Next Generation Issues and Solutions For a Family Business

Children may not automatically want to be part of the family business. Sometimes children who have grown up in the business become bored, uninterested or lack the desire and drive necessary to successfully run the business in the future. They may actually take the business for granted, assuming it will always be there for them. Understanding this going in, a family business can more effectively plan for generational issues in the growth and future of the business.

Preparing the Next Generation

The questions to ask are: Why do children join a family business? What are their motivations?

-- To Influence the Family: This can be a good thing or a bad thing, depending on the kid's underlying motivations. A Family Business should foster a mission which positively influences family members, not provide ammo for the children to attack each other. Positive Influences include:

- Family Education Fund/ Emphasis on Continuing Education

- Foster an Atmosphere of Openness & Learning

- Set good examples for kids to aspire toward

- Ingrain the values of Business Integrity and Ethical Responsibility

- Foster & Promote Civic Duty

- Promote & Support Community Volunteer Work, Projects and Board representation

-- To Help the Family Succeed: Success for the Family Business should translate to the success of the Family. Future generations can have better lives, pursue their passions and be happier if part of a cohesive team striving for a better future for the entire family- not just those in the business.

-- An Opportunity to Further one's Career: It isn't necessary for every family member to remain with the business. Family members should be encouraged to pursue their passions, and the family business can be the proving grounds, the incubator, for family who want to pursue other careers or possible spin off another related business. Often, children find that after working for other companies early in their careers, the Family Business is a great career destination, allowing them to reach their full potential and constructively apply their expertise and experience.

-- Like the Family Business: Having a passion for the industry and business the family enterprise occupies is often a major reason why family members join the Company. What also plays into this is the requirement to work outside the Company to gain expertise and experience. When the family member returns to the family business, there is inherent respect for the opportunity given and the successful growth history of their predecessors before them. Having a firm understanding of what makes the family business special and unique creates a strong loyalty and passion for it.

-- The Challenge: If family members worked in the family business from a young age, were taught the value of a dollar, went off to college and to work for an outside Company for a several year period, then returning to the family enterprise can be a fantastic challenge to pursue. For this reason, it is important the family business provides qualified family members with a real growth opportunity, a challenge to inspire drive, loyalty and passion in their career maturation.

-- Sense of Duty and Responsibility: Some of the older children in the family's next generations may feel the duty and responsibility to serve their family interests and ensure future succession success of the business. This becomes apparent after the younger children become involved in the Company and sometimes the older child moves onto another career since his or her passion was extinguished by the stress and forbearance of fiduciary responsibility. Or, it is sometimes the older children who spin off a subsidiary or new Company after feeling they have accomplished their role in the Company. It is important to encourage the family's children to pursue their passions, no matter what industry, and gain outside experience; however, sometimes it is a necessity to have the older child assume responsibilities early on if resources are scarce in the Company's particular Growth Stage.

-- To Make Money: While this is often the number one reason family members join the family business, it is closely followed by the "Liking the Business" category. This relationship certainly makes sense: making money is a major requirement of any career but it is strongly linked to liking what you are doing, the passion factor. A well-prepared family business provides ample growth opportunities for family members to nurture their passion and be well rewarded for it through a competitive Compensation Package.

Considerations when planning and preparing for the next Generation in a Family Business

-- When family members are young, have them work on simple jobs on a part-time basis.

- This provides insights into the business, helps them understand the business from the bottom up, gives them a strong work ethic and encourages them to pursue and finish higher education.

-- Work for an outside Company after graduating from college to broaden training and background.

- If the family members worked in the lower ranks of the business before and during high school and during the summers in his/her college years, then outside experience can justify moving a family member into a higher position level upon entering back into the business.

-- Some tips when preparing for the next generation to join the Company:

- Never allow a family member to work in senior management until that member has worked for someone else for a few years.

- Rotate the family member throughout different positions to cross train, as well as, pinpoint interests and skills.

- Promotions only come when earned, just like everyone else in the Company.

- Devote time every day, preferably over breakfast, for face-to-face mentoring, teaching and training.

- Don't take business issues and matters back home.

- Reward the family member with responsibility so he or she can learn to manage the business in order to potentially take over or have executive level responsibilities in the future.

