We often tell our client families that there is no “one size fits all” formula for transitioning a family business from one generation to the next. There are multiple variables in every family and business that impact how to best address the process in a given situation, making it challenging to offer tools like checklists to help with preparations. Yet, while each situation is unique, there are some experiences most businesses will face for which there is some common wisdom. One such situation is the experience of getting the next generation of family employees started professionally in the business.
Any transition is essentially a hand-off, much like runners in a relay passing the baton or a trapeze artist swinging from one bar to another. And, just like a relay team requires each successive runner to be in position and ready to run hard and well, the transition of a family business requires a new generation that is ready to take the baton-both in the right positions and adequately prepared. And, just like getting ready for the big race requires years of training and dedicated effort, preparing to transition the day-to-day management of the family enterprise from one generation to the next takes years of preparation before the successor generation is sufficiently ready to assume that tremendous responsibility.
While it is important to remember that succession of management authority is a process that should evolve over many years, it should be lost on no one that first impressions count. Anyone who has ever begun a new job can attest that early accomplishments often play a significant role in one’s long-term success. Of course, there are no guarantees for success, but a family member who starts his or her career in the business with strong objective success or as a clear contributor on a team will be more valuable to the company and likely have continued success than a family member who does not. With that in mind, here’s that checklist I mentioned earlier; a list of “Do’s and Don’ts” for onboarding new family employees in a family enterprise:
Plan ahead. The most important preparations happen years before the new family employee actually joins the family business, ideally when they go to work at another company. The self-confidence, credibility and learning of outside best practices that come from working elsewhere have immeasurable value for the new family employee once they join their family’s enterprise. Outside experience gives the new family hire instant credibility with other employees-credibility that can otherwise take years to develop, as some non-family team members may assume successes the family employee has at the business are thanks to their family connection. Even more important, however, is the self-confidence that is developed when a family member knows without a shadow of a doubt that he or she can succeed in the outside world, too.
Start the new family employee at an appropriate level. If you start them at a level that’s well above their skills and experience, then you risk overwhelming them and sending a signal to the rest of the organization that they will be given unfair advantages. If you start them at a level that’s too low-because you started at the bottom and they should, too-even if they come with years of outside experience, then you risk putting them in a boring work situation or causing them a lot of frustration that could lead them to leave. Of course, many families believe it is important that their family employees experience all aspects of their business(tiresome jobs included), and that approach has great merit; the only caveat is you may not want to have a college-educated and well-experienced manager bagging groceries for more than a few weeks.
Announce the new family employee’s arrival in a matter-of-fact manner. In most cases, it should not be a secret that the new hire is part of the family, and the rest of the company will figure it out quickly, so why hide it? A simple e-mail from the CEO along the following lines will typically work well: “I am happy to announce that my daughter, Jane Doe, will be joining the company as our newest marketing manager.”
Have the new family employee report to a long-standing employee and well-regarded non-family member. It’s not always possible, but there are great advantages to having the new family employee report to someone who is not also a family member. Most importantly, this kind of reporting relationship will increase the chances that the new family employee will receive accurate performance feedback.
At a minimum, provide the new family employee with the same performance feedback process as all other comparable employees. If all employees receive an annual formal performance review with informal “check ins” quarterly, then that’s what the new family employee should receive as well. As it can be challenging for a mid-level manager to provide objective feedback to a member of the owning family, it can sometimes be helpful to develop some support from the HR department or other senior leaders in the business for this process. In addition, there may be a desire to take a more proactive role in the professional development opportunities for family employees if they have the ambition and potential to eventually move into more senior roles in the business.
Involve the board. An outside board member can be helpful to both the older and the younger generation during the time when a new family employee first joins the family enterprise. This board member can provide an important perspective of impartiality to both generations, particularly during episodes of conflict.
Communicate. Too often, the new family employee or the incumbent feels frustrated, angry, confused or even delighted about a particular situation… and they keep that feeling to themselves. It’s important for all key parties to check in with each other frequently and informally, simply to keep the lines of communication open. Establish a tradition of a weekly breakfast or monthly lunch to ensure communication stays strong. Family members may have many qualities, but mind-reading isn’t one of them!
Create a job for the new family employee. This is really an extension of the second bullet point above. Just as it’s important to bring the new family employee into the organization at an appropriate level, it’s equally important that a job is not created for them. If the position is not genuine, then others in the company will know that… and they will likely resent the new family employee as a result. In addition, it can be difficult to objectively assess the performance and development of the family employee if they are not in a role or job that has to be done, that provides some accountability.
Put all the responsibility for the career entry and development of the new family hires on just one generation. Onboarding a new family employee in a family enterprise is a complicated and sometimes difficult process that is too big for any one person. It’s not the new family employee’s sole responsibility to make it happen; nor is it the sole responsibility of the incumbent. Successful onboarding is a responsibility that is shared by both generations.
If you keep the above items in mind while planning for the transition of your family’s business, you will take an important step toward increasing the likelihood that your family business will continue long into the future.
By David Ransburg
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