Category Archives: Next Generation Development

Next Generation Development: Put Your Family Enterprise to the Test

Michael Fassler
Michael Fassler

Next generation development is a critical component of multi-generational continuity.[1] An effective process for developing the next generation of leaders requires a significant commitment of family resources. A test of whether your next generation development process is being effective involves answering three questions:

  1. Are family members developing the competencies to perform in their current and future family enterprise role(s)?
  2. Are family members developing the confidence that they can deliver in their current and future family enterprise role(s)?
  3. Are family members building credibility with family members, non-family executives and independent directors?

Development of competency, confidence and credibility go hand-in-hand. Competency is the combination of behaviors, knowledge and skills necessary to be well-qualified to perform in a particular family enterprise role, whether it be management or ownership. The opportunity to demonstrate competency combined with accurate feedback on performance is essential to developing confidence. Experiencing demonstrated competency sets the stage for family members to trust in themselves to further develop and prepare for increasingly complex roles. Experiences where learning is taking place and value is being created for the family enterprise is a powerful combination which builds family member credibility.

As individual family member competency and confidence build, credibility with other family enterprise stakeholders also increases as they come to believe and trust in the family member. Essential to building credibility includes having, and applying, a well-defined next generation development process which is understood and accepted throughout the family. This helps ensure that stakeholders believe decisions regarding access to development opportunities, including employment roles, are in line with what has been agreed upon.

As your family considers the significant commitment you are making to your next generation development process, test its effectiveness through assessment of the impact on developing competency, confidence and credibility in the family’s next generation of family leaders. This assessment will provide you with important feedback to drive needed adjustments and to encourage your family to continue to invest in this critical component of multi-generational continuity.

[1] See, for example, Developing Next Generation Leaders in Family Business; Stephen P. Miller; The Family  Business Advisor; 

Next Generation Development: Put Your Family Enterprise to the Test

Michael Fassler
Michael Fassler

Next generation development is a critical component of multi-generational continuity.[1] An effective process for developing the next generation of leaders requires a significant commitment of family resources.

A test of whether your next generation development process is being effective involves answering three questions:

  • Are family members developing the competencies to perform in their current and future family enterprise role(s)?
  • Are family members developing the confidence that they can deliver in their current and future family enterprise role(s)?
  • Are family members building credibility with family members, non-family executives and independent directors?

Development of competency, confidence and credibility go hand-in-hand. Competency is the combination of behaviors, knowledge and skills necessary to be well-qualified to perform in a particular family enterprise role, whether it be management or ownership. The opportunity to demonstrate competency combined with accurate feedback on performance is essential to developing confidence. Experiencing demonstrated competency sets the stage for family members to trust in themselves to further develop and prepare for increasingly complex roles. Experiences where learning is taking place and value is being created for the family enterprise is a powerful combination which builds family member credibility.

As an individual family member’s competency and confidence build, credibility with other family enterprise stakeholders also increases as they come to believe and trust in the family member. Essential to building credibility includes having, and applying, a well-defined next generation development process which is understood and accepted throughout the family. This helps ensure that stakeholders believe decisions regarding access to development opportunities, including employment roles, are in line with what has been agreed upon.

As your family considers the significant commitment you are making to your next generation development process, test its effectiveness through assessment of the impact on developing competency, confidence and credibility in the family’s next generation of family leaders. This assessment will provide you with important feedback to drive needed adjustments and to encourage your family to continue to invest in this critical component of multi-generational continuity.

[1] See, for example, Developing Next Generation Leaders in Family Business; Stephen P. Miller; The Family  Business Advisor

The Greatest Issue of Destructive Family Dynamics

Deb Houden
Deb Houden

In my last post, I shared the parallels I found between the marriage research of John Gottman, Ph.D. and how it applies to any familial relationship especially those who own/work together. Gottman dubbed the four most detrimental behaviors for a marital relationship as The Four Horsemen: criticism, defensiveness, stonewalling and contempt. (Criticism is discussed here.)

Defensiveness , says Gottman, is a way of blaming the other for the issue and blame has never solved any dispute. By accepting responsibility for at least your own part of the problem goes a long way in having a constructive discussion. Being defensive is like having a rubber wall around a person, never letting in any type of constructive feedback. The defensive person takes feedback and twists it to fling back at the person in order to protect themselves. Communication and problem solving get increasingly difficult with this person because attempts to better a situation are stalled from the beginning and the conflict escalates. Teenagers and young adults need to learn to graciously accept feedback and hone their own ability to change and grow. Defensiveness is an inherited trait.

