Leaving The Family Business—A Best-Management Practice

A recent Wall Street Journal article, The Truth About Failing Spectacularly* highlighted two issues I find not uncommon in family businesses: the value of experience and the rewards of failure. In today’s article I am addressing the first of these.

The experience connection for family businesses relates to the best-management practice that requires next-generation leaders to gain work experience outside of the family business. This practice adds value by ultimately bringing in skills and knowledge beyond that which had been fueling the family business up to that time. It provides third-party recognition of leadership abilities. It alleviates the concerns of non-family leadership about the value that then next generation can bring into the business. And it reassures them that they won’t be reporting to someone who doesn’t have enough experience to lead.

These advantages are absent when this best-practice is omitted. Working only within the family business can be insular and perhaps even incestuous. The door is closed to new knowledge and fresh ideas.

Attitudes differ widely with regard to these two practices.

I recently had a conversation with a young man who is second generation in his family’s business. His father is adamant that he should not work elsewhere. Respecting his father’s wishes, he doesn’t push the issue, though he would gladly accept an offer of outside employment.

Mindful of fostering sustainability in the family as well as the business, some families not only require ‘working somewhere else,’ they also require that a candidate son or daughter have the necessary experience for the position, within the family business, that they are applying for. This places the child on the same playing field as a potential non-family candidate. For other families providing opportunities for all family members is a priority, and this practice would be unacceptable. The more successful family businesses have found ways to balance these two approaches to next-generation employment.

In striving to achieve this balance, the axiom a strong business supports a healthy family is not to be overlooked.

In my next article I will go into the rewards of failure.

* https://www.wsj.com/articles/the-truth-about-failing-spectacularly-11550293225?mod=hp_lead_pos9



Hiring Professional Expertise For Your Family Business

I’ve always been careful about using my blog and newsletter to support the engagement of family-business advisors, because, while in the many situations the outside expert will provide tremendous benefit, I’ve been concerned that doing so would be perceived as self-promotion rather than honest advice.

Putting that aside, in my experience most successful family businesses, large or small, work with family-business advisors to align goals for the family, the shareholders and the business and future-proof the business against challenges that will be faced by emerging generations.

In looking for professional advisors for your family business it’s important to recognize that family businesses are complex and the expertise needed for a well-run family business is multi-disciplinary. Each area of expertise addresses one of the business’ three primary subsystems: ownership, management and the family itself.

As humans we have a tendency to seek advice from those we know and trust. But as I wouldn’t have my CPA do a root canal for me, I should not ask my business attorney to draw-up my will, or ‘have a talk’ with my children who are playing out their rivalries in the office. Equally, I would be wary of the advisor who does not recognize the multiple disciplines that make up a family enterprise or see a need for expertise beyond their own.

Unfortunately, it’s not uncommon to encounter resistance within a family against hiring outside expertise. In her January 29, 2019, Next Avenue article, Hiring an Outside Expert for Your Family Business*, entrepreneurship and personal finance expert Kerry Hannon brings up the psychological or ego issues around hiring professional expertise for a family business. She suggests that when a family believes they are smarter than an outside person or that they don’t need outside perspective, it’s a sign that they do need to bring in outside people.

There’s a reason 125-year-old family businesses are 125 years old. These families have been studied, and it’s not accidental. Hiring outside professional expertise to teach and implement best practices is vital to the multi-generational success of every family enterprise.

* https://www.nextavenue.org/hiring-outside-expert-for-your-family-business/?hide_newsletter=true&utm_source=Next+Avenue+Email+Newsletter&utm_campaign=1ca7a1cd48-02.05.2019_Tuesday_Newsletter&utm_medium=email&utm_term=0_056a405b5a-1ca7a1cd48-164957277&mc_cid=1ca7a1cd48&mc_eid=6bb3a49c82