Is the Next Generation of Your Family Business Entrepreneurial Enough?
Some points which I have my thoughts and questions on. My points will be based on SMEs (small medium enterprises) who are doing their best to survive and if you are someone who entered the business because your parents are getting old, or the parents asked them into the business, or you just felt it was your responsibility to take over.
I would think it is very different for someone who worked outside for many years and decided that they have interest in what the family business is doing and has entrepreneurial plans for it. Because it is like them already explored the world and this is the choice they personally made.
Which my personal take is the best way for a family business to survive.
It addresses a few points
great secret of business families is that they persistently promote the entrepreneurial spirit that led to their initial success.combination of ambition, sheer will, and the willingness to take calculated risks.on the tenets of entrepreneurial drive and diversification.
Question would be does the child have the entrepreneurial drive or interest in this area of business? Does it differ from business to business - if its a product that can be passed on (e.g. food, commodity etc), its totally different from that of one who passes down a service, ain't it? With the advent of technology and systems, services can be replaced in a wink of an eye, and sheer will and ambition probably would not aid in it, but instead a dabble in technology, then again do they have the expertise to manage it, and is this considered a calculated risk?
But doing that well is not easy, and there are multiple challenges to navigate along the way.Many family businesses are built around the legend of the entrepreneurial founder who persevered in the face of adversity.instill the drive required to nurture those values generation after generation.
1. Share the hard reality.
humanize the founder’s story, perhaps by describing a time when they had to go without during a particularly tumultuous period for the business, so that the next generation can relate to and learn from the founder’s experience. Dining table conversations are some of the most valuable opportunities business families have to exchange ideas with each other.The family members leading the business should talk with the next generation about what’s hard, how you are making decisions, and what doesn’t go well.
I am not too sure if this founder legacy story still is valid in the context of the current world. It depends on its relevancy. And by sharing how one went through its difficult moment in the past, would not help but instead have an opposite effect of being frustrating. But it extends a sense of comparison - and prideful effect - instead of empathizing and offering helpful advice. Instead with the expertise of what they have gone through, maybe they should review the current trend and market and have a healthy conversation on which areas are good to explore. And to suggest doing business conversations at the dining table is the worse ever. Dinner is for families to relax and just talk about random things or just bask in the comfort of each other and food. Also one point to note is that founders are usually very prideful creatures, but yes they founded and built the business to what it is, but if you are keen to groom the next generation, maybe hearing from them their concerns and listening then responding align with the concerns, rather than give an answer, or list other examples of successful family businesses whose children manage to turn around the business, in summary not listening to the concern and working together as a family but instead demoralizing them further by pinpointing their inadequacies. I think empathy is very important, because after all everyone has the business at heart, its important to acknowledge that. Everyone contributes in one way or the other.
In Summary for founders:
1. Open conversations with your children who are taking over
- Sympathizing with their concerns
2. Be Encouraging
- Explore their thoughts and use words like " Oh I came across,... Do you think its possible..."
3. Keep business talk out of Dining conversations
There is a time for it. And its not during eating time. There are other areas in their life that is worth talking about.
4. Stop talking about olden times and your success. Times are different.
5. Stop talking about the success of other business and their children. Unless its some idea that is worth exploring. Do it gently and do it kindly. No one deserves to be criticized when one is already trying their best. Appreciate them.
In summary for the children:
1. Prepare yourself for open conversations with the mindset to share and learn
2. Give mutual respect
3. Acknowledge your parents concerns as well
2. Test for viability
Indulging every half-baked idea that a budding entrepreneur has will not help them — or the business — in the long run. Ask smart questions and require well thought-out answers submitted through a clear process with appropriate deadlines. Hold ideas up to a “public standard” to see if they could attract outside interest. And if appropriate, have these would-be entrepreneurs pitch their ideas to outside venture capital firms — for the experience, if nothing else.
This I agree. And have heard of fellow peers who took over their family businesses. That every idea given is shot down. And they feel unappreciated. And have heard from the other side , the parents whom had their children entering the business. I would just say its all about the perspectives. For children entering the business, coming from a university education, where we are thought about business models, diversification and to always have new ideas and to propose them. That's how we feel we can value add. But we forgot. That's based on big corporations who have excess cash and also sufficient manpower to play around with. And that's why the parents always complain. They feel the children should get their hands dirty in the business, know what the business is about, then come to them with such suggestions. In short, either be that extra manpower to ease their load or earn some money and you can use the money you earn to do whatever you want. But first earn that money.
And we can see both parties are not wrong. Its important to learn the dynamics of the business because not every investment is suitable for every business, and its only by knowing the dynamics of the business that one can facilitate changes and sustain the change or the growth. But for us whom many companies have also complained about us being impatient and wanting to see results, I think it boils down to our confidence in our identity and that what we do or achieve is not our identity. We must be flexible, learn to be patient and calibrate our actions and its cost/consequences and learn through the process.
