The family business – The second generation arrives.

Posted: September 24, 2013 in Family Businesses, Up-and-running Business
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A family business requires new blood. In most cases this occurs when a  younger family member joins the firm. I did this myself. I had just received my bachelor of commerce degree and joined my dad in the family retail business. He had many years of experience in the textile manufacturing business and had left his own family business in the early 1960s to start a retail fabric business. He had years of selling and buying experience but he was certain that I would be the person to drive the business to the next level. After all, I had a university degree.

Yes, I had 4 years of theory but absolutely no real life experience. I was immediately elevated to a managerial position with no experience in hiring, staff supervision or merchandising.  This seems unusual but it happens all the time in family owned businesses. One business analyst joked that family members get to where they are by dent of DNA not ability. It may sting a little hearing this but it is true.

There is absolutely nothing wrong with on-the-job training but what is the probationary period for the trainee and what are the qualifications of the trainer? I learned a lot in my nine years in our family business. The lessons learned I have applied to family businesses with whom I have been associated over the years as either an employee or a consultant.

Some issues that need to be considered:

  1. Is the new family member interested in this type of (intense) enterprise for the rest of their career? Most of us need money to survive but working for a salary is not the raison d’etre for a small business entrepreneur.  This may take 3 or more years to become obvious for both the scion of the family and the new arrival.
  2. In my experience, a new family member is an overhead position. Is there financial room to accommodate them? This, combined with #1 above could dig the business into a deep hole in the 3 year feeling-out period.
  3. It is harder doing business today than 40 years ago, when I started out. The trainee needs to get up to speed quicker and the trainer needs to provide on the job training that will achieve that goal.
  4. What true authority will be transferred as part of the training process? I considered making this #1 on my list but I have put it in #4 spot.

These are four key issues that haven’t changed during my tenure with family owned and operated enterprises. Many family businesses have survived from generation to generation. Many fail however and it wreaks havoc on immediate families as well as long term employers, customers and suppliers.

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