Straight from real business families: how not to mess up the next gen

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In talking to enterprising families on both sides of the Atlantic, key themes and traits emerge concerning the next generation. I have no doubt they will resonate with other families and prove helpful.

Because intergenerational dialogue and engagement are complex, they require understanding, curiosity, compassion, patience and a fundamental willingness on all sides to work together to move things forward. It’s important that we bring awareness to it and continue to talk about it.

In preparing to write this article, I asked myself what readers would most benefit from. I also considered what I have observed over the years, and the thing that family business owners most enjoy is hearing from other family businesses.

Sure, they may bring in advisers to help them design solutions, and that is usually a great idea, but knowing how others have tackled the challenges they face tends to be gold dust for family business owners.

Therefore, here are 10 recommendations and reflections that come from interviews with members of family businesses who were keen to contribute in the hope of helping others, and I’m grateful to them for their generosity.

1. Avoid pressure

Don’t put pressure on the next generation to join the business, but support them to be good people and responsible owners first. Whether they get involved in the business or not should be secondary. It has to be voluntarily chosen; this was something I heard from everyone I interviewed. You can invite, encourage and educate them, but the decision ultimately has to be theirs.

Interviewees also mentioned that it’s important that senior generation members check in with themselves – if they are only in the business for the sake of the next generation, it could lead to pressure and disappointment on both sides.

“I experienced a different kind of pressure: the pressure not to work for the family business and develop an external career. My eldest brother grew up entitled to the family business. He was put under pressure as well, and I do not think he was happy about the idea of being the one in charge of carrying on our family legacy.” – Doris Sommavilla, third-generation family business owner, Italy

2. Share the joy

It’s important to enjoy what you do most of the time and to show the next generation how much fun it is, and to share the good things you do and create through the business. If you share only the challenges and problems, it will not be an inviting environment for the younger ones.

“No one wants to go into a place of ambushings and hurts. Show them the business warts and all, fun and all.” – Stephen Falder, third-generation family business owner, UK.

Shadowing can be a great way to bring these positive aspects to life. Going on site visits, speaking to employees, seeing what impact family community support is having, and so on, are wonderful opportunities to have a positive impact on the next generation.

3. Wealth & money

Talk about what you own and about money. If the older generations feel uncomfortable talking about joy and enjoyment of the business and what has been created, the younger generation will miss out on the chance to see the positives of your business and family business life.

They will also lack an understanding of why you have the resources you have and how the wealth was created.

My interviewees made two key points here:

When the next generation benefits from the wealth of the family without an understanding of where it has come from, it creates expectations that the wealth and the opportunities it provides will always be there. Therefore, it’s key to be mindful of this. It could create problems if those benefits are suddenly removed at a certain age. Talk about what you own, where it has come from, what to expect and what is expected and how to manage and steward things now and in the future. Ideally, start as early as possible and, as parents, get involved in these conversations instead of outsourcing them.

“Baby steps from an early age is better that sharing everything at 30.” – Celine Fitzgerald, third-generation business owner, U.S.

Secondly, if members of the next generation are going to get involved as owners, they need to understand money and finance, so it’s also important to educate them about it. This is something that the family will need to make conscious decisions about, as this knowledge isn’t readily provided in many places.

“My parents never spoke with me and my brothers about money, wealth or death. From a young age, they were our heroes, our role models. Also, our peers, extended family members or cartoons had significant influence on us. We have observed and absorbed their behaviours and spending habits without filters and any guidance as if they were the norm. Different events and the set of opportunities have further shaped our relationship with wealth and money. I and my three brothers had a very diverse and not-balanced relationship with money while growing up, from totally uncontrolled spending habits to too much savings-oriented. Differences in lifestyle created, over time, tensions among us that still persist today.” – Doris Sommavilla, third-generation family owner, Italy

4. Honesty with compassion

Honesty is the best policy; it builds trust. Be honest in your communication and tell the truth, but with compassion. That was a piece of advice one of my interviewees shared.

One family made it foundational to how they are as a family and in relation to the business.

I think we all love the idea of having relationships where truth is spoken with compassion, but it’s harder to implement in practice. So the recommendation from my interviewees was to start small, be authentic and have true compassion if you are sharing something that affects another person.

5. Authentic responsibility

Members of the senior generation should give the next generation real responsibility without interference, e.g. through an independent business or by lending them seed money for a startup. At the same time, let them know they have your support and they are not alone if they need help.

“I am a big fan of giving the next gen a routine early on (from a very young age) and teaching them how to plan for their living standards (from the age of 8, at least). This is the way to help our next gen develop a healthy relationship with money.” – Doris Sommavilla, third-generation family owner, Italy

“Buy a small business and enable the next generation to make decisions, i.e. learn for themselves how you get on when you are on your own but you’re not alone.” – Stephen Falder, third-generation business owner, UK

Lastly, don’t overfocus on how you would have done things and find fault with how the next generation is operating. Allow them to fail as well and learn from their mistakes.

6. Support the next generation to find their purpose

Further to the point above, help the next generation to find their passion, either in the business or elsewhere.

“Have your own sense of purpose. You will be happier and at peace.” – Celine Fitzgerald, third-generation family business owner, U.S.

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It’s important to value younger family members in the business and those who haven’t joined (yet) for obvious reasons. In addition to that, you never know what the enterprise may look like and grow into over time and who is going to be involved in what ways.

7. Clarity about involvement

Be clear about what it means to get involved in the business and what it means to own a stake in your family business. What can you expect if you choose to work there? This is something that all family members will need to understand, but being clear about this with the next generation, from an early age, is critical. This is an area where making assumptions can be costly, especially when it comes to relationships.

8. Support collaboration

“I say to the next generation that they have to do this collaboratively.” – Col Campell, third-generation family business owner, Ireland

Collaboration is a cornerstone and hallmark of a healthy family business. You are by nature in something together, and nurturing the ability to collaborate and make decisions together in the next generation will benefit the younger generation and their relationships with each other as well as the business.

If they don’t know each other well, start with relationship-building – doing things together that have nothing to do with the business. This can be very beneficial.

9. Build credibility

As a member of the next generation, it’s worth learning as much as you can so you approach the senior generation with knowledge and credibility.

The next generation often benefits from working elsewhere for a while so they bring outside knowledge and skills back to the company. This way they can know for themselves that they bring value to the business. This is not to say they wouldn’t without external experience, but it often helps them feel more confident.

10. Words of encouragement

“Be yourself, don’t fall out over the business, and help the next generation understand that they can make an impact.” – Col Campbell, third-generation family business owner, Ireland

“We find ourselves on a continued learning journey. Understanding the family business can be an eye-opening revelation as it is not widely discussed in our day and age. The RisingGen Cohort co-led by Fidelity Family Office Services and Legacy Capitals was a major turning point along with my internship at Loyola University Chicago’s Family Business Center.” – Celine Fitzgerald, third-generation, U.S.

Elizabeth Bagger, founder of Avanti Family Business Advisory, helps family businesses strengthen family dynamics, improve family decision making, design and implement governance structures that work and engage the next generation. She is a second-generation member of her family business and serves on its board. She has worked in the field of family business for 15 years, lives between Chicago and Los Cabos, Mexico, and works with families globally. She can be reached at elizabeth@avanti-fba.com by email.

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