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Tradition entwines the history, heritage, and reputation for any business, and especially family business. It creates a familiar foundation for generations to establish themselves as economies, markets, and business environments. Tradition sets expectations and creates standards for customers and business owners alike. It also has the potential to differentiate your brand from the competition. When the community recognizes the way you do business as a family tradition, they have an idea of the level of service they can expect from you.
With that said, sometimes tradition can be interpreted as restrictive and a hindrance. This is especially true if you or members of your family business are adverse to change. Tradition is not to be used as a reason or excuse to shun from incorporating innovations and new practices into your business. After all, these changes, difficult as they may seem, are what can give your company the cutting edge.
There is no established timeframe in making a tradition.
- If you are at the early stages or starting up your family business, then you don’t have preceding generations to carry on.
- If your business is 10 years old, then look back on the decade and identify what behaviors and standards have become part of your everyday ritual. Determine which of these actions build your business and uphold your shared family values and choose to elevate and protect them as tradition.
- Also look at what traditions are holding back or even hurting your business. If a tradition is not in your family’s best interests or if it no longer applies to today’s business world, then consider ways that you can eliminate them.
Tradition has a positive impact on family business and is essential for success for today and for the future.
The transition from one generation to another can be very seamless and smooth. However it takes education, planning, openness and humility.
- Education. Learning the business requires its own education process. That education is often not found in the halls of schools, but in the halls of the business, working with customers, walking hand in hand with employees. Learning what it means to make payroll, pay taxes, the impacts of discounting and generating new revenue. This education is the foundation of value for transitioning to a new generation. The education involves the next generation proving themselves, showing vision, seizing opportunities and learning the business from top to bottom. It involves at a minimum a season, and the length of a season greatly depends on the business and can span multiple years. Economic seasons can be 7 to 10 year cycles (winter—harsh economic conditions, spring—times of new growth opportunities, summer—high growth, fall retrenching of the business and the direction it is heading). The season will allow a full level of education which can be the difference between success and failure of the future business.
- Planning. The best way to ensure a smooth transition is to create a detailed plan of action. Talk about everything. Yes, I mean everything. I know—someone won’t want to deal with the touchy subjects. Talk about them anyway. Create a plan that allows you to roll out of the company. Here is the reality; one of these days you will leave the company. It might be tomorrow, a year from now or a decade from now. It still doesn’t change reality. Don’t leave your next generation a mess and have them not know what to do. Make your business legacy live on—and not live on in chaos. If you want help in how to do that planning, call your team of advisors. The next generation will love you for it.
- Openness. Be willing to accept new ways of doing business, new products, new management styles. Not all new is good, yet not all old is perfect. The next generation of leadership must make their own mistakes, but be there to guide them and keep them from falling off the cliff.
As much as possible, do away with the prejudices you have of this next generation about what they can and cannot do. Get rid of family politics. Stop protecting Junior and doing things for him. Let Junior stand on his own two feet or leave the business. There is no shame in not being in the family business. Life is too short to not follow your passion. A message to Junior: Understand that you will change. You may not want to join the business now, but your passions, needs, desires and interests will change as you age. Mom and Dad, Grandpa, and Auntie may start getting smarter and have a better perspective as you get out in the world, work a job and learn the realities of life. Don’t burn your bridges and be unable/unwilling to come back and see the value of that family business. Also, following your passion doesn’t mean sitting on the beach strumming a guitar (nothing against beaches and guitars). It does mean that if you have a passion for medicine and the family business is a furniture store, follow that passion for medicine. Just because your passion was the business doesn’t mean you have to force your passion on everyone else.
- Humility. If someone lacks humility, they need to start a family business. If they still lack humility after running a business, try transitioning a business to another generation of leadership. It takes patience and the art of learning how to step back and let others accomplish the tasks in new ways. The second-generation owners of a family business whom I interviewed told the following story about their dad.
