Many businesses that are just starting out typically don’t have a solid plan on becoming a multi-generational family business. Their plans primarily focus on growing their business and ensuring the business model is successful. Businesses often find themselves in this position when the next generation starts showing an interest in the family business.
|Ed Hart, Director of First Bank’s Center for Family-Owned Businesses
For many multi-generational family businesses, however, the next generation plays a vital role in their long-term success. Ed Hart, Director of First Bank’s Center for Family-Owned Businesses, said, “We spend so much energy on, and give so much attention to, the idea of how to engage the next generation in the family business. However, it’s also important for the current generation to make working in the family business appear very attractive to the next generation so they will take the steps needed to prepare to take over the business.”
When the next generation starts showing an interest, it’s important to recognize, engage, and nourish this interest to help the next generation become a valuable asset to the business now and into the future.
Engaging the next generation requires more than communicating with them about the business. It requires learning and understanding what is needed in order to bring value to the company. Some specific areas to consider when engaging and developing the next generation include fostering the needed skills and education for involvement in the family business, determining what the desired characteristic traits are that will contribute to the success of the business, and what external opportunities are available prior to joining the family business.
Skills and Education
For some family businesses, the next generation takes an interest in the business at a young age, often allowing the child the opportunity to work at the family business during their free time or over summer break. Hart added, “Family business leaders should give their children every possible exposure to the family business as they are growing up so that the next gen can have an idea of what working in the family business might look like when their time comes.”
Additionally, it’s important for parents to ensure that their child has an opportunity for formal education. A formal education can help expand their knowledge and prepare them for involvement should they one day decide to join the family firm.
Read more at Family Business: Grooming The Next Generation
Characteristics and Traits
When it’s time to pass the business to the next generation, it’s important to ensure the successor has the desired traits and characteristics needed to be a successful asset to the company. The successor should be able to communicate effectively, have a growth mindset, and be goal-oriented. “Great leaders have figured out how to engage others,” added Hart. “It’s often said about great leaders, ‘I would walk through a wall for that person’. That is largely because of the ability to inspire, to motivate, to celebrate successes, and to turn mistakes into teachable moments.”
Consider what other traits and characteristics are desirable and work with the next generation to help further nurture and develop them.
While the end goal might be the next generation being involved in the family business, it’s ideal for them to consider seeking external opportunities as part of their education and training. “It’s highly recommended that the rising generation work outside of the family business for a few years prior to coming into the family business. This gives them the chance to work with various personalities, have a chance to learn best practices from other companies, and move their way up to a level where they will, possibly, come into their family business,” he said. “Showing they have earned a position in the family business will often make a significant difference in how the existing employees, and other family members, support next gens coming into the business.”
Seeking external opportunities prior to joining the family business can help develop the person professionally, as well as give them additional knowledge and experience.
If your son or daughter loses interest and/or determines a career independent of the family business is a better fit, then read: What if No One in The Family Wants The Family Business?
As the next generation starts to show an interest in the family business, it’s critical that it’s being recognized, they are being engaged in the business, and are properly groomed for future leadership. Keep in mind what skills and characteristics are needed to lead the business effectively and help the next generation develop them further.
For assistance on preparing your business for the next generation of leadership and building a family legacy, reach out to First Bank’s Center for Family-Owned Businesses.
Originally published on May 5, 2021. Article has been updated.