Category Archives: Career Development

Next-Generation Leader Development: Entrepreneurship Across Generations

Steve Miller
Steve Miller

In my earlier blog post, I wrote about the importance of next-generation family leaders gaining challenging work experience with real responsibility inside or outside the family firm. How might a next-generation leader accomplish this within the family firm?  It turns out that preparing for leadership and ownership succession in a family firm presents a great opportunity for next-generation leaders to stretch themselves and help the family business at the same time.

Transition in ownership in a family business often creates the need to grow the business to support the financial needs of more than one generation of family owners. It also often comes at a time when the market is suggesting a time for strategic renewal. The term “transgenerational entrepreneurship” refers to the ability of a family enterprise to meet these challenges by creating new streams of value across many generations (Cruz, Nordqvist, Habbershon, Salvato, & Zellweger, 2006).  Next generation leaders may have entrepreneurial ideas for addressing new opportunities in the market that the senior generation does not see or understand. Taking responsibility for developing those ideas into new products, services, processes, or business lines can provide a way to stretch their wings and establish credibility in the family firm.

One of my former MBA students did exactly that. His father established and operated a highly successful catalog business in a niche market. My student researched opportunities for distribution of other products that were underrepresented in direct-to-consumer marketing and identified a highly fragmented market that seemed ideal for direct marketing. He developed a business plan that utilized existing distribution and sales infrastructure for his new line of products and raised the necessary capital himself.

Not only has his “company within a company” been successful in its own right, but he also convinced his father that investing in developing a robust online sales platform in addition to the traditional catalog was necessary to keep both businesses competitive. He has gained valuable experience, established himself as a respected leader, and created a new source of growth for the family business. His father now sees him as a capable successor for leadership of the entire enterprise.

References
Cruz, C., Nordqvist, M., Habbershon, T., Salvato, C., & Zellweger, T. 2006. “A conceptual model of transgenerational entrepreneurship in family influenced firms,” International Family Enterprise Research Academy.

Next-Generation Leader Development: Inside or Outside Experience?

Steve Miller
Steve Miller

Laura is the second-generation CEO of a successful beverage company started by her father 25 years ago. She exudes a contagious enthusiasm for the business and articulates a clear vision for growing the family firm. When her father began thinking about leadership succession, the employees asked him to recruit Laura as their next CEO, and they love working for her.

Joe is a third-generation senior leader in a large manufacturing firm founded by his grandfather nearly 75 years ago. Joe is burned out and seems weighed down by the burden of overseeing the family enterprise. Employees don’t want to work for Joe, and one division of the family enterprise recently failed under his leadership.

Both Laura and Joe were educated at top universities, got work experience outside the family business, and are highly intelligent – three characteristics most often mentioned in the family business literature as important to next-generation leader success.  So what’s the difference between Laura and Joe?

A recent article in Harvard Business Review suggests that how next-generation leaders are developed has an important impact on their success in the family firm (Fernández-Aráoz, Iqbal, & Ritter, 2015). The interviews on which that article was based revealed that the best family firms execute a thoughtful development plan for future leaders that includes real job responsibilities at varying levels of responsibility. Where that experience is gained – inside or outside the family business – did not seem to be a key factor.

One CEO indicated that his family firm no longer requires next-generation leaders to go outside the family business to establish a track record, but rather encourages them to work for the family business from the start. This finding is consistent with my own recent research of 100 next-generation family leaders which showed no statistically significant relationship between experience outside the family business and next-generation leadership effectiveness. My study showed that the more important factor was having experiences at work that challenged and stretched the developing next-generation leader.

A closer look at Laura and Joe supports this conclusion. Laura’s outside experience was gained in a job that required her to grow a business line for which she was responsible. She had to learn a wide variety of leadership skills including planning, influencing others, and adapting to changing market conditions. Joe, on the other hand, received superb training in a technical skill important to his family business, but in a position without real leadership responsibilities.

Here at The Family Business Consulting Group, we think gaining outside experience is often the right course for many next-generation leaders. It can increase the likelihood that they will receive objective feedback on their performance and provides an opportunity for them to prove themselves in a setting where their family name is not an issue. But in the right circumstances, they can also develop successfully working inside the family firm.  It is not so much where the experience is gained, but rather the nature of the experience that makes the real difference.