- Make sure the family member knows you trust him or her.

- Allow them to make mistakes and fail; give them room to grow and learn. Help them when asked; give them autonomy.

Next Generation Issues and Solutions

Here are some common main generational issues characteristic to family business operations and how to effectively deal with them.

-- The Business Owner Who Won't Delegate: A very common problem in family enterprises is the owner or CEO who can't let go. Many owners have a strong personal connection to the business which prevents them from allowing next generations to assume more responsibility in the business.

- The second generations are "entrepreneur successors" in training and the business owner patriarch or matriarch should be very careful not to stifle that passion and drive.

- An inherent attitude that an owner's or founder's shoes cannot be filled is common in a family business; therefore, it is vitally important to the future continuation of the business for a clear path toward ascendancy for the next generation be established through training, mentoring and delegation of responsibility.

- Best Advice: Hire a Business Consultant to help you work through these issues in order to develop a clear ascendancy plan that is fair, yet, challenging. Establish clear goals and expectations so next generation family members can strive to attain goals and career growth, without stifling their passions and drive. The Business Consultant can bring valuable experience and objectivity to this often controversial issue.

-- Next Generation Gaining Acceptance, Respect and Credibility: If a family member has worked from the bottom up during their formative years, gone off to college to earn their business related degree(s) and gained valuable expertise and experience working for an outside firm, give him or her the respect they deserve.

- Next generation members will work hard in the business if they are praised, encouraged and accepted as equals.

- Be careful not to set expectations too high, they should be in line with the family member's training, education, personality, skills and experience.

- A next generation member should express strong interest in the family business so the family knows of his or her passion, drive and interest level.

- The next generation member should know what their capabilities are and communicate that clearly to the family owner(s).

- A next generation family member should conduct a self-analysis of goals and skills:

* What are my strengths and weaknesses?

* What areas do I need to work on or need help on?

* What other parts of the business do I need to learn about?

* What are my leadership qualities? Are they sufficient?

* What training, mentoring and continuing education do I need to fulfill a leadership role in the family business?

* Am I happy working in the family business?

- Three Stage Training Program for Family members joining the business:

* Stage 1: Initial learning stage to fully understand all the aspects and divisions of the Company: Cross-Training.

* Stage 2: Specialization in a particular skill.

* Stage 3: Become a generalist, learn to manage, motivate and lead. Need to have strong strategic Management Skills.

- The next generation should have mentoring relationships not just with the family founder/ owner/ CEO but also with experienced business people in their industry, preferably one from other family enterprises. Long-term development mentoring support is a vital component in a next generation member's growth.

- A next generation family member should work outside the family business as this will increase his or her knowledge, experience, confidence, and most importantly, enhance credibility with family and non-family employees alike.

Frank Goley is a business consultant, business turnaround consultant and business coach for ABC Business Consulting. He is an expert in developing, writing and implementing business plans, business funding plans, marketing plans, strategic plans and business turnaround plans. He also offers complete solution business consulting, business turnaround consulting, and web SEO, marketing and development consulting. Frank is author of a business plan book, The Comprehensive Business Plan Workbook - A Step by Step Guide to Effective Business Planning, and he writes the Business Success Strategies Blog.

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The Family Business - No More Advice, Please

Family businesses have become the talk of the decade. Over 90% of businesses worldwide are family businesses we are told. Only 30% of family businesses make it through the second generation. Less than 10% make it through the third. Who hasn't heard this overused and often misquoted statistic or some other variation of it?

Family businesses underpin the economy of most nations. Some of our the largest businesses are family businesses. I struggle to think of a client in my practice that is not a family business in one way or another.

Yet family businesses are in trouble, statistics keep reminding us. Most of them are doomed to fail. They cannot handle the unique challenges that they face. They need help. And in business 'need' means 'market'. And this market has been tapped with a vengeance. A simple search for 'family business' on Amazon reveals hundreds of books on the subject packed with well-meaning advice, 'how to' guides and 'dos and don'ts'. We have MBA programmes on family businesses, family business networks, centres and institutes, family business magazines, family business seminars, family business websites and family business consultants. Accountants, lawyers, management consultants, financial advisors, academics and researchers have discovered The Family Business and are rushing to the rescue.