The third part of The Four Horsemen is stonewalling: when one of the participants of a relationship withdraws from interaction. How many times do we see people go quiet and withdraw when things get difficult? How many times do people get flooded and not know how to manage the situation so they shut down? It happens a lot. People falsely believe that by not interacting in a time on conflict that there will be a better outcome than by confronting the negative, but the research shows that is not the case. It’s a death knell for a relationship.

Being able to talk with someone (or even argue in a constructive way) is better than shutting down. I have worked with more than a few families who have the culture of not “fighting.” The problem is that no one learns to manage conflict effectively. Stonewalling is a fierce form of control over the other person. There is no emotional connectedness with the person who is stonewalling because they have emotionally built an impenetrable wall around their psyche.

Finally, Gottman argues that the greatest predictor of divorce is contempt, and I argue it is the greatest issue of destructive family dynamics. Contempt displays include sarcasm, cynicism, eye-rolling, name-calling, tsk-ing, sneering and hostile humor. (There are more, and you know them when you see them).  Parents don’t understand how their children can act that way towards their siblings yet they demonstrate those same behaviors to their own relatives in the firm.

Contemptible actions are made to discount the thoughts, feelings, and actions of the other in such a way as to inflict incredible damage. To ignore someone who is doing that takes Herculean strength!  I have been the recipient of contempt and it is probably, to me, the absolute worst treatment anyone can do. I feel silly, angry, not valued, and completely turned off.

Imagine if that happens every day when you work someone who is related to you?  I have been in situations where parents do this to children.  What does that teach?  The parent is keeping the child one step below, always on the lower rung. How can we prepare a child to have good relationships, have confidence to take on challenges when they are made to feel inferior?  To me, contempt is akin to hatred. Who needs enemies when family members display contempt?  There is NO PLACE for displays of contempt.

I am not naïve to expect that none of the above will happen in even the most loving, respectful and constructive of relationships. Sometimes emotions take over and we become our worst self – especially with those whom we trust will forgive us. But the preparation of our children is such an important task that we really need to teach them emotional skills that help with relationships. When you find yourself behaving a little subpar (and that might take some reflecting time to let the anger subside), acknowledge your actions and admit that you are not your best self sometimes.

Gottman’s final word of advice to couples is to try to have a ratio of 5:1 in positive to negative interactions (over a long span). By conceding less than stellar behavior and combating it with some positive interaction, you will mitigate the damage from the Four Horseman. We can do that with our next gen, too. Try to remember the golden ratio to keep the Four Horseman of the Relational Death at bay. Then you will have prepared your next gen well.

For more information about next-generation development, read Deb’s article published in The Family Business Advisor: Introducing Teens and Young Adults to the Family Enterprise.

Leading the Next Gen by Example: Constructive Family Relationships

Deb Houden
Deb Houden

I was reading On Wisconsin, the alumni magazine for the University of Wisconsin, when I came across an article highlighting John Gottman, Ph.D., who graduated from Wisconsin in 1972.  I knew of Gottman’s research because I used it often when teaching an undergraduate course at Wisconsin on Interpersonal Communication.

Gottman has devoted his life study to the indicators of what makes a successful marriage. I was in the process of writing an article on preparing teens and young adults for the family enterprise and I thought this is the most important aspect of preparing anyone in a familial relationship, especially those who own/work together. A constructive family relationship is key to continuance of the family firm.

While Gottman is a noted researcher on marriages, I believe his research applies to any familial relationship, especially when preparing the next generation. Parents can teach teens and college kids how to have a constructive, open relationship with family members by treating their own relatives in the business in a healthy manner. Gottman suggests that the four most detrimental behaviors for a marital relationship are criticism, defensiveness, stonewalling and contempt. In fact, his accuracy in predicting divorce (when he sees these behaviors) is at 94%!

Gottman defines criticism differently than a complaint. A complaint focuses on the specific behavior, whereas criticism focuses on the character of a person. When I teach negotiations, I tell the students to separate people from the problem; focus on what the problem is at that time.  Don’t get caught up in the behaviors of the other person because that causes one to lose their most critical leverage piece: their ability to think clearly.

The same is true of familial relationships.  Don’t slay the character of the other family member.  Examples such as “He always needs to be in control” or “She is lazy” is a direct slam at their character. It solves no problems but instead exacerbates the downfall of the relationship. In some of my most conflicted family enterprise work, I see character slams repeatedly happen. The manner of character slamming becomes a habit and is passed down to the next generation.  Children mirror these types of habits and begin to believe that this is how we treat relatives.

Not good preparation for the future!

For more information about next-generation development, read Deb’s article published in The Family Business Advisor: Introducing Teens and Young Adults to the Family Enterprise.

