How To Increase The Odds For Success In The Third Generation Family Business
By Kyle Danner - February 22, 2016
Many family businesses fall apart when the second succession happens or when cousins and extended family members enter the management structure. The reasons are varied, but communication, lack of structure and no family/business boundaries are oft-cited culprits.
With the third generation, more people means more complexity. Thoughtful planning in how family members connect with one another and engage business advisors is crucial.
Another generation means even more family members to keep in the loop. An annual family meeting where family and business concerns are shared keeps everyone engaged and informed on critical issues.
A family meeting should not be confused with a shareholders meeting or board of directors. A family meeting is about maintaining and building relationships with one another in a structured and meaningful way. They provide a venue to air grievances and for members to address conflict with one another. Activities that remind family members of their shared values and build bridges across generations strengthens bonds.
Families by their nature turn inward which can be reflected in the business. That can be a positive given the loyalty the family members have towards one another and those who work for them. However, it can lead to blind spots and tunnel vision.
One way to avoid this is to engage outside advisers beyond the business’ attorney and accountant. A board of advisers composed of non-family members can help uncover those blind spots and expose the family members to fresh ideas. They can relieve the pressure family members feel that they must have all the answers. Depending on the size and structure of the company, and the family’s goals, advisory boards can be small and informal with just a handful of advisers, or much larger.
Bringing it home
Every family and business is different, but it’s clear the long view is needed for planning. That’s hard to do when a founder is laser-focused on keeping the doors open and providing for the family. As a family grows and the daughters and sons take charge, there’s a risk that family members not active in the business, such as in-laws, may feel isolated. Staying connected becomes even more important with the third generation since more family members are involved.
Whatever generation your family and business are in, taking the long view and establishing clear boundaries provides opportunities to build support and resources that can be drawn on to meet any challenge that may arise.
Photo Credit: iStock.com/vandervelden