Not all business owners want to involve their family members in their companies, but many family-owned businesses intend to transfer ownership of the company to the next generation in order to continue or expand it. These owners need to know how to train their children so they will be able and ready to assume leadership roles in the company when the owner is ready to scale back or retire. This can be complicated, so here we will discuss ideas for bringing your kids into the business.
Family Business Transfers
Not all owners who want to transfer their companies to their children are successful. In fact, only about a third of family-owned businesses successfully transfer to the second generation. Bridging the transfer from the second to the third generation is difficult too, often even more complicated as more family members become involved either in management or as shareholders. Only about three percent of family businesses make it successfully into the fourth generation.
Bad management is the cause of so many business problems, but it’s especially difficult to manage family or to manage how family and other personnel interact with each other.
Better communication, conflict management, and education is the way to introduce family to the business and make sure that your kids are capable of working for its best interests and with the existing staff and personnel.
Involving Kids When They’re Young
One way that parents succeed at bringing their kids into the business is to introduce the company and its goals and values to them at an early age. Some children grow up competing with the family business for their parents’ attention and, as a result, grow to resent it. Parents need to expose their children to the company in ways that are positive and encouraging and will make them interested and enthusiastic about it. Practical ways to do this would be to talk about it at the family dinner table, bring kids to the business on special days, and get them involved in small ways, including doing small jobs, while they are young.
It’s vital that kids know that they have a choice to be a part of the family business, however. Many kids grow up feeling a sense of foreboding or even doom because they believe their parents will force them into jobs or roles they don’t like or feel capable of performing. Communication between parents and children about what their expectations are is key in avoiding this outcome. You can’t make your kids love your business, no matter how badly you want to.
It’s also good for parents to let their children “fly the coop” and discover what they can do outside of the established family dynamic. Let them go work for other people and other companies. This is good practice in many ways. First, it means that they will have to succeed without the crutch of being related to someone in a position of authority. To do that they will have to work hard, accept criticism, and be responsible. These are all good qualities to develop as a future leader of the family business.
Second, as a result of their successes, they will have an earned confidence they could not necessarily acquire working for their parents. They will also have the opportunity to witness how other businesses operate and manage their employees. More exposure to how the world works and how people communicate and deal with each other is always a good thing.
Training and Education
Too many owners put off even thinking about transition planning until they are approaching retirement, have a health issue, or some other complication forces the issue. The unfortunate result of that is that their kids are not ready to take over. Any kind of transition planning needs to be done early on to address weaknesses or problems that the business has. One of these would be a lack of training or education of the next generation.
Even if your children are not working for the family business, they can still be training so they will have the knowledge and skills they will need down the road. That might mean taking business classes, doing leadership training, or sitting in on board or shareholder meetings. It can also mean bringing them in as a regular worker or in a non-leadership role so they learn the business through and through, including its processes and procedures, products and service offerings, client base, values, goals, and culture.
Bringing Your Kids into the Business
It can be helpful for a business owner to assign their kids mentors within the business instead of appointing them or giving them leadership roles directly. The mentor can act as a buffer between the child and the parent as well as the child and other employees. If the mentor accepts the child and is encouraging about what he can do, other employees will be more likely to be accepting and encouraging too.
Expect this process to take time – between three and six years, experts say. In the meantime, lead by example and be available for your kids to learn from. If they do not perform, earn your respect or the respect of your clients or employees, this is when you learn that. You may find that they have talents that are of use to the business, but they’re not meant for a leadership role. Or you may have to let them go for the good of the company. This realization will give you the time you need to make other arrangements for transition planning.
Bringing your kids into the family business should be done slowly, carefully, and with a commitment to open communication and a respect for everyone’s needs. When it’s done right, there is a much better chance that a business transition to the next generation will be successful. If you would like further guidance about how to do this in your business, contact Prometis Partners today. That’s why we are here: to help make transitions succeed.