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Outside experience: How to train the next generation

Externship programmes, where next gens work for another business or manage a different unit of the family business, are a popular way to train the next generation. But what should next gens look for in an externship?

Mariella Bottiglieri must have always been destined to enter the shipping industry.

The daughter of fifth-generation Italian shipping magnate Giuseppe Bottiglieri, she was more likely to spend her childhood summers on board a tanker with her father than at the beach building sandcastles. She even has a tanker named after her.

But her first full-time job after she graduated in economics and maritime business was not with the Naples-based Giuseppe Bottiglieri Shipping Company. She instead spent time at another firm in the same industry, despite the pull of working at the 165-year-old business, which was founded by Mariella’s great-great-grandfather, Captain Giovanni. In her case, her outside experience was at the FTSE 250-listed Clarkson, also launched in the mid-19th century. Intended initially as just a summer job – she was already lined up to begin work at the family firm – her stint there ended up lasting four years.

There are, she says, many benefits to getting to learn about an industry “in an environment that’s not protected by the family”.

 “You have to prove you’re fit for the job,” says the 37-year-old, who was a tanker broker at Clarkson. “It’s a job that I liked, but I didn’t know if I was good.”

On leaving Clarkson, Ms Bottiglieri became managing director and chartering manager at Giuseppe Bottiglieri Shipping Company, where she works alongside her two younger sisters, Alessandra and Manuela. She is “definitely” more useful to the company than she would have been had she not had outside experience. She still applies things learned in London, such as the importance of looking after staff.

“The greatest lesson for me at Clarkson was to learn how to treat your own employees. I was good, but I wasn’t the greatest of their [tanker] brokers. There were people more senior than me and they were fixing more vessels. But the boss of the tankers was caring,” she says.

Ajay Bhalla, professor of global innovation management at Cass Business School, City University London, sees this experience of being a regular employee, rather than a member of the owning or controlling family, as being especially important.
 “It allows them to think from an employee’s perspective. The mindset is different,” he says.

Ms Bottiglieri’s experiences are likely to strike a chord with the many other next gens who, before joining or rejoining their family firm, spent time at other companies. The external experience, sometimes spent at subsidiaries of the main family business, can range from an internship of a few weeks to a decade or more of paid employment at multiple businesses.

Many of the benefits of time outside are linked to gaining industry-specific knowledge and experience that can be brought back to the family business. Bhalla says next gens often start off working for consulting firms or suppliers to the family business, learning about a particular sector.

More often, however, they take positions with professional services firms, which lead to generic business skills that are valuable regardless of the industry.

“For example, if you are raising capital for a new project, what are the options? Or, if you run a brand campaign, what is the media mix you can use? It helps the family to gain a talent pool that are part of the family and equipped with a skill-set,” he says.

Given the myriad benefits likely to result from working at an outside company, it is no surprise that some family firms actually require next gens to take time outside. There is nothing new in this: a McKinsey study from the early 2000s of a series of long-established family firms in Europe, the United States, and emerging markets found that to be considered for a position in the business, family members must first have worked elsewhere. In one case the company required “10 to 15 years of highly successful experience” elsewhere.

Often this can be about preventing nepotism from playing a role in appointments, thus ensuring the business’s long-term profitability and survival is not compromised by family considerations. It also ensures that family members have the right skill-sets to position the business for the future.

More recently, McKinsey cited as an example Australia’s ROI Group, founded in 1909, which insists that family members work outside the company if they are to join as senior managers. In the same vein, at the Saudi Arabian conglomerate the Almajdouie Group, third-generation family members must have at least three years’ external experience before they can join.

 This pattern of next gens being forced to prove they are successful is not uncommon, and helps the incumbent leaders feel confident in the abilities of a potential successor, says James Chrisman, a professor of management at Mississippi State University, who researches family businesses.

 “That’s really important because there’s always a hesitancy on the part of the incumbent to let go,” he says.
 Among the family firms where outside experience is considered necessary is Start-rite, a children’s shoe manufacturer based in Norwich, England that dates back to the late-18th century. Ownership is dispersed among more than 50 family members.

 Its company chairman and former managing director is Peter Lamble, an eighth-generation family member who trained as a management accountant. He spent eight years at other firms before joining Start-rite as finance director in 1990 and says ninth-generation members interested in joining should get a degree and “a few years’ experience”.

 “I would like to know what they would be contributing, rather than coming on board because they are in the family … You’re looking for people who are bringing skills to the business,” Lamble says.

 Success does not always have to be achieved outside the family business. Chrisman notes that next gens with leadership ambitions can equally prove their worth by taking on a particular project within the family business. Many next gens have had success digitising their family enterprise (see Bridging the digital divide, CampdenFB 63). Similarly, they sometimes start off by being involved in running a company’s foreign operations.

 Early success away from the family business is important not just for the credibility it gives next gens with their superiors. It can also improve their standing with employees they work alongside or manage, demonstrating the individual deserves their status in the family firm.

 Ronan Clancy, 32, who works for the family-controlled Clancy Group, a UK civil engineering company with a turnover of £283 million ($432 million), knows this. The third-generation family member began working for Clancy Group in 2009 as an area manager and went on to complete an MBA at Imperial College London before taking up his current role as business development manager. His earlier career was quite different: he worked at the Premier League football team Aston Villa, based in central England. There he helped to manage relationships with sponsors, after a time at IMG Media, where his duties included globally distributing the television channels run by other major football sides.

“If you have been successful elsewhere, it certainly makes people stand up and listen a bit more … The assumption would be it’s quite hard to get a job at a top football club – lots of people would want to do it. And doing an MBA at a top university [also helps],” he says.

Spending time outside the family business has its risks. The main pitfall is that next gens will decide they do not want to move into the fold. This is “the big danger” according to Chrisman.

“Then the family loses an important skill-set that the family member has developed, [and] also it can create some tensions among members of the family,” he says.

There is also the risk that family members, after time away, find it difficult to adjust to the family firm and its particular character.

“A lot of times the family business does things substantially different and even within family businesses there’s a great deal of variation, probably more so than in non-family businesses,” says Chrisman.

Balancing this out is the way that many next gens, who initially did not expect to work for the family firm, find that their early experiences elsewhere make them appreciate more the company their family is running. They may, for example, deal with people in related industries who are familiar with, or can understand, what the family business is doing.

“Working outside … made me respect and be proud of my family business much more,” says Victoria Ball, 25, a former actress who is now sustainability strategist for the David Ball Group, based in Cambridge, UK. She began to think about joining her family’s company, which develops and produces cement and sand products for construction, while working for a firm that managed socially responsible investments.

“Other people knew about it and were impressed by what it was doing … It made me want to work in the family business,” she says.

“Also, working in finance made me much more aware of how to position the sustainability profile of the business to appeal to investors.”
 


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