Next-gens might feel that the older generation aren’t doing enough to help them develop a good relationship with the family firm. But they can take matters into their own hands. CampdenFB takes a look.
There is more to successfully taking over a family business than being given a big office and a few shares. Successions only work if the next generation feel a strong bond with the business. Such a bond doesn’t just happen, but can only be the result of concerted efforts and detailed plans, which have to be worked at for many years. So say two academics from Barcelona’s IESE business school, Josep Tapies and Lucia Cela, who asked next-gens how they felt about their family businesses, and wrote a paper about the results, titled A Model of Psychological Ownership in Next-Generation Members of Family-owned Firms.
Ownership, Tapies and Cela say, is a strong human emotion, and in the case of a family business it stretches into the past and the future. They talk about “psychological ownership”, and say that the ownership of a family business helps shape family members and “provides them with an existential sense of belonging to something greater than themselves.”
A feeling of ownership is powerful. But, importantly, it is not always positive. Among the next-gens that Cela and Tapies interviewed were some who loved their family businesses, but others who felt constrained by them. One described his as “a straitjacket”.
The older generation can employ plenty of strategies to help make the ownership relationship a positive one. Giving the next generation early exposure to the business and giving them a structured plan for coming into the business, for example. There are also things that the younger generation can do to increase the chances of loving their family business, rather than hating it.
Cela and Tapies suggest five:
• Know Thyself. Define life goals and a strategy for achieving them, in the short, medium and long term. Adhere to a clear set of values and strengths, as well as a personal mission.
• Know Your History. Develop curiosity about the history of the company. Delving into the origins of the family business may reveal the winning qualities of those individuals who turned their entrepreneurial ideas into successful business reality. This may serve as a source of inspiration, deepening a sense of pride and belonging. It may also provide the ingredients for future innovation.
• Find A Mentor. Find a role model or someone to shadow, who will impart leadership lessons, help develop skills and abilities, and be supportive of you when you are trying to carve out a professional role consistent with your life goals.
• Be Proactive. Be creative and innovative. Discover your own individual way of bringing prosperity to the company.
• Get Training. Undertake multidisciplinary educational programmes, to be prepared when the time comes for entry into the family business.
We asked four experts in family business to add their tips.
Juliette Johnson: Independent family business consultant
Some families have schemes to allow the family members to experience the business, to do holiday jobs and work experience and see it from within. As a member of the younger generation, you should encourage the older family members to allow you in to get a taster. The marketing department, for example, could be a good place to develop some work experience in an area you may have an interest, and a good opportunity to see the business from inside as well.
Some next-gens feel actively discouraged and their families put up barriers that prevent them coming in. There might be a rule that you have to go and work outside for a number years and have certain qualifications. But if you are looking for a post-university gap year job, why shouldn’t you be allowed to do a year’s graduate scheme in the same way that non-family members are? It’s important to have hoops to jump through, like working outside the business before committing to join. If you are looking to gain experience and insight, however, with no commitment from either side, then this could be a good way to do it, while also solidifying their relationship with the business.
One family I know gives all their next-gens access to the occupational psychologist who works at the company to help them work out their career choices if they want. They might want to discuss what subjects they should do at school, or how to get into a certain profession. It’s about supporting their aspirations whether they are in the business or not.
One key thing is not to decide on your path too early. It’s all very well saying that you are going to take over the business, but when you get older it might well be in a different place to when your parents started it or took control, and the qualities and skills needed to run it are likely to be different too. You need to make decisions for the right reasons at the right time, and not be influenced by the expectations or hopes of others. The more of a relationship you can build with your family business, the better decisions you will make in the long run, both as a possible employee and as a responsible shareholder.
Nicolas Kachaner: Head of family business at Boston Consulting Group
Being born with a strong heritage is something that is hard to deal with. It is true if you are the son or daughter of a famous person, but also if you are the potential successor of a family business. People really feel the weight of the situation, and it starts very early on. So ensuring the relationship is one of love is very important. Usually those who have had a good relationship were typically those who managed to create a distance initially with the family business, to work outside it, which enables them to demonstrate that they can stand on their own feet and perform outside the family business. This is as much for themselves as for the people in the family business. If you live another life and then come back, you tend to have stronger credibility.
