Growing the family firm’s second generation

By Kathy J. Marshack, Ph.D., P.S.

Cathy and her older brother Charles have worked in her family’s restaurant business for 25 years. Cathy’s parents, the founders are nearing retirement and want the business to carry on under the care of their children. Cathy and Charles are ready and well trained for succession. So, where’s the problem?

The problem is the youngest son, Brian. Brian has never worked in the family firm, preferring to try other ventures. Unfortunately everything Brian has tried has failed. Cathy’s parents have “bailed” Brian out of one jam after another. Now as they face retirement, the parents want Cathy and Charles to share ownership and management of the business with Brian.

Cathy and Charles are beside themselves with frustration. They don’t want to offend their parents. However, Brian’s inexperience and lack of maturity may cause considerable problems in the business. Neither Cathy nor Charles relish the idea of taking care of their brother indefinitely as their parents have done.

This type of problem is all too common in family-owned firms. Most of us cherish the responsibility of parenting and are reluctant to give it up when the children leave home. In family firms where children may never leave home, the parenting role may continue indefinitely.

A parent’s job is to nurture and protect children so that they can grow up healthy and capable of independent adult life. But parents don’t teach independence directly. Independence is a state of mind that children must conquer for themselves.

Sometimes Mom and Dad fight because one doesn’t want the child hurt and the other wants the child to face their mistakes. Alternatively the child may be making a bid for independence but the parents thwart it. The parents complain that their grown child is not very strong or capable of leadership. Then they complain when the child speaks up for himself.

There are a variety of strategies for ensuring that the second generation in family firms really grow up. The strategy that fits for you depends upon the business, the parent’s skills and personality and the skills and personalities of the children.

The child needs an environment where they must prove themselves capable of leadership in the family business. For some this means leaving the business for awhile and working elsewhere. For others, it means getting an education before returning to the family business. Another child may benefit by working their way up from the “mailroom” with no preferential treatment from the parents. Finally, some children will be better family members and more capable adults if they never return to the family business.

There are two goals in family firms. One is to develop a thriving business. The second is to develop healthy independent adults who can contribute to society.

Keep in mind that the business can be successful without the child and the child can be successful without the business. That is, set your sights on accomplishing both goals independent of each other, and you may be surprised how they come together in the long run.