In summary for founders:
1. Give the child options to explore
2. Do not be harsh, but explain gently the rationale behind your thinking. Do not just say No or use harsh words which is usually the case.
In summary for children:
1. Get into the business, learn the dynamics
2. Come up with a solution that starts with a small project with minimal budget to prove the theory that it works
3. Source budget externally or maybe do a startup your own and incorporate it into the business eventually
3. Give “boosts” without micromanaging.
One of the biggest challenges for successful entrepreneurs who have built tremendous businesses is how to mentor their next generation without taking over. How do you balance giving the next generation enough guidance so that they can learn from your mistakes — but not so much that they dismiss all advice outright? Consider establishing a policy for yourself about the topics on which you will provide unsolicited advice, and those where you will not. Done effectively, a transfer of knowledge can carve years off of a new business’s development time and increase its likelihood of success. Done poorly, it can damage family relations if both sides are not clear on what would be valued and well-received.
4. Give an intrapreneur some breathing room.
Some of the best visionaries we know made their mark within an existing family business. Because they have the benefit of learning the lessons from the generation before them, they’re able to capitalize on that advantage by applying it to evolving market trends — putting the business at the forefront of a new market. If you have a promising intrapreneur, make sure to give them room to test out their ideas, to learn, and to grow — even if it’s not exactly how you would do it personally. Next generation intrapreneurs are often reacting to different market cues than what worked in prior generations. Stoke their talent and interests. It will ultimately be a boon to the family business if the next generation is engaged, driven, hungry, and enabled to create something of their own.
This brings me to another conversation I had with a family business child and parent. On how her child was unable to get the same outcome as her, despite using the same words, and gets frustrated with the child, which then leads to the child feeling even smaller. And making it worst, the child is no longer a child. Its an adult who is finding its footing in the world. Founders do not realize how networks are so ingrained in them, and that it is difficult to duplicate, and hence the success of the child in the company, is when they form their own business networks and form connections with them. They are thankful for the foundation networks that can sustain the business, but they cannot help but feel the clients always see them as a child of the founder, and compares them all the time. And the issue is many founders blames failure or lost deals on the child, which is also happening in the real world, but the emotional connection between a parent and a child, has a more detrimental effect. In the real world, there is an option to resign, or just heck care, but in a family business, it affects the relationship and any opinion goes straight to the heart, bearing scars which even if healed, is still a scar, and there is no option to resign.
In summary for founders:
1. Encourage them when they fail. That's what good managers do in the outside world. Not pacify them. But for them to fail and reflect with them on why. I understand its difficult because every revenue is a lifeline for the business,but still the long term benefits will be evident.
In summary for children:
1. Embrace every identity from every network. You cannot control what others think but you can control how you think.
These principles highlight how important it is to find the balance between offering wisdom and dictating how something must be done so that you stoke the next generation’s entrepreneurial fire. No matter how great the founding idea or business is, it cannot last indefinitely. Business families need fresh infusions of entrepreneurial drive and passion to adapt to changing environments, so they continue to thrive. And individuals need to test their own mettle and be driven to succeed on their own for their own sense of self-worth.
Perhaps most importantly, don’t be afraid to fail. Failure is only a tragedy if it’s a destination rather than a step along the journey. As tempting as it may be to have a safety net always in place, it can be more of a hindrance than a benefit to individual development and entrepreneurial drive in the long-term. Allow your next generation the space to take risks, to fall down, to fail. And if failure does occur, encourage them to learn from their mistakes, to recover, and to chart a new course.
My belief is life is journey for us to learn and explore. Its okay to try and fail, but always remember to stand up again and chart a new course. There is a fear to fail because of expectations of people or on yourself. or that lost of status tag to success or your identity that you hold so tightly to, but working outside or in your family business, life is a gift to enjoy. Do your best and be thankful.
As to whether we are where we are suppose to be, and why isn't the business working out how it should be, no one, even big companies, has the exact answers. Focus on the strengths of the business and see whether its viable, keep working hard, be thankful and keep learning and exploring. Every opportunity is an open door.
Good Experiment
For one seasoned entrepreneur we know, the idea of failure was as prized as the idea of success. He put together a collective fund for his six children to invest in entrepreneurial pursuits with no rules or strings, just a “training ground.” The next generation was astonished by the degree of trust he had in them. They promptly divvied up the fund into seven equal shares, one for each of them and the last for a joint venture later. Absent any structure or guidance, each stumbled in their own entrepreneurial attempt, all of which differed wildly (space rockets, surgical robots, a brew pub, and commercial real estate, to name a few).
Instead of getting mad when his children sheepishly reported their losses, the father asked what they learned in the process. Once the siblings peeled apart the lessons they learned individually, their combined experience led them to invest what was left in the fund in an innovative medical device, which turned out to be a success. Both generations agreed that losing money was painful, but ultimately it was also the best investment they ever made because they learned how to fail, recover, and work together. The experience and wisdom they gained navigating those hardships was worth its weight in gold, and has been especially useful during difficult economic times like the one we’re having today.
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