References
Fernández-Aráoz, C., Iqbal, S., & Ritter, J. 2015. “Leadership lessons from great family businesses.” Harvard Business Review (April 2015).

How one family got started with family education

Steve McClure
Steve McClure

When a large family was moving into its fifth generation of adults, their Family Council knew it was time to invest in future shareholder development.

The family had 20 fifth-generation future owners and beneficiaries who ranged in age from 14 to 39 (plus several more who were younger) and were geographically dispersed. There were also a few members in that same age range from the fourth generation. Some relatives had worked for the company in summer jobs, but most had not. Some attended shareholder meetings and many did not.

Faced with these challenges, the Council asked themselves: “How do you educate the family, and on what?”

They agreed to form an Owner Development Committee consisting of five fifth-generation members and one fourth-generation member. The mission was to research and design their own education program. Over the course of nine months, the committee organized their recommendations into four segments:

1) What should we do together? Seeing as some family members barely knew their cousins, the committee recognized that teamwork development was necessary to become a unified shareholder group. They decided to set aside one day prior to the annual shareholders’ meeting to conduct group programs. In turn, this would naturally increase attendance for the shareholder meetings. Programs would be oriented toward the whole group, but the day would also have three breakout sessions with age-appropriate content aimed (1) at the teens, (2) the college-aged group and (3) the older cousins. Programming would include tours, management presentations and education about the company. There would also be projects, plans and decisions requiring collaboration, leadership, organization and accountability. By learning and accomplishing projects together, they reasoned that teamwork would develop as they achieved their desired educational goals.

2) What body of knowledge and skills do we need to master? The committee identified subject areas based on their research drawn from attending family business seminars, speaking with other business families and reading related materials. Skill and knowledge areas included financial statements, investing, communication and negotiating skills, knowledge of their business and industry, family values and history, business strategy, and an understanding of the role of the board, shareholders, family governance and management.

3) What education should we provide and what should individuals learn on their own?  Next, the committee defined what individuals are expected to learn on their own (primarily from books, articles and seminars), what will be provided to the group (customized programs presented by other business families, speakers and trainers), or made available to attend (seminars, courses and training programs). For the seminars and other resources, they established rules and procedures to address education costs and set expectations about expenses covered by family members.

 4) How do we implement?  Understanding that implementing all the educational initiatives at once would be overwhelming, they designed a multi-year, roll out strategy. The first step was introducing the one day, pre-shareholder meeting to inform everybody of the curriculum and obtain buy-in.

The committee presented their recommendations to the Family Council, and then to the entire family at a family assembly meeting where they received unanimous support.

Laying the Entrepreneurial Foundation

Anne Hargrave
Anne Hargrave

At a recent gathering of 100 family business and family office advisors, from numerous professional disciplines, there was an expansive discussion about what it takes to foster entrepreneurship in business, philanthropy and wealth management.

Over the course of two days, a few themes surfaced around specific actions parents might take to instill qualities often found in successful entrepreneurs, such as…

Create a Foundation for Resilience. Resilience surfaced as the most common thread in entrepreneurial success stories.  Healthy relationships, sound health, eating and sleeping well, and physical activity all create a foundation for resilience.   When relationships amongst people in a family are healthy, individuals can withstand stress, even trauma.  When you feel resilient you are more able to view risk as a means to reward (not an impediment), and gain strength and courage from difficulties.

Insist on Respect. 
Being considerate of each other, demonstrating respect, is the tie that binds, even more than love. When we allow family members to define themselves, appreciating and celebrating differences, they can then embrace their own strengths – fostering confidence and self-esteem. When someone feels respected they are more able to believe in possibilities and their own personal ability, and dream actively – a foundation of entrepreneurship.

Embrace Failure.  Treat failure as a given; celebrate failure.  Some families actively seek out failure examples at the dinner table, or in family meetings, to explore what was learned and how the experience can be turned into another opportunity.  Making failure acceptable and expected encourages resilience, courage and the inner strength to continue to move forward.

Look for Mentors. Encourage family members at an early age to ask for advice, learn from others, and shape and create opportunities.  Mentors can be found through school, athletics, community, social relationships, business contacts, and family members.  Entrepreneurs generally have a strong work ethic influenced by those around them who modeled the right behaviors.  Mentors can help frame up a vision for the future.