The problems plageuing family businesses have been conveniently sorted and categorised under different headings and a multitude of 'products' have been developed to treat every conceivable situation. These have been neatly packaged in various forms and include succession planning, organisational design, operational effectiveness, strategic planning, leadership and management, remuneration and conflict resolution, amongst a host of others.

So why do so many family businesses keep failing? Why don't they take all this professional advice and just grow and prosper? Why do they wither when they should be blooming? To start with very few family businesses are prepared to accept that they have a problem. Everyone wants to be the perfect family, or at least be seen as one. A family that lives in perfect harmony, where there is little discord, where mum and dad always have time for the family, where everyone meets at the dinner table, where children are brought up to be responsible adults, where all members enjoys open and intimate communication with each other, where spouses are accepted with open arms. We all want the world to know that we are "one big, happy family".

So how do you suddenly own up to the fact that your family business is in difficulty? Saying that your family business is in trouble is like admitting that you have problems in your family, God forbid. Not a very easy thing to do, particularly for the parents. So what usually happens is that the root of the problem is ignored and instead the focus is conveniently shifted onto the 'business' symptoms, the areas where the problems are commonly manifested -cash flow, financial structure, profitability, and employee motivation to name a few. Poor performance in any of the these areas is then blamed on other 'business' causes - lack of financing, increasing competition, inadequate accounting systems, inefficient procurement, the state of the economy. The consultants are called in, reports are drawn up, business plans are prepared, employees are replaced, and IT systems are changed.

The result? Many changes but very little change. The son is still frustrated and angry at his dad's reluctance to let go and let him manage the business. His constant criticism and disapproval is driving him crazy. The daughter resents her brother's attitude, hates having her ideas ignored, and cannot understand why her husband won't be given a job in the business. The consultant said it is better not to have spouses in the business. But its not fair, after all, her sister in law was not asked to leave the business was she? Her brother cannot understand what she's complaining about. After all she gets paid almost as much as him and she hardly does any real work in the business. Dad is sick and tired of all this bickering. Why can't Junior appreciate that his sister has kids to take care of? Doesn't he have any family values? How can they both be so selfish and ungrateful when dad has worked so hard and made so many sacrifices to leave them this business? Mum despises the business. Her husband is rarely ever home. Whenever she invites all the family home for lunch hardly five minutes elapse before the conversation turns to the business and an argument erupts. So they rarely ever get together outside the business these days and she really misses her grandchildren. She wishes he would just sell the damn thing.

The more I work with families in business the more I realise that family business consulting is more about 'families' than it is about 'business' and that issues are always much more complex than they seem. Problems in the business are often deeply rooted in relationship problems between family members, which are rarely apparent at the outset. There are no quick-fix solutions here. is the people relationship issues that present the toughest challenge and which need to be given the greatest attention. The management aspects - organisational design, systems policies and procedures, business planning, financing, cost reduction etc., are in my view, the 'easy bit'. This is not to say that these areas are not important or that they do not present any difficulties. But providing advice solely on the business aspects is superficial if the relationship and emotional issues remain unaddressed.

I recently read a book entitled Keep the Family Baggage out of the Family Business, by Quentin J. Fleming, which is one of the best sellers on the subject. 'Baggage' is a term used by psychologists to describe 'issues' that people carry with them. But how in all fairness can the family baggage be kept out of the business? The family baggage is there whether you like it or not and you cannot just force it out. A business is nothing more than a group of people trying to work together toward a common goal. Forget about 'human resources'. People are people, and people carry with them a complex cocktail of genes, experiences, values, beliefs, strengths, talents, fears, insecurities, likes and dislikes. You cannot ask people to leave their baggage outside when they enter the workplace. The baggage is part and parcel of their being, no less than their finger or toe. Good leadership means being able to bring out the best in people, helping them discover their strengths, helping them direct their passions and motivations toward the good of the business. To do this you need to get to know the people concerned. What are they really good at? What do they really want? What they may need is someone to help them sift through their baggage and sort it out, rather than make them throw it out of the window.

