Navigating Family Business Dynamics with the Next-Gen
Owning a multi-unit franchising business is complex. Add in the relational dynamics of partnering with a spouse, sibling, child, friend, or parent, and the complexities multiply. Studies show that 70 percent of family businesses fail or are sold in the second generation, and just 10 percent of companies survive into the third generation. These numbers can be alarming if you are the owner, employee, or family member employee associated with the business. However, you don’t have to be one of the statistics; you can take control of your future by developing and implementing growth, leadership, and family governance strategies.
A common obstacle many owners face is developing sufficient leadership bench strength to support growth and delegating leadership when the owner wants to shift some of their attention away from the business. When the family is involved in the business, it is natural to consider next generation family as owner successors. However, next-gen often lacks interest, focus, or the capabilities to lead the business. The following are common reasons why next-gen may be opposed to joining the business or stepping into a more significant role:
- Fearful of failure, resulting in a timid approach to authority
- Feeling “burned out” due to:
- Long-term exposure to family business operations
- Constant family dynamics “difficulties”
- Impatience when dealing with close relatives
- Lack of interest and motivation to be responsible for maintaining the business legacy
- No interest in the type of business or options it provides to fill career goals
The good news is feelings can change as perspectives progress. If your next-gen is showing little interest in the business now, their attitude may change in the future. Over the last 50 years of working with business owners, there have been countless circumstances when, after the next-gen has had the opportunity to explore their interests elsewhere, they have been drawn back by their desires to join the business. Interacting with the business as an adult is different from interacting with the business as a child or adolescent. An open dialogue about the values, vision and skills, expertise, and strategies to operate, lead, and manage the business allows the next generation to see it beyond a sandwich shop, diner, or pizza place.
The best-case scenario is for the next-gen family to work outside the business for at least two years. If they still don’t have a desire to join the family business after two years, support their interests and personal feelings. As perspectives change, there may be a place for them in the future, based upon how they continue to grow and how the business grows. Meanwhile, develop Family Member Employment Expectations, which outline the criteria to be considered for employment in the business. A few requirements in these circumstances include:
- You cannot fail into the family business; you must have a strong work history
- The organization must have an open position
- Compensation is competitive based upon the market rate of the open role
- Must have the Behaviors, Attitude, Skills, Knowledge, and Expertise required for the role
You can gauge interest and “promote” the diverse and dynamic facets of the business by engaging in an ongoing dialogue where you exercise transparency, elaborate on the company vision, and formalize strategies. In addition, ongoing dialogue helps the next generation understand the complexities of the business, expectations as an employee - and potentially one day leaders - and what their future may look like as a team member of the organization.
Understanding why the next-gen may not want to join or even take over the business is paramount in developing strategies for the organization. A commitment to developing leadership bench strength provides you options for whatever may happen in the future. Unplanned health issues, scaling for growth, and mentors for next-gen are all areas bench-strength shores up gaps in leadership.
We commonly hear from business owners:
- I don’t want to put any pressure on them
- I don’t want them to want this
- After selling, I found out they were interested; I wish I had known
The last thing you want to do is pressure family into the business when they are not interested. At the same time, you don’t want to deprive the next-gen of an option that could fulfill their interests. Communication is the best way to ensure everyone is aware of the opportunities and how they may satisfy their interests, and who knows, perhaps they will align!
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