Why Leadership Capability is now the Defining Challenge for Family Businesses

Family businesses remain the backbone of the UK and Irish economies, representing the overwhelming majority of private sector firms and contributing a disproportionate share of economic value, employment, and tax revenues. In the UK, family-owned enterprises account for approximately 93% of all private businesses with more than five million firms, generating close to half of private sector turnover, nearly 60% of Gross Value Added, and supporting over 15 million jobs. In Ireland, family businesses comprise an estimated 70–90% of private firms, contribute more than half of national GDP, employ close to one million people, and generate approximately €19 billion annually in tax revenues.

Across both economies, these enterprises have demonstrated resilience and ambition, with strong post-pandemic recovery and growth expectations reinforcing their central role in economic stability, innovation, and long-term value creation.

As family enterprises move beyond the founding generation, they face a defining leadership challenge: how to evolve leadership capability without eroding the cultural DNA that made them successful in the first place.

Conducted in Autumn 2025, the Voices of Family Business Survey draws on insights from 168 family business leaders across Ireland and the UK and serves as a predecessor to a larger Global Survey due to be released later this year. Its findings make clear that the leadership challenge facing family firms is no longer theoretical. It is operational, immediate, and increasingly decisive for performance, growth, and generational endurance.

What emerges from the data is a sector in transition—confident in its identity, yet grappling with how leadership capability keeps pace with complexity, scale, and ambition.

Yet resilience and ambition do not guarantee continued success.

To capture both breadth and depth, the survey was structured around 36 questions clustered into four themes:

• Respondent and business profile
• Performance and talent management
• Governance and leadership transition
• Qualitative insights reflecting lived experience and future intent

Purpose, Connection, and Culture: The Family Business Advantage

• One insight from the study is particularly revealing. While compensation and role scope remain important, many non-family executives point to a genuine connection with purpose as the decisive factor in whether they stay. More than 62% of respondents cite strong company purpose and values as the primary anchor for senior non-family leaders. In a market where executive talent is increasingly mobile and financial incentives are often table stakes, this depth of connection gives family enterprises a differentiated, and difficult to replicate, advantage.
• Purpose and values operate differently in family businesses than in corporates. Rather than being shaped by shareholder primacy or quarterly metrics, they are deeply rooted in family identity, legacy, and long-term stewardship. This creates cultures that prioritise loyalty, quality, and reinvestment over short-term optimisation, while enabling a level of flexibility and responsiveness that is often harder to achieve in more bureaucratic organisations.
• At the same time, purpose does not replace the need for competitive reward. 32% of study participants cite compensation as very important in attracting and retaining senior non-family executives. Qualitative responses reinforce the need for family businesses to pair purpose with credible wealth-creation structures: long-term incentives, value-sharing mechanisms, or equity-like participation that align senior leaders with the enduring success of the enterprise.
• This combination creates a powerful, but demanding, proposition. It is a dual-edged sword: the stronger the culture and purpose, the greater the need for recruitment discipline. Success depends on identifying executives who can genuinely connect with the family’s values, operating rhythm, and relational culture, not merely tolerate them.
• That connection is also practical, not abstract. Family businesses can act quickly in downturns, protect jobs, and support customers and suppliers, drawing on patient capital and long-term horizons rather than short-term earnings pressure. Their closeness to local communities, often as long-standing employers, sponsors, and civic contributors, allows for more immediate care, visibility, and tangible impact, reinforcing the lived experience of purpose for those who lead within them.

Performance Management: The Credibility Test

Respondents consistently highlight performance management as a significant area of opportunity. Over 70% of leaders identify ensuring objective performance evaluation as the single greatest challenge in managing non-family executives. Among family executives, more than half cite the same issue, with almost 48% also highlighting the difficulty of holding family members accountable.