In a non-family business one can afford to do without all this 'hassle' and just opt to replace a 'high-maintenance' employee by another who demonstrates a more positive mental attitude and who can just get on with it. Even if this detached approach worked, and I don't believe that it does, in a family business it is a totally different story. The employee in question may well be your father, mother, son, daughter, brother, sister, spouse or in-law, and you can't just sack these people, can you?

So where does all this lead to? Is it all hopeless then? Certainly not, but the solution as I see it is not simply a question of advice. I have learnt to be wary of giving advice when working with family businesses. Advice is very tempting of course - the family members in the business are yearning for it, they need a solution and they need it yesterday. Advice does wonders for one's ego too. It makes the consultant feel like the expert, the family business guru. You just want to jump in there to the rescue, dispense advice, solve everybody's problems and exit heroically.

Unfortunately advice rarely produces the intended results. Sooner or later the advice is forgotten, the business plan is shelved, the relationship issues re-surface and the old habits kick in. The family members need to uncover the real issues and see the solutions for themselves. This is not something that can be achieved in a week. It is a process, a journey during which the door to communication is opened, fears and expectations are exposed, beliefs and assumptions are challenged, and existing mindsets are changed.

So my advice...er...I mean suggestion is this:

If you are a consultant working with family businesses make sure that you are equipped to handle the emotional as well as the technical, the people as well as the tasks, the 'soft' as well as the 'hard'. You are dealing with peoples' lives and the responsibility is immense. You cannot just bale out if things get messy.

If you are a member of a family in business don't expect the consultant to come in and whitewash over your problems. Don't expect him to implement your master plan for the business. Have an open mind and expect to be challenged. Demand a process not a solution. What you may discover along the way may well save your business.

Kenneth A Bonnici is a business consultant who works with family businesses. He has also undertaken research on business alliances and examined the hypothesis that family businesses tend to be less inclined to form strategic alliances. For more information please visit http://www.propatalliance.com

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Family Businesses Are BIG Business: Not Just "Mom and Pop"

What is a Family Business?

Far too often, when people hear the phrase "Family Business," they immediately conjure up the image of a little Mom-and-Pop grocery, shoe repair shop, or news stand. Perhaps they think of family businesses as quaint reminders of an era passed, or see them as heroic little David's fighting the corporate Goliaths.

That's just not so.

According to a study by the 2003 study commissioned by the Raymond Institute and Massachusetts Mutual Life Insurance Company, 89% of all business in the United States are family businesses, including some of the largest publicly traded companies in the country. In fact, family businesses represent 64% of the Gross National Product! Surprised? Do these companies sound familiar?

Take a look at these companies, and see if your perception of family business is changed: Wal-Mart (NYSE: WMT). With over 1.25 million employees and 4000+ stores, Wal-Mart is the largest retailer and largest private business in the U.S. Founded by Sam Walton in 1962 and his descendants currently own 38% of the company. I wonder how tough it would be to get something done if the Walton family was against it? If that's not family control I don't know what is.

Ford Motor Company (NASDAQ: FORD). In the world of publicly traded companies, it is often the case that when a single person or entity owns 5 to 10% of the stock, they can control the company. The Ford family still owns 40% of the voting stock in the Ford Motor Company. Read their company story - some of the Ford's have left interesting legacies - remember the Edsell? Nevertheless, no matter what - the Ford family calls the shots.

Motorola (NYSE: MOT). Founded in 1928 by Paul Galvin, Motorola made the first car radios, later moving into television manufacturing, and is now arguably the most popular manufacturer of wireless communications and cellular phone equipment. As companies grow requiring outsiders in various leadership roles, the names on the letterhead and faces on TV change, but the family culture is always there.

Considering the family business in the 21st Century we can think about a family business in two ways: Whether or not they are owned and/or controlled by a small group of people, or whether or not they act like a family in terms of how they handle each other, their employees, and their business.

The first scenario is obvious - the second, consider your workplace.

Invariably there are people who have taken on family-like positions that have nothing to do with their place on the organization chart. Someone is the person we turn to when we need help with a colleague, like our mom did when we had problems with our pesky brother or sister. Someone is the father figure, wise and thoughtful who pushes us to put aside our differences and get the job done. There are people like our favorite uncle - he doesn't seem to accomplish much, but he is such a great guy who could let him go? The parallels are endless.

