Avoiding a Too-Early Succession
Position yourself for growth in 2017—join us live at the Entrepreneur 360™.
Flash Sale—save up to $200 on registration. Ends Thursday. Secure Your Seat »
"Someday this company will be yours." This may sound like an innocent statement from a well-meaning parent, but it can wreak havoc within a family business. "When children grow up believing that no matter how they act, the business will be theirs to run, the stage is set for an entitlement attitude to flourish," says Tom Kaplan, a family business consultant and assistant professor of entrepreneurial studies at Fairleigh Dickinson University in Teaneck, New Jersey. And once that seed is planted, it's almost impossible to stunt its growth.
Patricia Schiff Estess writes family business histories and is the author of two books: Managing Alternative Work Arrangements (Crisp Publishing) and Money Advice for Your Successful Remarriage (Betterway Press).
The key to preventing a child's sense of entitlement to the family business and the wealth surrounding it is to nip that attitude in the bud before it roots.
From the time children are young, says Kaplan, business owners need to talk about the business and family values in a way that de-emphasizes the entitlement concept. Start by telling stories. Children are mesmerized by the tales of hard work and sacrifice that accompanied the formation or shaky years of the business--especially when their grandparents or other older relatives relate the tales.
As children mature, says Kaplan, "Parents should weave into family conversations what it means to have a family business." Does it provide you with automatic authority and privileges? Or is its message one of stewardship, whereby more is expected from you simply because you're a member of the family who owns it? "All this may be hard for teenagers to swallow, but the idea that they have to set high standards for themselves if they come into the business gets through eventually," Kaplan says.
Still, you also need to have a plan for "de-entitlement" training in case the message is forgotten--or ignored--along the way. For Cindy Iannarelli, author of 101 Ways to Give Children Business Cents (Business Cents Resources) and a family business advisor in Bridgeville, Pennsylvania, this training comprises four stages:
*Stage one starts when you begin exposing young children to the business in a fun way. Iannarelli suggests occasionally taking them to work, trade shows or conferences. For the Reeger family, taking the kids to work is a natural part of their business. Reeger Farms has changed and expanded during the 100-plus years it's been in Bill Reeger's family. In the beginning, it focused on beef cattle and grain. Now, under Reeger's direction, the land is used for growing vegetables and the family has opened a retail farm pavilion, which includes a market, gift shop, bake shop, cafe and greenhouse. That's where six of the younger children play and "help out" when they're not in school or engaged in other activities.
"During the summer, the children are expected to help out with odd jobs whenever they're asked--everything from carrying tomato baskets to emptying trash from the restrooms," says Barb Byerly, Reeger's sister and the company's business coordinator. "They know at the end of the summer, they'll get $50. And they love being outside, playing and talking to customers.Occasionally they'll object to doing something. That's when we have to let them know attitude is an important part of the $50 they'll be getting and everyone is expected to pitch in."
*Stage two occurs between ages 10 and 17 when children have an opportunity to work for real pay in the family business, says Iannarelli.All should be offered the opportunity to work, she says, but, of course, not all kids will be interested.
Neil Anderson, president of Anderson Jewelers in Wellesley, Massachusetts, and his siblings lived by his grandfather and father's work ethic. "We had to work over the summer when we were teenagers, but it didn't have to be here. In fact, I painted houses one summer and worked on a farm during another. It wasn't until I was a senior in high school that I worked in the jewelry store."
This isn't unusual or unhealthy, according to consultants. "It's the beginning of a self-selecting process whereby children begin to decide whether they want to be affiliated with the business someday," says Iannarelli.
It's also when parents can see the first real signs of an entitlement attitude, warns Gerald Le Van, author of The Survival Guide for Family Business(Rutledge) and a family business consultant in Black Mountain, North Carolina. "When children aren't provided with guidelines as to what's expected of them during their summer jobs, many negative consequences can occur. They may think they can work only the hours they please. They may expect a high salary even when the job consists of stacking boxes in a stock roomor they might don an air of superiority with other employees," says Le Van. When any of these things happens, you know you're facing an entitlement problem.
*Stage three is to keep the child out of the business, at least for a while. Not going into the family business immediately upon graduation from high school or college gives members of the successive generation an opportunity to broaden their experience. One family member might require a certain number of years working in an related field. Another might work in a similar but noncompetitive company, perhaps in another part of the country.Le Van's recommendation is to keep the next generation out of the family business until age 30. By that time, he says, the young person has gained plenty of valuable experience working in an environment where the word "entitlement" doesn't even come up. He or she has been just another employee--not the owner's son or daughter.
*Stage four is formal entry into the business. By the time the successive generation enters this stage, you hope they've learned about sweat equity, which is earned though hard work and business acumen, and that they won't be focused on blood equity, which comes by accident of birth. But even in the fourth stage, objective standards which check any malingering entitlement attitudes have to be in place. Among them:
*A sound basis for compensation, such as what the fair market value of the work being done would command at a similar company. Salaries and bonuses can't be based on how much the person is loved or needs the money.
*Titles that reflect what the person is really doing. Exaggerated titles sometimes encourage the bearer to throw his or her weight around.
*Performance reviews conducted by a nonfamily member. Evaluation is best done by a trusted manager who is secure in his or her position and will not feel too threatened to make constructive suggestions or be critical of the family member's performance.
Because the possibility for destruction of both the family and the business rises in direct proportion to a child's entitlement quotient, it's important to begin the training early, says Kaplan. "Once the kids are in the business, it becomes much more difficult to change the rules and say, `Well, now you've got to work for what you get.'?
Le Van Co., (704) 571-4080, http://www.levanco.com