As one Chair observed:

“Applying professional performance management to family members working in the business is critical, but it requires a particular mindset and will. As a Chair, you have to be prepared to separate role from relationship, performance from legacy, and fairness from familiarity. Most families understand this intellectually; far fewer are ready for the consistency and resolve it takes to hold that line in practice.”

“The moment a business operates with two standards, one for family and one for non-family, it undermines trust. Non-family executives see it immediately, even when it is unspoken. Consistent performance standards are not about being harsh on family members; they are about protecting the credibility of the organisation and the integrity of the leadership team. Without that consistency, performance management stops being a tool for growth and becomes a source of quiet disengagement.”

The risk, Chairs note, is the emergence of two standards; one for family and one for non-family.

Boards and Advisers: Expanding Access to Leadership and Expertise

One of the clearest signals in the study is a pragmatic recognition that no single family, or executive team, can carry the full leadership burden alone. Nearly 98% of respondents say they would consider appointing a Non-Executive Chair, reflecting a widespread acknowledgement that sustained growth increasingly depends on access to experience, judgement, and perspective beyond the family.

Boards and advisers are increasingly being used to extend leadership capacity rather than simply to provide oversight. Family businesses are adding independent directors, chairs, and external advisers to access leadership experience they do not yet have internally, specialist expertise in areas such as scaling, international expansion, digital transformation, or sector regulation, and seasoned counsel during moments of transition or uncertainty.

While fiduciary oversight and risk management remain important, the real value lies in insight, challenge, and guidance, particularly where the organisation is growing faster than its internal leadership capability and where long-term stewardship benefits from informed, external perspective.

This shift also reflects an awareness of the risk of insularity. Without independent voices, even highly successful families can become inward-looking: recycling familiar assumptions and reinforcing established ways of thinking. Independent boards and advisers introduce constructive challenge, external benchmarking, and fresh perspective, helping families test decisions against broader market realities and avoid blind spots that can emerge in closely held systems.

Succession and Capability Remain the Systemic Weak Point

For all the progress family businesses have made in governance and oversight, succession and capability development remain stubbornly underdeveloped. Fewer than 38% of businesses report having a formal, consistently applied succession process, while almost 47% acknowledge that their approach remains informal or uneven.

Only 36% strongly agree, and a further 29% agree, that their organisation systematically assesses and benchmarks current leadership capabilities against future needs. Almost 29% remain neutral. This caution stands in sharp contrast to financial confidence, where more than three-quarters of respondents agree or strongly agree that performance targets are being met.

The result is an obvious gap. Leadership potential is frequently trusted to experience and tenure rather than intentionally developed, leaving capability risk latent but unresolved as organisations scale and complexity increases.

Non-Executive Directors point to a structural explanation. Compared with listed and private-equity-backed firms, family businesses are often slower to invest in executive leadership development practices that are commonplace elsewhere. Structured development programmes, external coaching, and systematic capability building, hallmarks of leadership depth and resilience, are less consistently embedded.

Interim Leadership: From Stopgap to Strategic Lever

Just over 50% of respondents report having used interim leaders, reflecting a growing willingness to deploy flexible, external expertise during leadership transitions, capability gaps, or periods of accelerated growth.

With fewer than four in ten businesses operating fully structured succession processes, interim leadership is emerging as a practical bridge: providing experience, objectivity, and momentum without permanent commitment.

Non-Family CEOs: From Fallback to Growth Strategy

Attitudes toward non-family CEOs further illustrate the shift underway. One-third of respondents cite business growth beyond family leadership capacity as the primary trigger for appointing a non-family CEO, with a further 20% pointing to the need for specific functional or industry expertise.

Context matters. For many families, appointing a non-family CEO is not simply a capability decision. It represents a profound transfer of authority and carries heightened emotional, relational, and governance risk. Relinquishing day-to-day control to an external leader requires thought, deliberate preparation, and often a willingness to let go of long-established practices that have defined how decisions are made. Informal “kitchen-table” decision-making, family-only escalation routes, and unwritten expectations can quietly undermine a CEO’s mandate unless they are surfaced, challenged, and consciously redesigned.

