The family business – Inter-generational challenges

Posted: September 26, 2013 in Family Businesses

Most, if not all, businesses benefit from new blood. The proponents agree that the benefits to the business are: new ideas, new processes, an awakened vitality and different ways to connect with customers. All of this should be good… right? There might be one dissenter. The current controlling shareholder of the business.

“It worked for my father and my father’s father so why should we change anything?” Here’s a nugget that I’ve heard on too many occasions while working in family businesses: ” I know what I’m doing.” This means that any ideas of exploring new ideas and processes are effectively curtailed.

This is not to suggest that the status quo isn’t a good thing. The status quo represents comfort and predictability. The second generation family business member has a lot to learn about business in general and their business in particular.

This certainly has merit since a new family member is usually parachuted directly into the ranks of management without any prior training. Yet, this is exactly the way that the incumbents came into management too.  This paradox is obvious to an outsider (like me) who worked in a family business and has been around family businesses for many years.

This works pretty well for businesses in secure markets who are not subject to extraneous forces that upset the applecart. Few businesses escape market changes or change brought about by technology.  A classic example is big box retailing.  The Walmart phenomenon started in the US midwest and is now worldwide.  Walmart used scale to deliver goods that customers wanted and at prices that were affordable. The other basic tenet of the Walmart philosophy was that mass retailing was not only delivered in large urban centres but in smaller locales. The automobile changed this. People  drive 50 miles to save a dollar on a specific item and buy a whole lot of other items at the same time. Walmart has stores that offer groceries as well. It is the complete customer buying experience.

So what does this have to do with the family business? Everything!  The family business that thought it was inure from the big box competitor gets a rude awakening when a small community announces that one of these big stores is opening soon in its area. Great for the customer but bad news for the family (dry goods) retailer that has operated in the community for 75 years.

Inter-generational change is a critical element and obstacle for family business.



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