Seventy percent of all businesses are family businesses in the United States, but only two thirds survive past the first generation. Why? There’s a myth surrounding family businesses that sets them up for failure. It’s wonderful to be able to work with your children and imagine them taking the reins some day. But it requires a careful strategy.
There is a big difference between working with your children and setting them up for succession. You need to know more about them and they need to know more about the business as well as the industry. As you and they learn what their strengths are, they need to go broader — to outside experience, even in a different industry, and deeper — by creating stretch goals, encouraging outside training, and working with someone who excels in that area.
To successfully bring your children into the business and prepare them to take over, start with these seven steps:
Take Advantage of Summer Breaks
Summer breaks are great times to expose your children to the family business. Bring them in as regular summer hires and let them get to know some of the employees and gain an understanding of how the business works. As they begin to gauge how interested they are in the business, you can begin to evaluate whether or not they are cut out for it. Many family business owners go astray by giving their kids more responsibility than they should have, or by shielding them from hard work. And don’t encourage a sense of entitlement: This is the perfect time for them to realize the base elements of the business, and realize the position doesn’t come from blood, but from hard work.
Don’t Bring Them in Right After Graduation
As a new college graduate, your child’s first instinct may be to return to what’s familiar by joining the family business. It’s a mistake. Graduates know they can get hired, likely have some experience with the business, and avoid the nightmare of looking for a job by working for the family business, but they lose a key growth opportunity. They need to find out what they can do and who they are. If you let them tuck back under your wing right away, that won’t happen. Send them off into the world to get some experience first, before they join your company.
Identify Their Strengths
It is impossible for your son or daughter to think and act exactly like you. If you’re the founder of the business, this may be even more difficult to keep in mind. But that could be to everyone’s advantage. While your children may not have the same entrepreneurial spirit it took to launch the company, managing and growing an ongoing concern requires different strengths and skills than helming a startup. Pay attention to the strengths and interests your children bring to the table. What do they like to do? What are they passionate about? Stay patient: even if your daughter shows signs of being a financial wizard just like you, she can’t yet match your experience. Give her the time and room to grow at her own pace. Also, avoid reminding your children you know so much more than they do — they need to learn and do some things on their own. If they learn something you didn’t know, or successfully deal with something you didn’t, let them know you’re impressed they one-upped you.
Expose Them to All Aspects of the Business
If you want to children to someday take over the top spots, they need to know what it’s like all up and down the ranks and in every area. Look at yourself: how much of each area do you understand? You may know about merchandising, production, management, buying, marketing, financial planning — it’s a long list that depends on the field. You may not be an expert in each area, but you likely know more than the average employee. Your children need that knowledge as well. Let them get their hands dirty and spend time in all departments, including accounting. In five to ten years they’ll be stronger, and the company will be better off, if they have this kind of familiarity.
Have Them Work for Another Company
Family Business Review research shows that one of the highest correlations to a fruitful succession is when the next generation spends time working outside the business. If your son or daughter is truly intent on joining the family business at some point, he or she should join a company that has some relation to your business. This is invaluable experience as your children learn about the industry from another vantage point, and learn objectively what they are good at. When it’s time for them to enter your company, have them take a job that matches their skills. Or, have them enter near the bottom until they demonstrate an understanding of the basics.
Encourage Them to Continue Their Education
Future successors need to keep learning all they can. The education depends on the type of work the company does and the type of work your children would like to do there. If your children are already involved in the business, encourage them to take courses that align with the company’s mission, attend industry association educational conferences, read industry and business magazines and books, and stay on top of their field. Learning also means staying humble, being a good listener and, most of all, volunteering to take or lead projects. Actively and passively assist them to excel in that area.
Set Them Up with a Mentor
Many successful businesspeople and professionals refer to their mentors as being critical to their success. In a family business, it’s the best way to impart that “secret sauce” on how to think strategically, read between the lines, and learn the tricks, shortcuts and habits that work versus those that don’t. Often in a family business, there’s a ranking of optimal mentors, from those outside the business but in the industry, to those inside but not family, to those both inside and family. One rule: Mom and Dad are the worst — you love too unconditionally to convey hard criticism, and it will be hard for your children to listen. Best to identify someone else in your company who would make a good mentor, and ask them. If you do mentor your own children, remember: you are not trying to clone yourself. The world is evolving, and your children will be operating in a different environment that requires its own decisions and actions. They need to be able to take the knowledge you impart, match it to the world they are in, and act accordingly.
Creating a strong foundation for your children will enable a far more successful and smooth transition as they begin to assume roles of greater responsibility. You can rest easy knowing there are no holes in their training or exposure. Having taken the time to set them up in the business right, you can start to sit back — or enjoy the pleasure of working side by side with the next generation.
Have you read?
# The World’s Safest Cities Ranking.
# Most Startup Friendly Countries In The World.
# Countries With The Highest Average Life Expectancies In 2030.
# World’s Best Hospitality And Hotel Management Schools, 2019.