Trouble in the Corner Office?

Chris Eckrich
Chris Eckrich

A recent Wall Street Journal article (At Family Firms, Do CEO’s Work Fewer Hours? by Rachel Feintzeig, Wall Street Journal Online, March 5th, 2014) referenced new research by professors at Harvard, London School of Economics and Columbia that measured family firm CEO’s as working approximately 8% fewer hours than their non family counterparts.  Is this an indication of impending underperformance?

Vibrant family businesses are often run by CEO’s who have mastered the art of working on the business rather than in the business.  They may work intensely during much of the year but also find ways to create time for thoughtful reflection on their businesses and are constantly discovering ways to improve not just today’s bottom line, but future opportunities as well.  Their insights are as likely to emerge at 5:30 a.m or 9:00 p.m., and not just during office hours.

Signs of a vibrant family business include:

  • Clear and aligned strategic direction from the ownership group, to the board to the CEO and management team;
  • A culture of high performance in which problems do not fester unattended;
  • An engaged workforce in which each individual understands how he or she contributes to the company’s objectives, and has the resources necessary to meet assigned goals;
  • Mutual trust between ownership, the board, the CEO and the management team;
  • A dynamic and iterative succession/continuity planning process in which the CEO and the family ownership group are actively engaged in achieving generational transition (assuming they have agreed on doing so); and,
  • A constant drive to meet or exceed ownership’s clearly stated objectives (which may include both financial or non financial measures).

Signs of a family business whose future may be troubled include:

  • Owners, directors or executives who are not sure where the company is headed;
  • Acceptance of correctable company problems and weaknesses as just the way things are;
  • Managers or employees who do not have clarity on their work priorities or goals;
  • Distrust between the ownership group, board and/or CEO;
  • The inability to discuss or make progress on succession and continuity challenges;
  • Little effort to clarify what ownership’s objectives are or limited drive to achieve those goals.

CEO’s spending their time driving towards becoming or remaining a vibrant family enterprise position their businesses for future success while CEO’s who lack that drive will generally allow trouble spots to creep into the picture.  Regarding time spent at work, perhaps the best question to determine whether there is trouble in the corner office is, “What are you doing with your time?”

The Power of Mistakes

Stephanie Brun de Pontet
Stephanie Brun de Pontet

Nobody likes to make mistakes – but avoiding mistakes at all costs may be a big mistake…

First, everyone will make mistakes – you cannot realistically avoid this. 

Living in a bubble, making no decisions and generally staying away from life will still lead to countless errors of missed opportunities.  Don’t forget – there are mistakes of ‘commission’ (things you should not have done) like accidently insulting a key supplier, or making an error in your financial analysis – these you can avoid by taking no actions and making no choices.  Yet, there are also mistakes of omission (things you should have done, but failed to do) like not returning the call from your brother because he is difficult, or not following up on a sales lead  – and living on the sidelines trying to avoid any responsibility will lead to those mistakes every time.

Second, most successful businesses are built on a trail of mistakes. 

By that I mean most entrepreneurs failed many times before arriving at their current success.  It is not that entrepreneurs are wild risk takers – rather they do not see risk in the same way others do, and they are very skilled at learning from their mistakes.  In order to break new ground, truly innovate and bring a new product or service to market, the entrepreneur has to be willing to engage in a lot of experimentation, trial and error, and mistakes. The best advice I have heard on entrepreneurial mistakes is to ‘fail fast’ – that is, commit to a path or idea – be willing to make a big mistake, but then know quickly when to pull the plug, learn from the mistake and make the needed adjustments to try again.

Third, mistakes will help you uncover your path and full potential.

If, like many people, you are not clear about your path in life, trying a range of paths and ideas will help you to uncover first what you don’t want to be doing (the mistakes) which will help inform your understanding of what you should be doing.  If you are unwilling to try new things for fear of failing or making mistakes, you will never have the opportunity to discover what truly energizes you.  Note that even if you are clear on the path to success you want to follow, you cannot really reach your potential without making mistakes as you take the hard turns on that path.  If you never make a mistake – it isn’t that you are particularly gifted, it is rather more likely that you are on the path of least resistance and not taking the risks you need to reach your full potential.