“Dad had started to transition out of the business. He was very organized and had a place for everything. The son, the new business owner and leader, had not inherited Dad’s particular gift of organization. He had piles on his desk and on the table. Dad on a few occasions during the transition went through and “cleaned up” the piles and threw out what he believed was unnecessary papers. As you can imagine, that created tension and frustration—on both sides. New rules had to be set up. There were new ways of doing things. It wasn’t better—just different—and Dad had to step back. He needed to be humble, understand new ways and allow the new regime to succeed or make mistakes on their own. It was a reality check for Dad who needed to realize he was no longer in control.”
When a multigenerational family business continues to grow, the owners need to think about how they will manage the transition to the next generation of leadership.
A husband and wife team started a business more than 30 years ago. At one point, they decided to move the business to another city, essentially starting all over again. That was more than 25 years ago, and since that time, their children have grown and also joined them in their endeavors. Currently they are experiencing the third generation, their grandchildren, becoming involved in the family business. These previous entrepreneurs, have become very successful business owners. They provide not only for their own family but also for the families of many employees. They have done so many things extraordinarily well. The fact that the family still enjoys each other’s company, likes to be together, and is encouraging the third generation to become involved is a statement to the nature of the business owners. The challenge for future sustainability is in truly turning over the reins of the business to the second generation. Times have changed, the needs of the family continue to change and what worked 20 years ago doesn’t work in the same way today. They recognize the challenges ahead and I believe are scared about how the transition will take place.
One of the best ways for a family business to move to the next generation of leadership is to prepare for and organize the transition. The parents pick an heir apparent, lay out the organizational structure and spend the next five to 10 years grooming the new team and stepping out of the business a bit more each year. They let the kids start making decisions, knowing and understanding that mistakes will happen. After all, the parents made mistakes, too. They need to allow the kids to learn while providing a safety net of advice.
Here are three challenges to family business transitions:
Giving up Control. I hear you now, “I would be thrilled to give up control of the business.” Yes, you may actually believe it; until one of the new leaders makes a decision you don’t like. I see it all the time (and this happens in all businesses). Leaders give up control until they don’t like the decisions being made, then they step back in and take back control, and the resentment begins. Family members and employees that feel their actions are being second guessed feel the lack of trust in their abilities and often result in an unwillingness to try again.
Fear of the Unknown. Children are often called a perfect blend of their parents, warts and all! The things one doesn’t really care for in the spouse manifest themselves in the kids. One is wild, the other is too conservative. One is visionary, the other wants things to be the same as they have always been. The end result is parents who are afraid everything they have worked toward for the last 30 plus years now has the potential of being destroyed; maybe even going out of business but for sure changing. This fear can hold the business back and stunt its potential. Fear can also be well-founded, however, if the parents feel the children do not have the skills to run a business then a plan must be put in place to enable them to learn to run the business or provide someone else to lead and move the business forward.
Selecting someone other than a family member can often be a relief to the next generation who isn’t skilled or perhaps doesn’t want the responsibility of running the family business. And that is okay. Not everyone is gifted at risk taking and the responsibilities that come with business ownership. Their specific skills may be much greater in other areas where they can be high achievers.
Failing to move forward: Business is good, life is busy and the succession plans are ignore, there's plenty of time to get back to it. The wills may be completed and the estate planning has been taken care of, but not much else in the business has been addressed, then disaster strikes. Why is it that death seems to be the one thing that everyone runs from? I won’t answer that here as many books have been written on this topic. The more we plan for the eventual results of life, the more we can relax and enjoy ourselves. Stop playing God and being afraid of death. Know that death will come and your job—yes, your JOB—is to make sure the next generation is adequately prepared. That means helping them learn how to make decisions. Let them disagree with you and then you provide them wise counsel, but let them make the final decision and live with the result. Let them learn how to fall, pick themselves up and fall all over again. Don't be a reactionary, let things run their course. Read John Maxwell’s Failing Forward; it will change your perspective on failure. If they can’t run the business while you are around, what is there to make you believe they will do a better job when you are dead?
Give your family the best leadership of all and learn to let go.