Getting Unstuck

Chris Eckrich
Chris Eckrich

In a family business, it is not unusual for a junior generation family employee to become stuck in a job where he is under-performing. When this happens, it can be difficult for family management leaders to talk openly with the younger family employee about the situation. Although folks working with the family employee are well aware of the situation, no corrective feedback is given.

This can be even more difficult if it is a sibling or cousin that is observed to be in a rut. Commonly, the junior generation family employee feels strongly that there are artificial limits placed on what he or she is allowed to do in the organization, perhaps because of age, experience, or unhealthy family dynamics that are playing against them. Often, nothing is said as speaking up may create tension and nobody wants to hurt loved ones.

This is not a healthy situation. For the company, the business is robbed of a family employee who could either excel and add much more value to the company, or exit and make room for a nonfamily employee who would be more successful in the position. For the junior generation family employee, being in a stuck position creates frustration as valuable life time is being spent doing something that is perceived as either not meaningful or lacking direction.

When this happens, the status quo can continue for months or even years if neither side speaks up. Once the pattern is entrenched, senior generation leaders may form judgments about the junior generation employee’s motivations and assume that they are lacking. The junior generation may form judgments about the senior generation’s typecasting and form judgments as well. Both sides begin to see each other as the problem and a decline in mutual respect sets in.  A better model is needed.

If you see yourself in this situation, don’t settle for the status quo. You and your organization are much too valuable to settle for this no-win scenario.

Here are some actions you might consider:

 

What the “stuck” family employee can do:

 

What the senior leader can do:

Quit complaining about things not being the way you want them to be.  It does nothing to help you. Quit labeling the junior employee as ineffective and commit yourself to helping him or her develop into a better person and employee.
Identify a resource that can coach you to clarify and state your desired goals and roles. Work with ownership to develop a comprehensive family employment policy that addresses an expected family work ethic and identifies career resources available.
Communicate your hopes to your supervisor or HR Director, asking what specific training or behavior changes you could make that would increase your chances of reaching your desired goals or roles. Speak with the younger generation employee about his or her desired goals and roles, listen to what is shared and write it down.  (If he or she has no future goals, request HR assistance or outside coaching as a way to help the person gain clarity.)
Create an action plan to develop the specific skills or experiences needed to reach your goals, even if it will take time (like furthering your education). Once goals are clearly stated, work with HR or appropriate supervisors to identify behavioral, educational and experiential requirements that will be needed for the person to advance.  (Request coaching for this person through HR or outside resources, if it is needed.)
Talk to senior family leaders about your hopes and what you intend to do to reach your goals, asking them for further input on what you can be doing to become more valuable to the organization. Determine what corporate resources are available to help the junior generation employee achieve his or her stated goals, and what strings are attached (e.g. the company will pay for courses in which a B or better is earned).
Use your coach or another person to serve as a support resource to help you stay on track. Clarify what role senior family leaders and immediate supervisors will have in providing guidance and feedback to the junior generation employee.
If you realize that your needs cannot be met inside the company, don’t be afraid to pursue your career outside of the family business.  You may end up developing a stronger skill set that will allow you to reach your goals in the family business at a later time. Affirm progress towards goals and expect setbacks, but don’t fall into the trap of labeling.  Be honest in providing feedback that will help the junior generation family employee get back on track.

Podcast: Revealing Family Business Challenges Can Empower Startling Opportunities

Brun de Pontet 100x150
Stephanie Brun de Pontet

Senior FBCG consultant Stephanie Brun de Pontet was a recent podcast guest on Business Confidential Now with host Hanna Hasl-Kelchner.

The show explored how a family business can grow and prosper and successfully transfer from one generation to the next while at the same time avoiding blow-ups and other situations that make for really awkward family get togethers.

Interview highlights include:

  • The most common first generation family business challenges.
  • Which should come first, business or family?
  • Why it’s important to manage a family member’s sense of entitlement.
  • Distinguishing the rights and duties of family business owners who don’t work in the business from those that do.
  • Why pay objectivity is more important than pay parity among family working in the family business.
  • The quintessential family business succession challenge.
  • Why next generation leaders must be empowered to adjust leadership styles.

To listen, visit www.businessconfidentialradio.com or download:
On iTunes http://apple.co/1PW0PA0
On Spreaker http://bit.ly/22eEtkz
On Stitcher http://bit.ly/1UJPlnM

First Struggle Then Strength

Dana Telford
Dana Telford

Is it possible to build personal strength without first going through personal struggle?

Sometimes as parents we are tempted to cushion our children from the pain of disappointment and failure as they mature. Too often as family business leaders we believe that we are helping family members by giving them a position that they have not earned when in reality the opposite is true. By helping too much we hinder growth. By enabling we create entitlement.

