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Bridging the Generation Gap

5 strategies that will help every intergenerational family business make it through the critical years
January 26, 2007
URL: http://www.entrepreneur.com/article/173674

In the old days, it was the farmer or dry goods store owner who hoped his son would take over the family business. Now you're more likely to be hoping to pass on your technology firm or e-commerce business to your offspring. In either case, the premise behind family businesses hasn't changed: You hustle to build a business from nothing. You sell your vision to customers, not to mention investors or a bank loan officer. You go through hard times, but you persevere. And when you have children, you naturally look at them and say, "Someday, this will all be yours."

That's fine if your baby was born when you were 50. But with people living longer and putting off retirement until they're in their 70s, chances are, by the time your offspring are ready to take over the business, you won't want to give it up. In fact, handing your children the company's reins may be the last thing on your mind. Still, you need to think about the future. What entrepreneurial parents should really be saying to their progeny these days is, "Someday, this will all be ours."

The years where you and your children are both actively involved in running the family business, each knowing that one is the president of the company while the other is the president-elect, may not be easy ones. In the typical family business, this generational overlap can be tough to handle.

That's why family business expert Dr. Tim G. Habbershon calls these years the hot zone. And he says that the way the older and younger generations work together in the hot zone can mean the difference between the success or failure of your business.

If you're part of a generation gap in a family business, then start taking notes. To get through the hot zone successfully, we've outlined five strategies that every intergenerational family business should employ.

1. Embrace the hot zone. Habbershon, founding director of the Institute for Family Enterprising at Babson College, says of this time, "Potentially, it's a significant problem, and we do address it a lot with our students. But it can be a positive experience and even a great opportunity. It's a time when you have different perspectives, experience levels and skill sets."

No matter what the differences between the generations--stodgy vs. progressive, risk-oriented vs. cautious--it is, says Habbershon, a time when the company has "complimentary resources." No company, after all, should be risky to the point of recklessness, and no business should be cautious to the point of paralysis. If anything, the generation's differences should be celebrated.

The problem, says Habbershon, occurs when the business owners "stay in the parent-child relationship, with the senior entrepreneur playing the parent role and the younger one acting out the teen rebellion stage. The parents, in other words, are trying to stay in control, and the children are trying to get control."

2. Separate family and business from the family business. Cassie Henes, 20 years old and recently married, not long ago was a teenager sneaking out of her parents' house to party with her friends. Now she's working as the training and store launch facilitator with her father, Jim Baskett, as part of the management team at Emerald City Smoothie, a Washington state smoothie franchise company that's planning to go national (they so far have 34 locations in California, Arizona and Washington). In the office, where she works in operations, Cassie refers to her father as Jim. She never calls him Dad.

"It was weird the first week at work," Cassie admits, "but I work with a lot of people who are older than me, and I realized if I wanted to be taken seriously, I had to start calling my dad by his first name. At work, you have to separate family and work as much as possible."

That means, if Cassie has a problem with the business she can resolve on her own, rather than going the easy way out and getting her dad involved, she takes care of it herself. She's also careful not to take perceived slights personally.

"Business is business, and he has an investment to protect," says Cassie. "If he says something that hurts my feelings, I'll tell him, but I'll tell him later." Meaning out of earshot from other employees. But she'll definitely say something. "You have to do that," Cassie says. "You have to be honest with each other."

3. Treat each other as a peer. That's how the Noys have worked successfully together in their real estate business, which includes several subsidiaries like NYREX (New York Realty Exchange LLC) and Helm Management Inc. Ely Noy, now 72, moved from Persia to New York City in the late 1970s with his wife, Ester, and his six children, Rami, Abe, Isaac, Iris, Jack and Eran. Even though his children were young--Eran was just entering kindergarten--they were all more or less involved in the business from the beginning.

In the early days, Eran, now 32 and a co-owner of the company, says he and his siblings translated documents and conversations for their father, who came to America knowing very little English. "We were kids, but we always played a part in the business," recalls Eran.

It isn't necessary for the child to be so locked into the business that they're indispensable, "but you have to have mutual respect for each other," says Habbershon, who adds that one way for a parent and child to get that parity is for the younger generation to do something new within the company. "It may be good for successors to start another division or business, or launch another product line. They have to find some entrepreneurial activity, where they can have a sense of autonomy and some success of their own, out from under the wings of the parents."

