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Bridging the generation gap

John Stepek  is the son of a retired second generation family business owner. He lives and works in London as a finance journalist.

One of the first features I wrote was on how easy it can be to drift into the family business. I called it 'The Marshmallow Effect' – where an heir is dissuaded from making hard choices about their future by opting for the apparently soft, comfortable option of the family business, only to find once inside, the environment is somewhat suffocating and too sticky to leave.

A potential third generation heir myself, I never wanted to work for the family. I wanted to write for a living, and the electrical retail world did not interest me.

Yet it was tempting. Degree courses in becoming a rich and famous script writer don't exist, and part of me considered joining the business as a stop-gap to earn money while waiting for Hollywood to knock on my door.

My family had introduced a five-year rule, barring next generation members from joining before serving their time elsewhere. This removed the 'lazy' option, and I soon found a job with a publisher.

It's hard enough to decide what you want from life without a family business muddying the water. But while most of us hopefully realise – possibly from bitter experience - that cajoling, bullying or emotionally blackmailing offspring into the business is counter-productive, a hands-off attitude to the next generation is not much more effective.

Telling a potential heir to ignore the business is like telling them to ignore the elephant in the sitting room – it can't be done. The next generation have grown up with the business, spent their lives hearing their parents discussing it, had school mates tease them about it – it's only natural for even the most independent-minded heir to be influenced by it. A decision not to join can just as often be a wrong-headed kick against the business as a genuine desire to pursue a different career.

The Family Business Network has set up a Next Generation Working Group to help future owners and managers understand the issues involved in running a family business. This group runs the Building the Future Programme, a next generation training scheme, which matches family businesses that can provide internships with potential heirs who gain valuable experience from seeing the challenges that face family businesses 'at arm's length'.

Explore your options before committing to the business
Adele Levinge is a second generation director and co-owner of her family business, Australian land developer and homebuilder, The Dennis Family Corporation.

Adele worked in the business while at school, but after leaving university, she travelled round Australia supporting her husband's career, gaining experience working in administration for a food corporation and setting up her own restaurant.

But when she and her husband settled back in her home town, she rejoined the business, and worked part-time while raising three children.

When the youngest went to school, Adele decided it was time for a change and researched nursing as a career. But she found it was difficult to gain mature entry to the profession, and would have meant disruption to her immediate family. So she returned to the business full-time and carved out her own role as a director with skills in marketing and public relations.

Adele's story illustrates the pervasive draw of the family business. Despite time spent working for other companies, and even setting up on her own, she eventually returned to the business.

Having gained experience working elsewhere, and explored other career options – in Adele's case, nursing – she didn't suffer the nagging feeling of unfulfilled potential that can afflict younger members, who perhaps have never considered other paths.

As Adele puts it, "I know I would not have had the flexibility to combine family and job if I had not worked in the family business. I had flexibility but also job responsibility – which is uncommon."

Work with other family businesses first
Monodor SA, with partners Lavazza, is the worldwide leader in the coffee capsule market. Nicole Favre, eldest of three daughters, is a second generation member, and has worked with another family business, Swiss private bank Lombard Odier Darier Hentsch & Cie, since completing a masters at London School of Economics.

She works directly with the owner-directors of the bank. "This proximity has given me the opportunity to learn a lot from their experience – it's a real exchange of best practices between family business members," she says.

It has always been important to Nicole to build her own career, and she believes outside experience is essential for next generation members, preferably with both family and non-family owned businesses.

However, she remains strongly connected to Monodor. She is currently an auditor board member, and should become a full board member from Spring 2005. She and her sisters have been given responsibility for projects matched to their skills and knowledge. They are also building a family council with the help of a consultant.

Nicole's experience also shows that a successor's business education and responsibilities do not have to stop just because they are working elsewhere. The key is to keep the heir involved in a continuous education process, rather than hoping they will one day return to the fold with a set of new skills.

Communicate clearly
Alex Arnback, treasurer of the Next Generation Working Group, also works for Lombard Odier Darier Hentsch & Cie, his family's business. Alex didn't have a chance to drift into the business – when looking for work experience in his summer holidays, his stepfather told him he definitely could not work in the bank!

After studying economics in Paris, he worked in cost accounting with another firm, leaving to study for an MBA. Having com­plet­ed his MBA, his stepfather offered him a job. Alex was unsure, but wanted to at least try the family business. He has now been with the bank for five years and is happy with his career. But he feels he would have more credibility and experience if he had worked more elsewhere.

Alex's story shows the importance of communication when it comes to developing the next generation. He seems to have joined in reaction to an 'either/or' offer which he felt compelled to take advantage of, rather than from a specific desire to join the family bank. Although he feels happy with his career, a defined succession plan could have allowed him leeway to explore other careers, develop his skills, and learn more about the business itself, before making a solid commitment to join.

Keep the next generation involved
Michael Carlander is a second generation heir to the Roswi business, an importer of outdoor and sports goods.

He and his brother have been board members since 1996. They were both very interested in the family business and in February 2004 Michael's brother joined the family business. This lead to fewer 'dinner-table-discussions' since the rest of the family were discussing business-related issues during the working day.

A family council is currently being established with Michael as chairperson. He still works outside the business because he wishes to develop his career before joining Roswi. With Michael's brother joining the business, Michael feels he has the time to explore other career options before making a decision on whether to join or not to join the family business.

Michael also says that speaking to his peers has helped. "None of my friends understand the complexity of my family, but when I speak to other FBN members, I know they understand me when I describe a situation to them."

Owners don't have to be managers
With four generations in the business and a fifth on the way, the owners of Raute Group, a Finnish engineering business, know more than most about holding disparate branches of the family together.

Both Mika Mustakallio's grandfather and father built their own careers, while serving on the Raute board. Mika, a third generation member who also chose his own path, admits he spent a lot of time thinking of the firm as "nothing more than a cold investment. And I was not the only one.

"Allowing that to happen with such a large owner base is definitely a risk for the stability and unity of the family – and more importantly it is a risk for the company."

It wasn't until they set up a family council, with the help of FBN, that Mika and other third generation members began to under­­stand the importance of the business to maintain the family's unity and identity.  

As Mika says, it is easy for uninvolved owners to look at the business simply as money in the bank, rather than a valuable family asset to be protected.

A salutary lesson
All these experiences show that the choice is never as simple as joining or not joining. As long as the business is a going concern, and remains in family hands, an early decision to follow one's own career can be reversed later in life.

Also, a family member doesn't have to play an active part in the day-to-day running of the business. Many are shareholders, and some may serve in governing roles as members of the board, or on the family council, while building careers elsewhere.

And there are those who join, only to find the business is not for them, or they are not for the business, something best avoided by both parties.

A salutary lesson comes from an executive who would rather remain anonymous, who joined his family business after a long, successful career elsewhere. Despite misgivings – he had worked there 30 years previously, but been unimpressed by the older genera­tion's attitude – he was persuaded to rejoin when a suitable position arose. He has found management still "centralised and arrogant", and been surprised by the lack of prof­essionalism: "Don't they know that new executives need to be properly absorbed?"

Even a textbook family business candidate such as this one – years of outside experience and filling a specific post – will find smooth integration impossible if there is no clear induction and development plan.

Going it alone
And as for me? In the end, I chose not to join the business. I pursued my desire to become a writer, working in TV, film and publishing, before retraining as a journalist.

It's taken me eight years from first graduating to find the career I'm happy with and one thing I've learned is – it isn't easy for anyone to work out what they want from life. A family business can make that process harder – but with careful planning on both sides of the generation gap, it can also make it a lot easier.

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