My teenage son Will loves video games. In his free time, he sits in front of our TV, thumbs a blur on the controller, eyes fixed to the screen, chattering away into his headset as he and his friends strategize how to counter the latest wave of alien invaders. My favorite game growing up was one played not on a screen but in a field: baseball. Despite my hope that this interest would somehow be passed down to Will, his interest in Little League was short-lived and unfulfilling. He tried some other sports and activities and has become a good tennis player.  He has found a passion for nutrition and weight-training. But video games are his first love, and his mom and I have given him the space to pursue this interest.

As Will’s gaming skills and interests have grown, so has the price of his hobby. Earlier this year, he set his sights on a high-powered gaming computer that was “on sale” and asked if we would order it online for him. “You know how it works,” I told him. Once each of our kids is old enough to understand, I explain to them our approach to large purchases: If we agree that the purchase makes sense, the child is expected to work to earn half the money.

It’s the same principle I learned from my mother. Whenever I wanted a new baseball bat or bike or expensive toy, my mother made me earn half the money to pay for it. That not only made me think about how much I really wanted the item — not surprisingly, a lot of things dropped off my “must-have” list when it was clear I had to help pay — but also created space for me to earn the item through hard work, rather than having it handed to me.

“But this is a lot more expensive than anything else I’ve wanted,” Will said when I reminded him of the policy. “I’ll have to earn $800 and I don’t have a job!” I told him I understood that earning the money would be difficult, but reminded him of a few pending expenses in the household that were higher priority – Anna needed braces and Sarah needs her wisdom teeth pulled.  “And,” I reminded him, “your half is going to be more than $800.  Don’t forget tax and shipping charges.”  He let out a sigh of frustration but accepted the reality and agreed to the deal.  Over the next few weeks, I observed him working and saving diligently, putting aside the money he gained from extra chores, babysitting and selling other gaming equipment he didn’t need.

One day Will came to me excitedly and said, “Dad, the computer sale is ending this week.  I need $1600 now!” I reminded him of our deal – that we would order the computer once he put $842 (don’t forget tax and shipping charges!) in my hand or my bank account. He looked disappointed. “I only have $500 saved,” he said. “But my Xbox is for sale and I’m sure someone will buy it.  Could you just order it and I can owe you the rest?”

I admit that it was tempting to give in to his request.  The clash of family socialism and breadwinner capitalism clashed inside me in a major way.  He had worked hard to save more money than ever before. But my wife and I realized that giving in would fail to uphold the principle we wanted him to learn, and would limit the space he needed to grow fully.  Obviously Will was disappointed, but he kept working toward his goal.

Within two weeks, Will sold his Xbox and reached his goal.  We were thrilled to see that the price of the computer was still $1,600 and ordered it straight away.  When it arrived it was everything he’d hoped for and he beamed with joy as he opened the box.

My wife and I told Will how proud of him we were for earning that computer.  He had become very resourceful as he pursued his goal of buying the computer: He had worked and saved and sacrificed his time and other valuables. He had become much more confident in his ability to figure out a way to make things happen. And he gained a greater appreciation of the value of money.

Through the struggle comes the growth.  As leaders we need to keep this principle in mind as we offer jobs and financial benefits to family and non-family employees.  We need to provide them adequate time and space to struggle.  Time to filter through the emotions of disappointment and space to figure out what they really want and how to earn it.  Without it how can they ever hope to develop their own strength?

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).

The Sixth Generation at National Geographic

Craig E. Aronoff
Craig Aronoff

The National Geographic Society with its famed National Geographic Magazine is a not-for-profit entity dating to 1888. Among its founders and first president was Gardiner Greene Hubbard, an attorney and financier.  He helped to fund Alexander Graham Bell’s research that led Bell to being awarded the patent on the telephone in 1876. The next year, Bell married Hubbard’s daughter and after his father-in-law’s death, succeeded him as National Geographic Society president.

Gilbert Hovey Grosvenor became the Society’s first employee in 1899, and the next year, married the boss’s daughter.  He was editor of the magazine for 51 years and served the Society as president and then chairman of the board.  His son, Melville Bell Grosvenor, joined the family business in 1924, also served as president and editor, and in 1967 succeeded his father as board chair.  His son, Gilbert Melville Grosvenor, joined the magazine in 1954, became editor in 1970, president in 1980 and was named chairman emeritus in 2010. He retired from the board in 2014 after 60 years of service.

His daughter, Alexandra Grosvenor Eller, MD, joined the National Geographic Board in 2009 and continues family stewardship of this important institution into its sixth generation.

An organization need not be a business to benefit from a family’s multigenerational nurturing commitment. And profit from the good done by the organization need not be in the form of dollars to the family who founded and developed the institution.