Another way to make sure the relationship is one of love is to make the relationship personal – not with the business, which is an abstract entity. Of course, love is something that only works when it goes both ways, and it is equally important to be loved by the business. How do you do that? It starts with taking time to get to know the people involved, spend time at the rock-face, so to speak, at the very lowest end of the organisation. Get to know the people personally who work at that level and get to understand what they do. This human dimension is very important. Some people feel at ease doing this, others find it more challenging, but it is beneficial if it can be done.
Next-gens will probably get to know the senior executives one way or another, and that is something that usually happens naturally. But equally important is getting to know the clients, the business partners, the people you work with outside the company. Firstly, that helps you better understand your business and its key relationships. But secondly, there is no better way for a next-gen to feel proud of the family business than to hear what the external stakeholders say about it.
That helps develop pride, and pride is important for falling in love.
Michael Louie: Partner at D+H Group
A couple of strategies I have employed, with the goal of improved communication between generations, are around the idea that the new generation is very much socially conscious, and also are big users of social media. On the social conscience side of things, many family businesses have not set up formal philanthropic foundations and sometimes next-gens can start a conversation about doing that. Gen Ys are much more socially conscious – to a fault, the older generation might say – but if they are passionate about it, then talking about using money the business is generating for a cause they feel is worthwhile can get the attention of the older generation. Closing the circle, and giving back, is important for families in business.
The challenge is that the first generation might not be amenable to the philanthropic side. They might rather reinvest the money into the business. So a word of caution: those conversations can be challenging and you have to approach the topic carefully. This initiative is removed from the core business, which might make it a means to begin talking about the business in general. In family businesses, succession is all about communication and this can be a way to get some conversations and engagement around the family dinner table.
The second strategy is social media. A lot of businesses have not begun to engage themselves in social media, and if you are a business of any substance then that is the next opportunity in marketing. It might be as simple as starting a business-oriented Twitter feed or Instagram account. It’s probably not going to be a huge social media strategy initially; you can start it simple, get some presence on the net. This topic should be brought up in a gentle way, because of course the older generations might have little understanding of how social media works. They might think it is a waste of time and there can be negative connotations around it. But it’s a way for the next-gen to get a better understanding of the business. One way of really selling it, of course, can be to show some return on investment from the social media. That should engage the senior generation.
Stephanie Brun de Pontet: Senior consultant at the Family Business Consulting Group
Building engagement in the next generation is important – whether family members plan to work in the company or not. Shareholders who care are committed for the long-run, and will be more supportive of the company leaders. Also, when family members have a positive emotional bond with the business, the work of owning the company together can enrich family bonds.
For example, I recently went to the 75th anniversary of my family’s business. Walking around and feeling part of that celebration, shaking people’s hands and appreciating how many years they had worked for the enterprise, is an example of the sort of thing that can help younger family members develop an affection for the business.
Inviting a key non-family executive to talk about the business or the industry at a family meeting can help educate younger family members about the business, and gives them contact with company people beyond their family. It also helps them learn about and appreciate the leaders who are involved in the business, and the talents they have. That can build a rapport and a positive relationship with the company.
Philanthropy is another way to engage those who might not have an interest in business, to help them appreciate how their family’s enterprise contributes to the community beyond creating employment.
A challenge we often encounter around next generation engagement stems from a communication boundary between generations. The older generation wants to see the younger ones “step up” and seek answers or opportunities. But the younger generation will say that they don’t want to appear greedy and be accused of being nosy. Uncertainty around how much initiative will be tolerated can be a source of stress.
To overcome this, we sometimes suggest that the younger generation write a letter to the older one expressing their respect and interest, and then indicating a desire to learn about the business in order to prepare for their future responsibilities. To say, “We appreciate and respect what you have built and in order to carry on your legacy there are a number of things we’d like to understand. How might we work together to build our knowledge?”
Because everyone likes to get a love letter.