These quick reminders of the value of mistakes can be important for families in business together because once a family and business have experienced great success and stability – it can be hard to remember the journey of failure and mistakes that lead to this outcome, and easy to fall into the trap of playing defense and striving only ‘not to fail.’  Both the business and family members need to continue to be willing to make mistakes to grow, evolve, and find their full potential.

There are many paths to greatness – the challenge is finding yours…

Stephanie Brun de Pontet
Stephanie Brun de Pontet

Over the years of my work with business-owning families I have had the privilege of collaborating with many successful individuals, whom I greatly admire.

  • There is the founder with an idealistic spirit, exceptional sales ability and sharp business instincts, whose greatest sense of accomplishment comes from never having laid off any employees – even in times of hardship.  Though he is the sole owner of his business, he seeks input, truly listens and builds consensus with others.
  • There is the hard-driving leader who has built a business on the strength of her work ethic and determination to ‘do the job right.’  While she drives all around her hard – all are clear that she drives herself the hardest.  Demanding and ambitious, she also mentors and develops all who come into her circle and devotes a tremendous amount of energy to her church and family.
  • There is the next generation young adult who always struggled in school yet persists to complete a degree, while working full time to learn business and develop more ‘practical skills.’  Not content to simply ‘fulfill the obligations’ of the family employment policy – he has worked for several years in a related business, developing industry contacts as well as knowledge he plans to bring back when he does eventually join his family’s business.
  • There is the second-generation leader whose intelligence and quiet resolve have allowed the business he owns with his brother to flourish where competitors have struggled.  Though revered in his industry he shares the limelight and all ownership decisions with his brother, and has comfortably transitioned out of the leadership role.

The point of these stories is to highlight that there is no one path to success in a family business, or anywhere else for that matter.  Sometimes we spend too much energy looking for ‘the formula’ for success – when in truth the search should be for your personal path.  For the most part, when people arrive at success it is because they have a vision of where they want to go with their potential, and then put one foot in front of the other towards that goal.  Make sure you are on the right path, because if you aren’t – no matter what you accomplish, you will not have achieved success for yourself.

Are you Providing Decision Making Opportunities to the Next Generation?

Kelly LeCouvie
Kelly LeCouvie

Junior generation family members sometimes tell us that they believe no decision-making authority will come to them before senior generation family members either exit the business or die. And in some cases, they’re right. That is somewhat discouraging, and also a deterrent for next generation engagement.

We have found that decisions are difficult for the next generation to manage when their “transition” goes from making no decisions to making all decisions.

Why not provide the next generation with opportunities to make decisions (either related to the business or the family) before you make your exit? You might not want to start with key strategic decisions, or life-altering decisions on behalf of the family, but there are many options. Here are some examples:

  • Planning the next family meeting (location, social time, draft agenda);
  • Making a hiring decision without your stamp of approval;
  • Designing a family website or newsletter;
  • Selecting his own mentor in the business;
  • Choosing recipients of philanthropic donations;
  • Setting up a pilot project for a new product or service;
  • Identifying development workshops/conferences that are most appropriate for her generation;
  • Make some investment decisions with other members of the junior generation with a fixed sum of money;

There are many opportunities to build confidence and establish credibility among the next generation through increased decision-making. What decisions can you identify in your family that might engage them, while developing decision-making competence?

The Importance of Mentorship

by Kristi Daeda

“I have had my 15 minutes of fame and enjoyed my time in the spotlight and walking at the head of the parade. I believe that to whom much is given, much is expected. I want to give back. I enjoy watching younger people learn and develop. By helping others, I may in a small way be able to influence the next generation.”

         – Jack Pycik, former CEO, in interview with FBCG Principal Steve McClure

In our work with families on succession planning, much time and effort is spent in considering how the next generation will be prepared to step into leadership roles in both the family and the business. One important piece of the puzzle for these emerging family leaders is mentorship.

Mentorship relationships take many shapes and sizes. Some are very formal, with agendas, regular meetings and development goals. Others are more fluid, with meetings as needed or when the mentee requests them. Some of these relationships include guidance and feedback on wide-ranging topics from career goals, to leadership, to professionalism, to family dynamics. Others are very focused, such as a CFO helping a young manager improve their understanding of company financial performance.