Respondents note that the most successful transitions are those where families are taken on a journey—moving from implicit, relationship-based governance to more explicit, transparent, and intentional systems of leadership and oversight. When this evolution is handled thoughtfully, families remain deeply connected to purpose and legacy, while non-family executives are enabled to lead with confidence, authority, and trust.

This is where the role of the Chair and Non-Executive Directors becomes pivotal. Independent Chairs and experienced NEDs act as stewards of the transition—helping the family articulate new decision rights, clarify boundaries between ownership and management, and provide a neutral forum for working through inevitable tensions. Equally important is the discipline of capturing these new ways of working: formalising governance protocols, escalation mechanisms, and role clarity so they are understood, repeatable, and resilient beyond individuals.

What Participants Say Works: Four Recommendations for Successful Appointment

The qualitative data adds important texture to these findings. Respondents are clear that succeeding as a non-family executive in a family business—whether as CEO or senior leader—is inherently challenging. The role demands not only technical and commercial capability, but a rare ability to operate within complex family dynamics, unspoken histories, and overlapping lines of authority. Many participants describe senior family-business recruitment as high risk, particularly when cultural fit is assumed rather than rigorously tested.

Against this backdrop, respondents consistently emphasise the need for a careful and disciplined approach to recruitment—one that blends judgement with science. Clearly defined authority boundaries emerge as the most critical success factor. Explicit role expectations, decision rights, and escalation protocols reduce ambiguity and prevent the power drift that often undermines otherwise strong appointments.

Finally, families underline the importance of alignment before the appointment is made. Successful transitions are framed not as a failure of family leadership, but as a strategic step in support of growth, stewardship, and continuity. Where this rationale is clear and shared, incoming executives are far more likely to succeed; where it is ambiguous, even high-calibre leaders struggle.

Participants also stress the value of specialist executive search firms with deep family-business expertise—and, critically, the time and capability to understand the family and the business at a genuinely deep level. Beyond candidate identification, effective search partners invest in understanding the family’s history, values, decision-making norms, and relational dynamics alongside the commercial realities of the enterprise. This depth of insight enables a more rigorous assessment of motivation, values alignment, resilience, and political acumen—factors that are decisive in family-owned contexts but difficult to surface through traditional interviews alone. Increasingly, respondents point to the importance of modern assessment tools—psychometrics, values-based diagnostics, and scenario testing—to reduce risk and improve decision quality.

Strengthened governance is the second pillar. Independent Chairs and Non-Executive Directors are viewed as stabilising forces who can support incoming executives, mediate tensions, and provide continuity during moments of transition.

Taken together, the message is clear. Recruiting senior non-family leaders into a family business is not a transactional hiring decision. It is a high-stakes leadership intervention—one that requires multiple layers of expertise, disciplined assessment, and a level of rigour equal to the complexity of the system it seeks to lead.

“In a family business, the search firm has to understand the family system as well as the role—without that depth, even the best candidate can fail.”

Endurance Is Designed, Not Inherited

The evidence from Voices of Family Business is unequivocal. The strengths that have carried family enterprises this far—deep purpose, long-term commitment, and close-knit decision-making—remain powerful advantages. But on their own, they are no longer sufficient.

As family businesses scale, invite non-family executives into positions of real authority, and operate in increasingly complex markets, success depends less on instinct and more on intent. Culture must be translated into leadership standards. Trust must be reinforced through governance. And legacy must be expressed through systems that enable objectivity, accountability, and continuity across generations.

Continuity, the data suggests, is not inherited by default. It is built; patiently, intentionally, and with leadership discipline equal to the ambition of the families who steward it.

The family businesses most likely to endure are not those that choose between tradition and change, but those that deliberately integrate both—pairing deeply held values with disciplined leadership practices, rigorous talent decisions, and independent perspective. In doing so, they move from founder-led success to institution-level resilience