to engage in handholding to prevent your children from making mistakes is understandable. The desire to impart what is second nature to you is perfectly natural, but they need to earn their own calluses and bring their unique perspective to the business.  

If they willingly choose that path for themselves, they will bring that perspective with love and intention, for the business and for their family. 

Resist the urge to drive from the backseat, possibly driving him or her out of the business or, at the very least, adding even more stress and anxiety to your child’s life. 

If you’ve made the decision that they are going to take over the business, settle into the passenger seat so that you can be there for them when they need you most and leave the driving to them.