Mentoring Benefits All Involved

Regardless of the structure or content, both mentors and mentees can benefit greatly from a mentoring relationship. Some benefits of a mentoring relationship include:

For the Mentee:

  • Experience at building professional relationships, especially with senior staff/company leaders.
  • Support and feedback.
  • Regular focus on professional goal setting and long-term career thinking.
  • Sounding board on how to handle complex work issues and interpersonal challenges.
  • Direct access to advanced knowledge about the business and industry.

For the Mentor:

  • Personal enjoyment of helping another professional succeed.
  • Reaffirmation of professional knowledge and experience.
  • Increased perspective on other areas of the business, trends and challenges.
  • Recognition from superiors as an organizational leader and contributor to overall success.

Mentoring Can Greatly Accelerate Professional Development

The best business lessons often don’t come from textbooks, and our best wisdom often comes from someone who has learned the hard way.

When done well, a positive mentoring relationship can lead to much quicker advancement – not just in job title, but in key success areas like communication, leadership, collaboration, and business thinking. The experience of learning from a mentor’s successes, failures and hard-won perspective, with the opportunity to ask questions and work together to apply these lessons to one’s own day to day work, can create great leaps in learning.

A mentor can also be an advocate (“sponsor”) within the company, helping the mentee identify opportunities for growth and smoothing their path to advancement.

Mentors can be Impartial Advisors

Lastly, and perhaps one of the greatest advantages of mentorship within family businesses, is that a mentor is often viewed as impartial in a way that Mom and Dad are not.

When Mark hears that he needs to step up his communication skills from his father, that message comes with the baggage of the family dynamic, no matter how healthy it may be. The same message delivered by an independent third party can be received very differently. The mentor’s perceived disinterest allows them a unique position as trusted advisor, a plus for both the organization and the mentee.

It’s clear that mentorship is a powerful tool that carries a wide range of benefits for all involved. How might your family embrace mentorship?

 

Playing to Strengths

Dana Telford
Dana Telford

There are many ways to create wealth – particularly if you use your strengths.

Consider the trophy wife.  In her husband’s final days he whispered, “Barbie, promise me something.”
“Anything, Baby Cakes,” she replied.
“My money means a lot to me,” he said. “Please bury me with it.”
She nodded solemnly, thought carefully, and agreed.  He died shortly thereafter.

As the funeral concluded, she placed a small box inside his coffin. Her girlfriend, seeing the box, asked incredulously, “Did you really do it?”

The widow replied, “Yes. I promised I would.  Call me old-fashioned, but I believe in keeping a promise.”

She dabbed carefully at the water welling in her eyes and continued,” After he passed, I put the money in my checking account.  Inside that coffin is a check I wrote to him for the full amount. If he can figure out how to cash it, he can have it.”

Of the many paths there are to creating wealth, I believe they all start with playing to strengths.

I have a client with a son named Henry. After years of frustrating his teachers and parents, Henry was diagnosed with ADD.  By his mother’s account he couldn’t sit still for 10 seconds, let alone concentrate on a blackboard. She became obsessed with finding something that would hold his attention.

Then she took him to a go-kart track. He drove with confidence, zoomed past everyone, and loved it.  From then on all he wanted to do was race go-karts.

She got him involved in circuit racing.  He won nearly every race.  In one particular race she noticed him raise and shake his right hand as he passed her seat in the bleachers. As she congratulated him after the race, she noticed that he seemed upset.  When asked about it he replied, “You changed seats in the middle of my race. I know where you sit.  I watch you every lap. Don’t you see me waving at you?  It’s hard to concentrate when you change seats while I’m racing.”

The realization hit her that her son’s ADD brain was wired to manage lots of images and information simultaneously.  A 16 year- old who did poorly in math could drive a go-kart 60+ mph, maneuver corners and opponents, locate his mother in the stands, wave to her, and win the race.

We all have inherent strengths. Let’s all get better at helping the young people around us discover theirs — whether it’s driving go-karts, sculpting, singing, running a business, or a myriad of other talents.   By so doing we’ll help them build self-confidence, attain individual fulfillment, and succeed.