And even large companies without the family component are operating with family systems. They exist in many business environments because its a well-known principle that family systems are successful at getting the most out of people.

Some Fortune 1000 sized companies are organized around a system of having no more than 150 people at one installation. They recognize the value of the family (teams) atmosphere and believe they are more important than the "economies" that could be achieved with larger business units.

Typically, when the experts consider the criteria that characterizes and organization as a "family" business, they look at these three characteristics:

A single family controls the company's ownership.
The controlling family's members are currently active in top-level management.
The family has been involved in the company for at least 2 generations, or it appears they will be.

Not all three must exist, but all typically do. The huge misperception remains, however, that all businesses run by families are mom-and-pop. This couldn't be farther from the truth.

Challenges for Privately Held Companies.

I've given examples of family businesses that have grown into giant, worldwide corporate entities. But what about the privately held family businesses who stay out of the public's hands, companies you couldn't buy stock in because it's not for sale? Can they compete against the Fortune 500?

Cargill Incorporated. Headquartered in Minnesota since 1865, Cargill is the world's largest privately held company. Its 95,000 employees buy and sell commodities with operations on six continents. Cargill and MacMillan descendants have run the company for five generations, with family members owning 85% of the company, and key employees owning the remaining 15%.

Koch Industries: This privately owned company with over 11,000 employees in Wichita, Kansas, owns a diverse group of companies engaged in trading, investment and operations around the world.

Clearly, these privately held companies are playing in the big leagues. No Mom-and-Pop shops here. With publicly traded companies making up such a tiny percentage of all businesses it should not be a surprise to us that this is the case. In fact there are over 30,000 privately held companies in the US with annual sales of over $25,000,000.

Typically however, since the family owned companies are not continually looking for investors money, and because they do not have a public information staff - to keep their name in the media and hold their per share value up - we never recognize their dominance.

Common Ground.

What do these privately held companies have in common with large, publicly traded businesses?

When it comes to the problems associated with getting along and working together, they have exactly the same issues that any large company has! And, focusing down through smaller and smaller companies, it becomes clear that the problems are the same at all levels of business.

And bigger companies don't necessarily mean bigger problems.

From a financial angle, smaller, privately held companies have exactly the same stumbling blocks as their megalithic counterparts, but the situations can be even more intense, and the consequences even more dire: After all, its one thing if you're losing stockholders´ money, its quite another when you're losing your own!

So, what's my point? Well if you are a member of a family owned company, you already know this stuff. I'm really preaching to the choir, aren't I? When I meet someone for the first time and they ask me what I do and I say "I work with family businesses" - many of them will launch immediately into their story - how their great grand father came to the US with only his clothes on his back and a carpet bag full of samples from the family business in the old country and on and on the story goes.

This article is actually for the rest of you. Those of you who thought (before you began reading here) that family business and mom/pop businesses are the same things. Those of you who wish to serve this huge audience, now that you are beginning to see the potential, but are not sure how your experiences with government agencies, the university, and big companies will translate to Main Street.

Business is Business.

Its not about Mom-and-Pop. Business is business. It's human nature to want to snag the huge multimillion dollar sale to the one giant company in your area, but the regular mainstream businesses in your neighborhood are the ones that will benefit the most from your experience and expertise (and vice-versa). With no committee meetings, board approval and endless request for proposal requirements.

For example, there are far more opportunities for conflict resolution professionals to build their client base and reputation in the family business arena than in the publicly traded arena. There are many more insurance prospects for $500,000 policies than $5,000,000 policies. And since 755 of all companies have fewer that 25 employees - there are many more opportunities among them.

Professionals of all kinds will find a greater number of opportunities among family businesses than the public companies - there are so many more of them. And when you don't get the appointment, or you don't make the sale, or a client drops you in favor of someone else, it won't be fatal - they'll be easier to replace than that single giant client you've spent your life looking for.

Fewer than 50,000 companies are listed on all the stock exchanges, but there literally millions of companies that are not. And "privately held" don't necessarily equate with small profits: Over 20,000 privately held family business in this country have over million dollars in annual sales!

So, I ask again, how are they different? We've seen that, from a business standpoint, they are alike; same regulations, same structures, same challenges, etc. But family business means that people are related. And you can't just choose, when the going gets rough, to stop being related.

