Teach Your Children Well: 5 Succession Strategies for Family Businesses
Here are five tips to help introduce the next generation to the family business.
This is an abridged version of an article that originally appeared in the Winter 2017 edition of Zions Bank’s Family Business Newsletter. Read the full article here.
Continuity in a family business is dependent upon the next generation, and it is the responsibility of each generation to prepare the next to exceed them. In enterprising families, there are many facets to preparation: leadership, ownership, independence and stewardship.
Because there are many facets to that continuity, the best place to start is with education. Skill development should start early with very young children.
“Work habits, attitudes toward the business, values, and relationships all take root in the soil of childhood and are formed over the years, long before successor development begins in any formal way,” write Craig E. Aronoff and John Ward in “Preparing Successors for Leadership.”
Following are five tips to help introduce the next generation to the family business:
Positivity is Paramount
The biggest impact in preparation for the next generation is development of a positive attitude. If employment is discussed at home as an opportunity for self fulfilment, problems to solve, goals to achieve, relationships to enjoy and responsibilities to honor, then children look forward to employment in any business. On the other hand, if employment in the family enterprise is discussed as a stressful, boring and stagnant duty with relationships with relatives who are hateful, then children foresee the enterprise as an obligation, a place where they must work but will never be fulfilled.
Often, children of entrepreneurs have an intimate knowledge of the family enterprise as they grow up. They spend time at the business playing or exploring while accompanying their parents. In later generations (especially generation three and later), the opportunity for teenage exposure to the business dwindles. The limited contact with the business may hinder the knowledge and perceived opportunity for that child. The innate understanding of exactly how the company is run or how products or services are rendered does not develop in the same way it does when children are around the business more often.
Create a Plan
Children can become involved with the family enterprise through after-school and summertime employment in appropriate areas. Employment education should include the following:
- Set learning goals each week.
- Communicate progress by asking questions such as: How is what you’re doing important to the company? Can you see a way to improve the process for what you do? Are you respecting others in their jobs? What are some actions that show respect? Do you have other thoughts about the area you work in that might be helpful for us to know? What do you see as the next step if you left this department?
- Provide feedback to promote the ability to listen and reflect upon areas of needed improvement.
- Allow college-aged kids to work in areas of interest or at other companies that may have similar skills needed for the family’s company.
Develop a Culture of Ownership
Family meetings are an opportunity for education and learned responsibility of the family enterprise. Parents can develop a culture of ownership by carving out time to create, attend and participate in their own family meetings. To increase interest and participation, invite the teenagers to develop a part of the agenda. Their involvement underscores the importance the family places on each individual’s involvement in the family business.
Keep History Alive
Storytelling at family meetings by senior generation members is a good way to educate and capture the attention of younger members. Stories of the early days — of mistakes made and small triumphs achieved — help younger members understand that nothing was ever perfect, that sometimes there were failures, but the family endured. Those stories create a sense of hope and wonderment.
If teens and young adults can develop a healthy attitude of opportunity in the family business, many of the other preparation steps fall into place. Preparing the next generation takes time and energy, but the rewards are immeasurable — both for the family and the enterprise.
Deb Houden, Ph.D., is a consultant with the Family Business Consulting Group Inc. specializing in communication, transition and next generation development.