Leadership transitions are critical moments in the life of any family enterprise or council. They often mark a crossroads where tradition meets change, a process that presents both opportunity and risk. A well-executed transition can invigorate a system with fresh energy, innovation, and renewed purpose. A poorly managed one, however, can destabilise family dynamics, decision-making structures, and compromise the long-term vision of the enterprise.

At the heart of this risk lies a tension between socioemotional wealth (SEW)—the desire to preserve legacy, identity, and control within the family—and the need to innovate and evolve in a changing environment. Navigating this balance requires clarity, intentionality, and solid support mechanisms, a subject we wrote about earlier. Families must define roles and expectations during the leadership transition, but also articulate why this shift aligns with their broader strategic vision and values.

Common Challenges in Leadership Transitions

Despite their frequency, leadership transitions are rarely seamless. Several recurring challenges tend to emerge:

  • Resistance to change or fear of legacy loss: Incumbents may fear that successors will abandon long-held values or dilute the founding vision, while next-gen members may feel constrained by the weight of expectation.
  • Unclear succession processes: A lack of transparent, agreed-upon succession planning can lead to confusion, tension, and last-minute decisions that harm continuity.
  • Role ambiguity and lack of readiness: Without defined responsibilities or structured mentorship, successors may struggle to gain legitimacy or operate effectively (Salvato & Corbetta, 2013).
  • Internal conflict or dysfunction: Transitions often expose or deepen unresolved family tensions, especially when stakeholders disagree on direction or leadership suitability (Pratt, Smollan & Pio, 2019).

The Importance of Governance Structures

Strong governance structures act as stabilising forces during change. Whether through a family council, independent board, or formalised family charter, governance bodies ensure clarity around roles, authority, and decision-making pathways.

Transparent rules around term limits, eligibility criteria, and transition timelines help reduce the emotional fallout and prevent conflict. As the Family Council Handbook illustrates through the example of the Shank family, having defined qualifications for leadership (e.g., years of involvement, prior committee work, demonstrated values) helps ensure capable, committed leadership and smoother onboarding (Eckrich & McClure, 2012).

Moreover, governance facilitates multigenerational collaboration by creating forums for ongoing communication, strategic alignment, and collective ownership.

Preparing for Transition

Intentional preparation is what separates reactive transitions from strategic ones.

Start by defining the roles and expectations for leadership positions well in advance. What does a future chair or CEO need to demonstrate—technically, emotionally, and relationally? Families like the Shanks formalised this with clear eligibility criteria and role descriptions.

Involve the next generation early: through observation, participation in meetings, and guided exposure to business and family governance. This kind of engagement builds not only knowledge but also emotional readiness and commitment.

And finally, build transparency into the process. When transitions are handled behind closed doors or with ambiguous processes, resentment and misinterpretation can take root. Open dialogue avoids hurtful surprises and encourages unity.

The Role of Advisors and Transitional Leadership

Advisors play a crucial and often underappreciated role in leadership transitions. When family dynamics are sensitive, an external advisor can act as a neutral mediator, model professional behaviour, coach successors, and lend legitimacy to the process.

Research by Salvato and Corbetta highlights the power of transitional leadership, a temporary, shared leadership model in which the advisor assumes a surrogate leadership role. Transitional leadership helps the successor gain confidence and social endorsement (Salvato & Corbetta, 2013). 

Similarly, transitional ministers or leaders have been shown to restore well-being, facilitate healing after conflict, and set up the organisations for long-term success (Pratt, Smollan & Pio, 2019).

The key is intentional withdrawal: knowing when to step back and allow the successor’s own leadership identity to solidify.

This intentional withdrawal also requires the incumbent to start planning to step back before the big moment comes. Often, stepping back from the family business results in a loss of social connections for the incumbent and his/her spouse.

Supporting Successor Development

Succession is not just a title change but a developmental journey. Encourage next-gen leaders to gain experience outside the family business before assuming key roles. Exposure to different industries, leadership styles, and challenges broadens their perspective and builds confidence.

Internally, support their growth across multiple literacies:

  • Financial (understanding business fundamentals and metrics),
  • Emotional (resilience, self-awareness),
  • Interpersonal (communication, negotiation), and
  • Governance (how to lead within a family enterprise context).

Leadership is best constructed through ongoing feedback, shared decision-making, and relational trust. When the successor feels recognised—not just appointed—they can lead with clarity and conviction (Salvato, Corbetta, 2013).

Sustaining Momentum Post-Transition

A successful handoff is not the end—it’s the beginning of a new cycle of growth.

To maintain momentum, it’s vital to keep cross-generational engagement alive. This might include:

  • Inviting outgoing leaders into advisory roles (without interfering),
  • Keeping shared projects or philanthropic initiatives that span generations, and
  • Continuing structured forums like family councils or strategy retreats.

Finally, share leadership before the formal handoff. Joint decision-making fosters trust, surfaces unseen tensions, and allows the next generation to lead with support before taking full responsibility.

Closing Words

Leadership transitions are emotionally charged, structurally complex, and strategically significant. But they don’t have to be fraught.

When families approach transitions with transparency, emotional intelligence, and long-range thinking, they turn fragile moments into formative ones. Ultimately, the goal is not just to pass the baton, but to make sure it’s carried with strength, purpose, and a shared sense of direction.

References:

Deloitte (2022). Pivotal Moments for Family Enterprises: Leadership Transition and the Next Generation.

Eckrich, C. J., & McClure, S. L. (2012). The Family Council Handbook.

Pratt, T. J., Smollan, R. K., & Pio, E. (2019). Transitional leadership to resolve conflict, facilitate change and restore wellbeing. International Journal of Organizational Analysis.

Salvato, C., & Corbetta, G. (2013). Transitional leadership of advisors as a facilitator of successors’ leadership construction. Family Business Review.