That's exactly what Jim Baskett had his daughter, Cassie, do. Before he bought Emerald Smoothie, he was thinking of purchasing just three of their locations, so he encouraged his daughter to work at one that he had nothing to do with, with the idea that she would learn how his future franchised business worked. After he actually purchased the entire company and brought Cassie aboard, she'd already risen from the lowest employee ranks--doing everything from mopping floors to cleaning the bathrooms--to managing the smoothie bar. Her father may have been one of the owners, but Cassie had the hands-on experience that Jim didn't have and he was smart enough to value her wisdom.

4. Communication is crucial. When they're working together, Habbershon says parents and their children need to have clearly defined roles. Through his extensive work at Babson, he's found that the successors usually complain their parents have an old-fashioned vision and are too conservative when it comes to risk. The parents, on the other hand, think their kids are only too happy to risk their parents' money on unnecessary expenses for the business, like new computer equipment or improving the infrastructure.

"Another big complaint from the business successors is that the parents won't tell their kids what they need to know to make decisions about the future," says Habbershon. "I've found that parents tend to be pretty secretive during this time. One study I did on multi-generational family businesses showed that around their mid-thirties, a successor's trust of their parents begins to plummet. In the early stages, they have high trust levels, but by their mid-thirties, they're no longer sure their parents have their best interests at heart. So right when the family needs the highest levels of trust, they have the lowest. That's why we encourage them to start clarifying these issues right away."

5.Create a succession plan. The hot zone is the perfect time to create a succession plan, but it should be done by creating a specific plan rather than relying on the hope that just working with your children will mean everything will work out fine once the mantle of leadership has been passed. After all, throughout corporate history, there's a solid trail of broken family businesses.

One of the more recent struggles occurred within In-N-Out Burger, a popular restaurant chain in the western United States. Last year, an In-N-Out co-trustee brought a family feud to light when he filed a lawsuit, charging that Lynsi Martinez, the then-23-year-old heir to the family business, and some other corporate executives were trying to speed up her takeover of the business, which wasn't supposed to happen for several more years. Whether this was true or not--everything was settled before the case could go to court last year--the suit stirred up some pretty hard feeling. The 86-year-old co-founder, Esther Snyder, was quoted as saying that her granddaughter and others in the company "only want me dead." On August 4, 2006, unfortunately, Snyder passed away. You have to imagine that the family wishes the succession had worked out differently.

In 1988, Levolor, a window-blind maker business in Parsippany, New Jersey, was featured in The New York Times because of the infighting that went on after the eldest son of the founder died (there was some disagreement as to who owned which parts of the company). One family business expert at the time said what was true then and is still true now: "Successful family businesses come from well families, and this was not a healthy family. There's a lack of generosity and an abundance of greed." Levolor was sold soon thereafter and now thrives as a division of Newell-Rubbermaid.

Jeff Harris, who runs the Family Legacy Forum, says that if a family business is destined to burn out, it will do so by the third generation. "Because by then, the owners have no idea where this family business came from. All they've known is wealth and success," says Harris, whose organization works with affluent families to ensure that they pass enough wealth onto their children in a way that doesn't overwhelm the offspring.

Of course, the best way to ensure a successful succession plan is to actually have a plan. Harris's organization, which often works in tandem with the Heritage Institute, helps parents recognize which values are most important to them. "I know it sounds basic," Harris says, "but most folks don't sit down and spend a lot of time thinking about this." At the Family Legacy Forum, that's all they do, and when Harris takes on a client, they always end up organizing a retreat for the parent and child or children whose goal is to discuss working during and after the hot zone.

Successfully running an intergenerational family business sounds like a lot of work--and it is--but it can be done, if you follow the experts' advice and learn to do it properly. And your odds of everything operating smoothly will be better if you take Paul Bullock's words of wisdom to heart.

Bullock is the owner of two Volvo Rents equipment rental franchises in West Monroe, Louisiana. His two sons and two daughters are all involved in the business in some capacity and the business has been running smoothly from the get-go. "When it comes to running a family business, children are like a healthy saving's plan," says Bullock. "You have to invest in them regularly. Our business secret has been gradual empowerment--giving the kids more responsibility as they learn the ropes and prove they are ready for more."

Sounds like an ideal way to raise kids, whether in a corporate environment or everyday life.

Geoff Williams is a freelance writer in Loveland, Ohio.