How do you bring the next generation into the family business?

Business Leader Post, June 3, 2014

Thomas D. Davidow, Ed.D.

We all know the statistics:  85 % of all businesses in this country are family owned or family controlled; yet only one in three gets to the 2nd generation, and one in ten gets to the third.  It is an extraordinary statistic and makes one wonder why families continue to bring in members from the next generation with such low odds for success.

While I don’t have a well-researched answer, I can tell you from my experience that very little discussion, intention or planning takes place.  Members of the younger generation sort of "show up".  When asked how they got involved in the business, they all have the same story:  They worked in the business every summer, did odd jobs and it just kind of evolved. When the senior generation is asked how the next generation got involved, their answer is either that it was their children's choice, not their own,  and they were happy to have them; or that they brought their children in because they were not sure they could achieve the same level of monetary success elsewhere.

What is remarkable in all circumstances is the lack of planning. Planning seems to be a problem with family businesses whether it is planning for succession or planning for the next generation to enter the business. I believe that this lack of planning is the driver of such poor statistics for the survival of family businesses. The planning process for succession should begin before the next generation comes into the family business. The plan starts with questions, such as:  "What does the next generation need to be successful in this business? Do they need experience elsewhere? Why are they coming into the business? Do you need them? What education, skills do they need?  Are the reasons for entering the family business family driven?" And I am sure there are other questions as well.

If you have a dialogue with the next generation, and each of you begins to address these questions, you will, by definition, be starting a planning process; and hopefully, the idea of planning will be integrated in all you do. I guarantee that starting the planning process at the beginning will dramatically increase your odds for success.