Getting the Next Generation Ready to Run the Family Business

 by Dr. Patricia A. Frishkoff
Past Director, Austin Family Business Program, Oregon State University
www.familybusinessonline.org

You’ve built a successful business – let’s say it’s a nursery – and you hope to pass it on to the next generation.But you’ve seen succession fail, down the road and across town. So you wonder – why does the transition work in some family businesses, and not in others?As with nursery stock, success grows on strong roots.

Passion.Does the next generation perceive and understand the passion of the senior generation?

We used to visit businesses on our vacation trips when I was a child.That was due partly to our family farm: my Dad and Grandpa knew a lot of people, plus we really couldn’t afford to pay admission to amusement parks. I loved those visits.It was partly about the interesting work that the people did.But, it was more about the performance that the owner gave as he (sometimes she) showed us around.For the eyes, gestures and voices of those owners exuded passion – deep love for the business and their work. 

But, the reasons for that passion aren’t always clear to younger family members. It’s the job of the senior folks to explain.Have you told your family the legends about the founding of the business?Do they know who the guys are in the historical photos?We don’t tell stories much these days.Everybody’s too busy with cars, TV and the Internet.But make the time, for through hearing the tales, children are likely to recognize that the business matters, and may begin to understand why.

Have you ever given a VIP tour (like the ones you give me) to family members?If not, the only time they’ll hear about the nursery operation is when you complain over the dinner table (if you find time to come home to eat with them).Once they’ve taken the tour a few times, let them be the tour guides.

Education.Does the next generation have the fundamental intelligence and technical capacity to take the business into the new millennium?

The next generation of leaders in the nursery industry will have to be smarter than those running operations today.Why?Because the business won’t make it otherwise.Take changes in technology, add environmental concern, mix in government regulation and top it off with competition from around the corner and, increasingly, from around the world.Unless the next generation can cope with the day-to-day running of the nursery business plus all of the above, they’re doomed.So, one of the tasks for the senior generation is to define a set of rules – RULES FOR INVOLVEMENT – requirements for next generation family members who are interested in joining the family business on a permanent basis. 

Must the next president of the company have a college degree?I say, yes – for reasons of maturation and time management, as well as learning to learn and enhancing communication skills.It’s also a test of commitment.

Does it have to be in agriculture or horticulture?That depends on how specifically you want them to prepare.You might specify that the degree be relevant and directly applicable, and require that candidates clear choices with the Board of Directors if they’re uncertain about fit.

Experience.Why would they go to work in another company when there’s so much work that needs to be done on the new land you just purchased?

I consider experience outside of the family business to be even more important than education.All kids make mistakes early in their careers, and it will be much easier on yours if they do it in someone else’s operation.If, at 22, Johnny puts the wrong fertilizer on the new plantings, and they all die, his mistake will never be forgotten.When he’s 44, an older worker will still judge his performance on this early mistake. 

But, it’s more than that.Good outside experience builds self-esteem.Young people learn what they’re good at and what they like to do.Hopefully, they receive honest performance reviews and praise for work well done.In many family businesses, family members are never reviewed, except through parental nitpicking.

Plus, they’ll learn some tricks, and bring good ideas back to your operation.Earning respect in a family business is tough if you are the son or daughter of the owner.Everyone is watching for the young person to “fall on their nose.”When it happens, a certain remark will allude to a job obtained “only because he had the right last name.”Therefore, young people need to come to the business highly skilled, with an understanding of what the business world is like.

Does the experience have to be gained in the same industry as the family’s business?Not necessarily.Activities that involve production, marketing, seasonal peaks, agriculture would all seem to qualify.After all, your competitor down the road probably isn’t eager to hire and train your kids.I’d recommend 4-7 years, with at least two promotions.Let your kids find their own first jobs after college.After all, if they can’t find jobs, what business do you have hiring them?

Opportunity to shine.What position makes the most sense for your son or daughter when they finally join your business on a permanent basis?

Hiring kids for part time and during the summer is great.It teaches them the value of work and provides money for activities and for school.Find tasks that they can perform well, and show them as much of the operation as possible. 

Hire them permanently only if (1) they’ve met your requirements and (2) the business has a genuine need for their services.Putting someone on the payroll just because they need a job is a welfare system, not a sound business.

Suppose your daughter is passionate about your nursery operation and she’s met the stated requirements.She’s earned a degree in business and economics, and worked in a finance office for a large manufacturer.You’re looking at a future based on high growth and heavy marketing – maybe even sales on the Internet.Do you assign her to accounting or marketing for her first position?Here’s my test – where will she shine?Her first assignment should be one where she has considerable experience and can produce results quickly.Remember, she’s got to prove her worth!I’d suggest accounting, maybe enhancing her computer skills on the side.If she’s going to lead the company someday, doesn’t she need to learn about marketing?Yes, of course, but why sabotage her start by making it hard for her to be on the fast track.Wait until the day a key employee comments about how bright and capable she is, then think about her training in the marketing arena.

Once she’s on board, think about upcoming trade shows.Why not take her along and introduce her with pride to all the key players in the industry?And, next time they ask you to be on a panel, suggest her in your place.Provide opportunities for her to escape your shadow.

Commitment.What kind of commitment should the next generation make when they join the family business?

Have a heart-to-heart talk with your kids, when they indicate interest, because the commitment that you ask for is unlike that in any other career.The commitment to family business is for a lifetime.And, unless you have an only child, it’s also a commitment to family – to working together as a team and to running the business for the good of all.Stewardship of the land and stewardship for the family. 

Brady worked in his parents’ nursery operation, had a fight with Dad, and quit.He bounced from job to job.After three years, he asked his folks if he could come back.They loved him, and wanted him near, so they agreed.Then one day he took a two-hour lunch, with the office secretary, and didn’t understand why everyone was up in arms when he returned.He didn’t like “being under the gun every second.”That’s why a clear understanding of the lifetime commitment is crucial.

The mark of the next generation.Will the successes of the next generation be timely and visible?

Young family members sometimes run into opposition when they propose changes in the way the nursery operates.But we’d still be plowing fields if a “why-change-what’s-not-broken” philosophy were always applied.One of the challenges of succession is for the next generation to make its mark, to move the business forward, without implying disregard or disrespect for the successes of the past. 

Putting their own personal stamp on operations is essential, because such allows a shift in perspective.No longer is the nursery just “Dad’s business.”The word “our” comes into play – a very key transition strongly linked to commitment and pride.

The nursery business depends on new growth.So too family businesses.It’s time to water the stock with honest discussion – generation to generation – about the roots of your future.