People are often forced into situations where they must work cooperatively in an interdependent, long-term relationship with people they wouldn't have necessarily chosen to work with, and they can't (or won't) easily leave. People need to be able to get along with their family members at work, because they will need to get along with each other outside of work.

In addition to the standard business angles, people in a family business are in the unique situation of having to juggle family and personal dynamics with other on-the-job stresses. For example, a family member feels that the matriarch or patriarch loves their brother or sister more, and gives them preferential treatment at work.

Or a brother-in-law with an advanced business degree is passed over for president in favor of the son, who can barely add a column of figures! Mixed messages come from the senior generation often keep one group of people thinking they're entitled to something that they are not going to get.

So, if you're working in a family business, you've got all of the issues associated with managing a business, getting along with people you may not want to work with, a lifetime of the personal baggage that comes with any family, and the knowledge that one day, all of this will be yours.

And it might be yours sooner than you think! Not long ago The Wall Street Journal featured a survey on the transition plans of business owners. The great majority of owners of family-owned businesses see their businesses continuing in family hands.

In fact, 9 out of 10 family leaders said that the family will control the family in 5 years. These are significant figures when you consider that 39% of businesses will experience a leadership shift in the next 5 years, and 56% in 10 years, as today's leaders retire.

Family Businesses and Professional Solution Providers.

Emotional issues often overrule logic in the family business environment, and by learning about the advanced emotional challenges of family businesses, becoming knowledgeable in the techniques of conflict resolution can provide valuable assistance. And it will greatly enhance your reputation as someone who understands them (the most important element in any relationship).

All of the business issues; the management issues, the human resource issues transition planning issues-- are exacerbated by the fact that the entire process is highly emotionally charged.

Someone who understands simple conflict resolution techniques has a huge advantage over their competition, regardless of advanced degrees, professional designations, etc. They are recognized as the ones in the best position to help the company create an atmosphere where productive planning can take place.

Based on the principles found in the landmark self-help mediation text, "Managing Differences", each of us can learn the simple process of helping our clients manage their long-term family/business interdependent relationships. These are strategies that will help people work together in the long run. Integrating them into your work will allow you to help your customers develop the common goals required for an atmosphere where active planning for the future can take place.

Simple Idea, Unlimited Possibilities.

The idea is this: if you can combine your professional knowledge with conflict resolution skills and developmental coaching skills, the potential market for your services is huge. There are virtually unlimited possibilities to add to your business, your satisfaction, your client base, and your revenue by reaching out and going after the family-owned businesses in your area. they're easy to reach because they're everywhere. And once they understand how you can help them, they will reach out to you to help them.

Sure, everyone wants the big deal-- The government contract, the training contract with the megacompany. Typically, those organizations take weeks or months or years to make decisions. Numerous meetings, an unwieldy chain of command, and decision by committee all slow things down. You will have made a huge investment of your time and effort before you even get the green light, if you get the green light.

Smaller, family-owned or privately held companies can make snap decisions. They can determine whether they like you or not, whether they think you can help them or not, they can say yes, and they can write the check. They can make these decisions without having to ask permission.

They can be found at the Rotary club, chambers of commerce, and through tens of thousands of trade associations located in every corner of the country. And if they like how you operate they'll refer you to their friends whose family company is dealing with similar issues - a never-ending stream of contacts.

Business owners who think strategically, plan comprehensively, and execute flawlessly will certainly outpace those who simply set goals and hope for the best. If you want to be even more successful in the future than you are today, a business to business mastermind group will show you how stay focused on what's important to you, you family, and your business.

Effective business leaders know that when you make better decisions you get better results, and that their best decisions are those made in collaboration with people whose success they respect and whose opinions they trust. It is universally true that when we harness to power of our peers, we make better decisions that are the keys to higher profits.

Your current and future success depends on your ability to consistently make better business decisions. Click below now, watch the video and listen to the brief audio to learn how your peers will help you make decisions about the directions you take and the plans you make with greater confidence. http://www.21stcenturymastermindgroups.com/introduction Your self-managed business to business mastermind group does not require outside experts or professional facilitators, and there are no meeting fees.

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