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Everyone has heard the statistics about family business survival to a second generation – only 30 percent make it.
The chances of survival to a third generation are even smaller, about 12 percent.
There are many reasons for this, not all of them negative. Many family firms are sold to larger corporations, for example.
But if your vision is a multi-generation family business, then it’s never too early to include that precious crop of grandchildren – your legacy in life and in business.
Remember, just as some traits skip a generation, so might your best company leadership.
Take the long view – Many business owners focus only on the next generation in succession planning. That’s often a challenge in itself.
But in light of the statistics, it appears many companies would benefit from forecasting company goals and vision out an additional generation or two. Create an organization chart for that vision and then see which leadership roles are filled and which need to be developed.
Of course, it’s best to fill those roles with people who are both suited to and passionate about that particular career path. Developing the next generation of leadership requires a sensitive balance between the needs of the enterprise and the aspirations and strengths of the people involved.
Expose them early – Include your family business in the wide variety of activities and learning opportunities experienced by your grandchildren. These field trips can directly inform them about the business or use various functions as learning tools.
Counting inventory as a math lesson is an example. They can work side by side with other family members doing their own version of the task – designing, writing or bookkeeping. As you do this, their natural inclinations and gifts will bubble to the surface. One child might be attracted to motorized equipment; another may enjoy writing or drawing.
Being on site will also expose them to the interpersonal workings of the company. Watching how you handle a difficult customer or lead your team will educate your grandchildren in the so-called soft skills needed for leadership.
Create a career development plan – While joining the family business may be an option and not an obligation, certain experiences are key to successful succession.
Once your grandchildren are older and thinking seriously about their futures, give them summer jobs in the business. Like shadowing, this experience will either help confirm their career direction – or change it – as well as give them an in-depth education about business operations. They may have ideas for improvement. If you consider those, they will feel valued and committed.
Performing special projects for the business can help build the sense of connection and pride. Two examples are preparing a company history or planning a celebration of years in business. You can also ask them to explore solutions to a need or issue and then present their findings. This mini-case will provide a taste of what business ownership entails.
Beyond formal education, successors can benefit from communications and conflict-resolution training since a family business often has dynamics beyond a typical employment situation. Why not prepare them to meet the challenges struggled through during the first two generations?
Another pitfall in second and third generations is the loss of the entrepreneurial and risk-taking spirit demonstrated by the founders. This can lead to a loss of responsiveness to a changing marketplace. Entrepreneurial training or experiences can ensure the company receives a fresh injection of energy when needed.
A family business can provide unparalleled career opportunities for young people. Not only can they use their unique abilities and share in a proud legacy, they have an ownership stake that will benefit their own children. Very few jobs offer those perks.
With a thoughtful, open-minded approach, the next generation can understand exactly what is being offered and determine the best role for them. – Elizabeth Penney, M.B.A.