Many small business owners dream of creating lasting legacies that their children can later take over. Unfortunately, that doesn’t always happen.
For one thing, many families are simply dysfunctional, according to Ira Bryck, director of the U Mass Family Business Center. Those underlying problems don’t disappear when kids grow up and enter the business. Plus, there are so many potential problematic issues, from compensation to job duties. “There’s a strong likelihood you’ll have a major conflict at some point,” he says. The results can be anything from poor employee morale to slow growth.
Still, according to Bryck, most companies are family businesses and “they seem to be chugging along nicely.” How can you make sure you bring your kids into the business successfully? Learn these five important do’s and don’t’s:
Don’t: Bring your adult children into the business if they lack sufficient moxie.
Just because you run a company doesn’t mean your kids are cut out for the business world—or that they even want to join your firm.
Bryck points to a small company where all four adult children worked in the business. One of the kids, however, was only there because he felt it was expected of him. As a result, he often didn’t show up or was rude to managers in the company, hurting overall morale and causing frequent tensions with his other siblings.
Do: Have a frank discussion with your kids about their career aspirations. Make it clear you’re ok with them potentially seeking different employment.
Don’t: Fail to take sibling relationships into account.
It’s a rare family where siblings always get along, even in adulthood. The fact is, many brothers and sisters have clashing personalities. As a result, they can’t work together and their sibling rivalry can threaten the business.
Bryck recalls two brothers who ran their father’s company for several decades, even though they hated each other. That feeling ran so deep that they would sabotage each other’s deals. “It was more satisfying to see the brother lose than to get the contract,” says Bryck.
Do: Objectively assess your kids’ personalities.
Notice how well they get along and their track record for resolving conflicts. If you realize their history isn’t good, then put your doubts out in the open. If you still don’t feel the kids can address the issue, then you may not be able to let them both into the business.
Don’t: Assume your child is going to run the company.
Your kid might want to join the business. He or she might even make a great addition to the mix. But that doesn’t translate to taking over the helm one day. In fact, you might have any number of long-time employees who would do a better job.
Do: Get other advisors in on the act. If you don’t think your child is up for becoming CEO, it’s a tough conversation to have. The best option is to have an outside board of directors or advisor select the next leader. “The board might pick one of the kids. But they also could end up choosing someone else in the company,” says Bryck. “In any case, it’s an objective decision not made by a family member.”
Don’t: Give them too much responsibility too quickly.
It’s tempting for small business owners to put their children in managerial roles right away. If they haven’t had relevant training, however, they probably won’t be up to it. As a result, they’re likely to mess up and cause lots of resentment among staff. “I’ve seen many cases where key employees have quit because they couldn’t take the incompetence of a family member anymore,” says Bryck.
Do: Put your child in a job suited for any new comer and give them appropriate training. Also put in place a formal policy for promotion. “You need a career development path for the next generation,” says Jane Hilburt-Davis, president of Key Resources, a Cambridge, Mass-based family business consulting firm.
She points to the owner of a manufacturing company whose daughter dropped out of college and joined the business. But, she assumed a role requiring more expertise than she had—and she wasn’t up to it. Eventually, the family introduced new guidelines mandating that family members had to have a college degree to work in the company, along with other stipulations.
At the same time, there’s no cookie cutter program for all children entering a business. One may have worked for the company during college, while another never stepped foot in the office. Another may have worked in a comparable firm for a while. “If your kid grew up in the business, there’s no reason to start him in the mailroom,” says Bryck.
Do: Learn to let go—and step aside when the time is right.
Don’t: Promise to leave—and then refuse to quit.
Some small firm owners bring the children into the business with the understanding they’ll retire in a few years. But when the time comes, sometimes they aren’t ready to leave. That’s not only demoralizing, but it can also hurt the kids’ interest in developing appropriate skills needed to take over.
“Kids say, ‘Why should we bother learning these skills when Dad won’t leave,” says Hilburt-Davis.