Many people find great joy working in a family business. Spending time with relatives and moving toward a common goal can be fun and fulfilling. Families who work together often feel an especially close bond because of their shared business interests.
However, for every family business that hums along on these shared aspirations, there’s another that’s disenchanted and unhappy. Family baggage has taken over relationships, the generations are at odds with one another, and neither the company nor its family employees are prospering. As one miserable family business employee sarcastically described his situation, “Our family puts the ‘fun’ in dysfunctional.”
To avoid this situation, it’s smart to start preparing the next generation of leadership early: exposing them to the family business, guiding them toward good choices and fostering healthy, fulfilling careers.
Teach your children well. Like a marriage, work relationships fare best when they’re based on shared values. For parents interested in bringing their children into a family business, establishing these principles begins at home. Work ethic and interpersonal skills are learned by observation. Keep this in mind as you discuss business around the dinner table.
Establish employment rules. Family employment policies serve as a great guide. These policies can cover such topics as who can work in the business, when they can join, how their salaries and benefits will be calculated, where their career paths start — you name it.
For example, some family businesses require all relatives to have a college degree or work outside the company for a period of time. Putting these requirements in writing takes the emotion out of employment discussions and lets the kids know exactly what is expected of them.
Treat relatives like anyone else. Many moms and dads have a hard time taking off the “parent” hat and putting on the “boss” hat at work. Either they’re too easy on their kids, letting them come in late or allowing them to be disrespectful, or they’re too hard, expecting them to do twice what’s required of other employees.
As much as possible, it’s best to treat relatives just like everyone else. This sense of equality creates goodwill among non-family employees, and lets the kids know that they are expected to toe the line.
Let them fail a little. One of the most common problems in family businesses is that the older generation is reluctant to let go. But at some point the founders must let the younger generation move into the driver’s seat. Otherwise, they’ll never learn to manage the company and make good decisions.
To accommodate this learning curve, let the children start making decisions early in their careers. Begin with fail-safe choices. Let the kids take some risks, endure the consequences of questionable decisions and gain management experience. In other words, get them ready to lead.
Remember, the family business is an asset, not an heirloom. Keeping it running smoothly requires more than just a hand-off to the younger generation. It’s not easy to smooth the way for the next generation, but hard work will pay off in an efficient, profitable business.
Start preparing the next generation of leadership early: expose them to the family business, guide them toward good choices and foster healthy, fulfilling careers.
Our firm works with many family businesses on succession issues. Please let us know if our Business Transition & Family Enterprise Advisory Services team can help you.
Article by: Paul G. Stringer, CPA, CA, FEA, Partner
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