Are your children ready to take over?
“Hey Dad, now that I graduated from college, I’m ready to take over the family business.”
Your child may not use those actual words, but in far too many cases, your child really believes he or she is ready to take over the business, or at least be crowned the new Vice President. Sometimes, parents are so excited about having a child follow in their footsteps that they ignore the obvious. Those parents do a tremendous disservice to their children by allowing them to come right into the family business without the appropriate readiness. As a general rule, an 18-21 year old simply cannot learn to be the boss unless they have had an opportunity to succeed as an employee for someone else. The better bosses in the world have learned that empathy, when dealing with staff can be critical, and it isn’t something that can be learned in a classroom.
Experience is truly the best teacher.
I've read that 70% of family owned businesses fail or are sold before the second generation gets a chance to take over. Only 10% remain active for the third generation to lead. I hypothesize that this statistic is directly proportionate to the readiness of that third generation. If the child slides into the business without being truly prepared for what that means, before they’ve had a chance to work for someone else, the odds are greater that failure will result.
“I wonder how much money dad’s going to pay me.”
Too many children come into the family business for one reason, and it’s in order to have immediate financial security, and a lot of it. I say, let them learn to have financial security somewhere else, from someone other than his or her parent. Successful people have passion for what they’re doing. As a parent in a family business, I would want my child to have passion for the business, then a desire to expand it and not just sit back and be content with the status quo and a nice pay check every Friday. That’s a hard task without experiencing the business world without mom or dad. I would never want my child to wake up at the age of 35 and come to the realization that they don’t like what they are doing and dread getting up in the morning. They feel stuck because they lack the confidence to go out into the world and earn a living. They’ve never had that experience. That fear can lead to such unhappiness, and on occasion resentment towards that parent.
“I hope dad doesn’t think I’m going to work the number of hours he did”
A successful family business will have a family business plan for the new member joining the operation. It doesn’t have to be a formal document. In fact, it might be best for parent and child to sit down together, with paper and a pen and write down any issues either think will affect the new partnership. Some issues to consider are things like compensation, work schedule, and expected duties and responsibilities. If consensus can’t be reached at this early stage there will be problems.
I strongly suggest that a part of the compensation package include some sort of commission. How does your child earn more money in the coming years? How do they earn stock? In turn, it's not fair for hard working children in the business to worry about what Dad or Mom might give them as a Christmas bonus, as they watch them get ready to leave for Florida for the winter. Conversely, the parent shouldn't feel guilty for not giving that bonus if their child hasn't produced as expected, per the original agreement.
When I first joined my family business I was the first person in and the last one to leave. Here is an opportunity to ensure that your child does the right thing. Your child won’t remember how hard you worked or how many hours you had to put into the business when you first started. Don’t assume your child thinks about how hard you worked or even cares. He was a child. If it doesn’t exist naturally it is your responsibility to model the work ethic you expect him to duplicate.
What department will your child work in? How will promotions be awarded? You might think the parent and child will know the job description on day one, but unless you write it down, you cannot expect what you don’t clearly ask for and articulate. What decisions can the child make without parental oversight and what decisions must be approved by the parent?
You won’t think of everything, but at least the basics will be covered – this ensures the relationship has a better chance to be successful. My son and I have a strict policy of not discussing business once we’ve left the building. Remember, at the end of the day, no relationship is as important as the one you have with your child.
Clear communication is the key to establishing proper expectations, both for performance and results. Make sure, before you venture into anything with a younger family member, before you get upset when you feel that your new employee isn’t doing things the way you did them, that you set your expectations. Be clear with what you need. Welcoming your child into your business without setting expectations, before he has a chance to find confidence within, is simply a recipe for disaster and not fair to the child.