Bringing the next generation of family members into the family business can be both an exciting and scary time. For the senior generation it is an opportunity to continue a legacy while sharing an experience with those closest to you. For the next generation, it is an opportunity to become an integral part of something that was always in your life at a peripheral level. Either way you look at it, bringing the next generation into the family business requires careful consideration and constant communication.
I recently had the wonderful opportunity to join my father in our family business consulting practice. The following is a meta-level view of our experience as well as some thoughts on how to increase the likelihood of a successful integration of the next generation.
Communication is Key
It is critical that both the senior generation and next generation communicate their desires, concerns and expectations with respect to the family business. This doesn’t just take a place in a quick conversation at Sunday dinner, but requires deep thought at an individual and group level with all key stakeholders, which in this case are those most affected by the move (spouses, mothers, fathers, siblings, other family members in the business).
When my father and I considered working together we each developed a “Pros and Cons of Working Together.” This wasn’t on the back of a napkin but rather resulted in a four page synopsis of what each of us felt the experience would be like as well as what was needed for a successful partnership. Here are a few examples of what we wrote down and discussed in a family meeting with our spouses. Pros:
The sheer joy of working with my son/father; the pleasure of growing, learning, and creating together
The opportunity to share more of our lives and spend time with each other beyond the golf course
It provides a transition/exit strategy yet allows for continuity of our consulting work
The chance of putting our relationship at risk
Difficult to exit if it doesn’t work out
Risk of enmeshing our family and business relationships – clear boundaries of partner vs. father/son
Is this what my father/son wants? Why? Really understanding the depth of our desires
Ensure that this does not make son career dependent or financially dependent on father
What if it doesn’t work? Need dialogue in advance as to what might cause that and how to avoid and/or handle it
Establish a Business Relationship
Although this is family, and blood is sometimes thicker than water, bringing in the next generation still needs to be treated as a business relationship. It is important to manage the expectations of roles and responsibilities upfront as this will help reduce frustration and disappointment down the road.
After our family meeting to address the pros and cons, which resulted in a decision to move forward, our next series of meetings was to discuss roles within the company as well as meet with our lawyer and accountant to formulate the new company structure. These series of meetings included addressing the following criteria:
Day to day responsibilities
Buy/sell agreements – in the event my father passed on, I didn’t want to be in the position of having my mother as my partner and vice versa was true for my father and my wife
Monitor the Progress of the Transition
Although the initial hard work has been addressed, the transition is in no way is complete. Think of ABC - “Always Be Communicating” when it comes to making a transition or change in the business. As this may be the first time that both generations have worked together in a business environment, it is very important that the senior and next generation continue to communicate around all aspects of the transition. Here are a few examples of areas that you want to be conscious and continuously reflective of:
Roles and responsibilities and how they change and expand
What’s working and what’s not working for the business and the family and especially in our relationship with one another
What adjustments need to be made in order for our partnership and ultimate transition to be successful
As I went through this process with my father, we agreed that we needed to be totally open and honest with respect to how this new relationship was working on both the business and family front. As this was the first time either of us had worked together, we needed to ensure that our expectations of each were in synch and be willing to reset expectations if necessary. I think this played a critical part in the beginning of successful business relationship as well as even stronger family relationship.
I encourage your thoughts and comments on this approach.