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What's wrong with these scenarios?
- You want your Ivy League-educated son to learn the business from the ground up, so you start him with a six-month stint as a stock clerk.
- You and your daughter, who for the last three years has proved herself a fabulous marketer with another company, decide it's time for her to join the family firm. You put her in the accounting department.
- With his newly acquired college degree in business administration, your son comes to work in the family business, and you put him in charge of manufacturing.
What's wrong here is that the parent is setting the child up for failure.
There's nothing wrong with wanting a child to learn every aspect of your business. But relegating the Princeton graduate to the stockroom can dampen enthusiasm and crush the spirit of someone who's eager to tackle what he considers more important projects.
"You might reason you don't want anyone to think you're favoring the child, but if you wouldn't normally hire a college graduate for a stockroom position, it's equally inappropriate for your own child," says Michael O'Malley, a family business consultant in Chicago.
In that same vein, the daughter who has proved she is an able marketer in another company should be allowed to bring those skills to bear in her family's business. Knowing how the accounting department works may be important at a later date, but giving her the opportunity to prove her worth in an area at which she excels is better than letting her flounder in a field in which she has no interest.
Finally, putting the business graduate in charge of a department before he has had the experience he needs demoralizes the employees he'll be supervising. Even worse, it sets him up for failure by giving him too much responsibility without the necessary background or expertise.
Why The Setup?
Why do business owners make such seemingly irrational decisions when it comes to hiring and supervising their kids? Ivan Lansberg, a New Haven, Connecticut organizational psychologist specializing in family companies, explains that parents who are very attached to their businesses often feel a combination of pride and resentment toward possible heirs. "In more functional families, the pride side is dominant. In less functional families, resentment dominates," he says. If a parent's ego can't tolerate the idea that a child might do something better than the parent, problems arise.
Parental resentment "usually gets played out under the table," Lansberg says. Kids get set up for failure in subtle ways, such as not being properly prepared for an assigned task or not having a well-defined job, which makes it hard to figure out what the scope of their responsibilities is or how to measure results.
"Often, kids participate in the setup for failure as well," Lansberg says. "They may be ambitious and overstretch. They may try to reap the rewards of their position before they are ready to do so. Or they may be afraid of real challenges and shy away from them."
But most often, children of founders want to succeed in the family business, says Wendy Handler, assistant professor of management at Babson College in Wellesley, Massachusetts. They come in eagerly, wanting to prove themselves as independent adults and gain credibility among other employees, as well as with their parents.
Parents who want to nurture their children so they succeed in the family business should consider these suggestions from Lansberg, Handler and other family business consultants:
- Give children the opportunity to earn their stripes at another company before joining the family firm. The experience gives adult children knowledge of how the business world operates and a chance to explore their strengths and weaknesses without parental observation. It gives them confidence in their worth as employees who are not sons and daughters of owners, and credibility in the eyes of the parents' employees when they join the family business. It also gives them fresh ideas from other operations that might be useful in their parents' business.
- Provide supervision for all employees--whether or not they are offspring of the founder. Whenever possible, have someone other than the parent act as supervisor. In medium-sized to large companies, there's plenty of room for that to happen, and there are generally processes in place, such as annual or semiannual reviews, to objectively measure performance. But in smaller companies where that strategy is not always possible, Lansberg suggests focusing on the amount of work accomplished as a way of measuring performance.
Instead of the supervisor providing feedback, "use the person best equipped to judge the value of a service or a product--the client," says Lansberg. "But the owner must explain why he's asking the client to do this--[to help his offspring grow and succeed]--and, in a way, train the client as to how it can be done most effectively."
Obviously, the child should be completely aware of the situation and help set up the process by which the ongoing feedback takes place. "The client should understand that in no way will [anybody] suffer for an honest evaluation, and that the assessment will really be appreciated and helpful to the company and the offspring," says Lansberg.
- Don't give children too much responsibility. While offspring entering the business need some freedom in which to operate and prove themselves, don't give them more responsibility than they can handle or more authority than they are ready for. "Overcoming little challenges successfully perpetuates success," says Handler. One way to give a child freedom while still providing a safety net is to team him or her up on a project with a more seasoned employee, suggests Handler.
- Provide the tools for success. Make certain the child has all the necessary information to do the job. That includes access to financial information, experienced employees and you; membership in organizations, trade groups or peer groups; or anything else needed to accomplish the task.
- Don't rush in to save a child from making a mistake. "[Offspring] of a founder can't prove [themselves] unless they take risks," says Lansberg. And risk inherently implies the possibility of failure. Limit the extent of the failure by taking certain precautions, such as thoroughly discussing plans before taking any action, getting frequent progress updates, or setting limits on money or time expended (not to be exceeded without further discussion).
- Let children learn from failure. "When something doesn't turn out as expected, it warrants discussion and analysis between parent and child," says Handler. Sometimes the child does everything right, but something beyond his or her power goes wrong (such as unexpected government regulations sabotaging a terrific expansion plan). Sometimes the problem is too much free rein. Sometimes the offspring doesn't fulfill his or her responsibilities. Whatever the reasons, any discussion of the problem should include ways to correct it and establish new procedures so failure can pave the way to success.
The Berman family has been in the real estate brokerage business for four generations, specializing in buying and selling commercial real estate such as apartment complexes and shopping centers. "So when my son David, who had been in the business for six years, saw an opportunity two years ago for us to get involved in a [different] type of real estate vehicle--single-tenant, net-leased properties--I was somewhat resistant," says Gerald Berman, senior principal of Advance Realty Co. in Great Neck, New York.
"Though David did a tremendous amount of research, and the idea was sound, I wasn't about to change the company's whole method of operation," says Gerald. "I decided to continue what we had always done, and this became our financial safety net while David developed his concept.
"We set up a schedule to measure his progress," he says. "My role in David's project was to ask questions to broaden his thinking." Now that project is in full swing, working successfully.
"When I asked my father for advice on one issue," recalls David, 35, "he'd often go beyond the narrow scope of the question and start reviewing the basics with me. Then I'd have to say, `I already know what to do about that. Let's just stick to the point.' "
"It's true," says Gerald. "I probably try to guide him too much. But he's proved himself to be such a fine associate that I'm learning to mind my own business."--P.S.E.
Patricia Schiff Estess is the author of Remarriage and Your Money(Little, Brown) and former editor of Sylvia Porter's Personal Financemagazine.
Advance Realty Co., 107 Northern Blvd., P.O. Box 220411, Great Neck, NY 11022-0411, (516) 466-3510
Ivan Lansberg, 100 Whitney Ave., #1, New Haven, CT 06510, (203) 497-8855
Michael O'Malley, c/o Family Business Dynamics, 2102 N. Clifton, Chicago, IL 60614, (312) 477-0247.