The most significant challenges with running a family business arise due to the relationships within families. With a regular job, you can leave work at the office with no worries about bringing the job home. However, when your co-workers live under the same roof, or are related to you, work and family issues can become intertwined. Your childhood relationships with siblings, parental interactions, self-image, generational thought processes all affect relationships in a family business.
Some of these challenges include:
- Boundaries: At some point in a person’s career, we almost always bring some level of work home with us. However, in the family business, work and home become blended. Work is done at home and personal issues are often addressed at work. The challenge family businesses sometimes find themselves in is a potential total absence of boundaries. The blur becomes contentious, depriving family members of a place of solitude and escape. In the end, the family always suffers.
- Illness/Contingency Plans: In the journey of life, situations occur that impact our ability to focus on life, let alone business. Emily, her parents, three brothers, three cousins and two uncles and aunts all worked in a manufacturing business. They had about 10 additional non-family employees as well, however the greatest responsibility for running the business fell on the shoulders of the family. Then disaster struck: Mom was diagnosed with cancer. She was the lifeblood and bond for the whole family for all these years. The cancer took its toll on Mom and everyone else in the family. They no longer cared about delivering orders, servicing customers, selling product or growing the business. They wanted to be at her side during the last weeks and months prior to her death. That is exactly where they needed to be, but the business could not run without the family. No plan had been put in place to allow for the entire family to essentially be unavailable for weeks at a time. Orders weren’t being filled, deposits weren’t being made, and materials weren’t being ordered.
- Marrying into the business: Your spouse’s family business has been around for years and your skill set matches specific needs within the family business. Now for the challenge. You are part of the family, yet you are still the in-law. Should disputes arise (ok, when they do), too often you are left standing on the wrong side of the family tree. No matter how much your spouse understands your opinion, there is always the question of support.
This uniqueness also creates advantages and opportunities. Family name/reputation can carry a great deal of clout in the community – especially if the business has been around for a long time. The lasting legacy that it creates, presents opportunities for even those not in the daily operation of the family business. Truth be told, it is hard to be fired from the family business, so general job security is much stronger. The sense of belonging and strength of relationships can create a vitality that carries through many an economic, personal or business storm.
There are lots of challenging issues when working in the family business such as divorce, health challenges, financial stability just to name a few. Rather than ignore the possibilities of such things happening, it’s best to create a scenario and then a contingency plan should something arise. Protect your business, but don’t forget to protect the family as well.
Transition timing can be very stressful. How long will it take to transition parents out of the business? It seldom happens overnight (unless by death or divorce). Yet the multi-year transition can be enough to kill the business, the relationships or both.
The challenges include:
Customers. Do customers always want to work with Dad, since he gives them a long-term customer discount that Junior won’t? Do they like the way Mom runs the business and always ask for her, making it hard to establish a level of leadership?
Boundaries. So who really is in charge? Daughter? Mom? Dad? All of the above? Who makes the decisions during the transition time? Create a plan that lays out the transition. Is this a six-month, 12-month or two-year plan? You may have to revise the plan at some point. Do not just go with the flow. It might work out, but there is a great chance that it might not. Hoping things will go well doesn’t work. Hoping no one will get their feelings hurt doesn’t happen. Not making a plan puts you on a path to having issues.
“But we have always done it this way.” That statement has been heard around the world in businesses of all sizes. Family business owners do not have the corner on this market. It does take on a new twist when changes need to take place to keep up with the times, the skills of the next generation or just market changes. One of my favorite books is If It Ain’t Broke, Break It by Robert Kriegel and Louis Patler. Their concept is to examine conventional business wisdom and to break those rules in order to gain a competitive advantage. This book was written in the ’90s but much of it still applies today. When something is working, you need to analyze why it is working and what can be done to improve how it is working. In other words, what can be done to make things work better? Football for many years was solely a running game. Even after the forward pass was legalized, it remained a running game until a coach decided to have his team try throwing the ball. Everyone was shocked and critical. Yet, today football is very much a throwing game; just look at what quarterbacks get paid for their throwing ability!