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Why do so few family-owned businesses pass successfully from generation to generation? Because it’s harder!
“You had it easy Dad,” said the exasperated daughter.
“Easy? Are you crazy?,” the father replied. “I started with nothing. Your mother and I scraped up every dime and leveraged everything to start our business. We worked night and day to make it happen— what do you mean easy!”
The daughter countered, “I said easy, because you started at the bottom—everything you did was a success story—my brothers and I start at the top.”
The business owner undoubtedly was thinking, “yes, I gave you all the advantages of taking over a thriving business, so why complain.” The truth is each generation faces different challenges and often find it difficult to relate to the other generation’s perspective.
Different Entry Paths
As the entrepreneurial father, you started from scratch, building upon each level of success and learning as you went—on the job training at its best. You were involved in every aspect of the business because you had to be. You were watching expenses like a hawk, so rather than hire others, you did it yourself. You could get your arms around everything, because your business was small, a fraction of what it is today.
So, why is it harder to pass the business successfully from generation to generation? You started from nothing, but your success means your children are faced with the challenges of a much larger business. Your family business is not only larger, more complex, more sophisticated, it now requires many different skillsets than were required years ago when you started. I often hear older business owners reflect that business is so different today and there are many things their employees are doing that have passed them by.
There is clearly a huge difference between running one dealership versus 30 dealerships, which is the situation facing the grandson training to be the successor to his grandfather’s legacy. Not only will he need to learn the basics required by their business, but in addition, managing 2,000 employees is significantly different than being GM of one store. Dad grew into the job, gradually moving from Singe A to the major leagues (using a baseball metaphor). But the next generation has to learn to play in the big leagues and must have the capacity to hit a 100mph fastball—not everyone can!
Can’t Upskill Experience
Recognizing the next generation’s task of becoming equipped to handle the magnitude of running your highly successful business, it is important that you don’t rush their development. Experience doesn’t happen overnight. If the recipe for a cake says ‘bake at 300 degrees for 20 minutes,’ you can’t bake at 600 degrees for 10 minutes and get the same result. All you get is a burned-up mess!
Wanting your child to succeed is natural but wanting them to succeed in your business all too often involves parents promoting their children too quickly. Experience means you’ve seen and lived through teaching moments, often getting your knees skinned so learning sinks in. This takes time. Skipping steps in their development is a great recipe for future problems, as they are not prepared for the challenges business will create when you’re not there to pick up the pieces.
We are currently working with a family with whom I’ve worked for almost 40 years that is progressing from Generation 4 to 5, with over 100 years of the family being in business. Generation 4 increased sales and profitability five times over what G3 had experienced. To achieve this growth required hiring managers with experience at a higher level, resulting in the revamping of processes and procedures designed to facilitate exponential growth. Preparing G5 to be ready to take over will require mastering a business which demands skills his grandfather never contemplated.
Succession Success
There are so many factors which challenge Succession Success from generation to generation. Whether you are anxious to see your dream come true via your family succeeding you, or you are tired of the day-to-day grind and want to have your child take over ASAP, either of these motivations may sabotage your succession objectives.
Just because you were ready to assume the reins in your 20’s or 30’s doesn’t mean you should expect your child to do the same.
The good news is you created this mountain of success—the challenge is the next generation may not be capable or simply need more time to climb your Mt. Everest.
