As Seen in Park Press: Smooth Seas Don’t Make Skilled Sailors
Why do family businesses have a high chance of dying on the vine when the kids take over? As you might guess, there are a multitude of factors; like the perspective and motivation of ownership (sometimes a sale is the goal from the start); key managers might have other plans as the business moves into the next generation; or the bench strength of up and coming managers might not be up to par. The list goes on.
However, in my experience, the biggest challenge to success in the next generation is entitlement. Often times the family name is on the building, which makes it is easy for many to fall into the false belief, because it is their last name it is equivalent to being a natural born business owner. You can guess how that plays out with key managers whom have most likely invested sweat equity into the same business for decades.
Consequently, what would you guess as the number one fear of current ownership when it comes to their children? Yep, entitlement.
What to do? Be intentional. We see owners whom are understandably mired in the day-to-day operations and are always working “in” the business. I suggest making the time to work “on” the business. Develop a clear, written plan of intentionally transitioning the business to the next generation. Remember to be a parent first. Have your children be responsible to managers other than yourself.
This can be a tricky situation for your managers, but we’ve seen it work with great success when roles and responsibilities are clearly defined up-front and everyone involved understands the expectations.
Give your children room to make mistakes, so that they can learn from them. You might think the seas were rougher for you when you started, maybe you began with a sketch on a bar napkin and now your organization spans ten states with 1000 employees. What started out as a one-person endeavor has become an incredible opportunity for your children to surpass a level of success and a standard of living beyond your wildest dreams. You would be right to think this way.
However, my suggestion is that the seas are just as rough now as when you began your business dream. Resist the urge to harbor your children in calmer waters. This will only enable a lack of confidence and it will not offer the opportunity for them to earn respect. You can give them a lot of things but respect is not one of them.
Helping your children understand they have a tremendous opportunity in the family business and not a birthright will give them the greatest odds of success. It will give them a feeling of having earned their way because they have worked hard. Intentionally developing a plan for the future offers the next generation the best opportunity to become great sailors on the difficult seas of business.
Dan Iosue is an Associate of The Rawls Group, a business succession planning firm. Dan specializes in dealing with the issues that must be resolved by business owners to implement succession strategies geared towards building business value. For additional information, visit www.rawlsgroup.com or call 407-578-4455
Family and Business alignment is hard to find when business issues liven up family dynamics.
However; with proper process, governance policies, and mutual respect built over time, a Family Business can thrive through multiple generations. Click the following links for more drill-down resources on Family Dynamics and Family Governance.