Great Expectations Is it too early to call 1998 a good year for entrepreneurs? Our experts certainly don't think so. Here's why...

What's wrong with these scenarios?

• You want your Ivy League-educated son to learn the businessfrom the ground up, so you start him with a six-month stint as astock clerk.

• You and your daughter, who for the last three years has provedherself a fabulous marketer with another company, decide it'stime for her to join the family firm. You put her in the accountingdepartment.

• With his newly acquired college degree in businessadministration, your son comes to work in the family business, andyou put him in charge of manufacturing.

What's wrong here is that the parent is setting the child upfor failure.

There's nothing wrong with wanting a child to learn everyaspect of your business. But relegating the Princeton graduate tothe stockroom can dampen enthusiasm and crush the spirit of someonewho's eager to tackle what he considers more importantprojects.

"You might reason you don't want anyone to thinkyou're favoring the child, but if you wouldn't normallyhire a college graduate for a stockroom position, it's equallyinappropriate 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 ablemarketer in another company should be allowed to bring those skillsto bear in her family's business. Knowing how the accountingdepartment works may be important at a later date, but giving herthe opportunity to prove her worth in an area at which she excelsis better than letting her flounder in a field in which she has nointerest.

Finally, putting the business graduate in charge of a departmentbefore he has had the experience he needs demoralizes the employeeshe'll be supervising. Even worse, it sets him up for failure bygiving him too much responsibility without the necessary backgroundor expertise.

Why The Setup?

Why do business owners make such seemingly irrational decisionswhen it comes to hiring and supervising their kids? Ivan Lansberg,a New Haven, Connecticut organizational psychologist specializingin family companies, explains that parents who are very attached totheir businesses often feel a combination of pride and resentmenttoward possible heirs. "In more functional families, the prideside is dominant. In less functional families, resentmentdominates," he says. If a parent's ego can't toleratethe idea that a child might do something better than the parent,problems arise.

Parental resentment "usually gets played out under thetable," Lansberg says. Kids get set up for failure in subtleways, such as not being properly prepared for an assigned task ornot having a well-defined job, which makes it hard to figure outwhat the scope of their responsibilities is or how to measureresults.

"Often, kids participate in the setup for failure aswell," Lansberg says. "They may be ambitious andoverstretch. They may try to reap the rewards of their positionbefore they are ready to do so. Or they may be afraid of realchallenges and shy away from them."

But most often, children of founders want to succeed in thefamily business, says Wendy Handler, assistant professor ofmanagement at Babson College in Wellesley, Massachusetts. They comein eagerly, wanting to prove themselves as independent adults andgain credibility among other employees, as well as with theirparents.

Nurturing Success

Parents who want to nurture their children so they succeed inthe family business should consider these suggestions fromLansberg, Handler and other family business consultants:

• Give children the opportunity to earn their stripes atanother company before joining the family firm. The experiencegives adult children knowledge of how the business world operatesand a chance to explore their strengths and weaknesses withoutparental observation. It gives them confidence in their worth asemployees who are not sons and daughters of owners, and credibilityin the eyes of the parents' employees when they join the familybusiness. It also gives them fresh ideas from other operations thatmight be useful in their parents' business.

• Provide supervision for all employees--whether or not theyare offspring of the founder. Whenever possible, have someoneother than the parent act as supervisor. In medium-sized to largecompanies, there's plenty of room for that to happen, and thereare generally processes in place, such as annual or semiannualreviews, to objectively measure performance. But in smallercompanies where that strategy is not always possible, Lansbergsuggests focusing on the amount of work accomplished as a way ofmeasuring performance.

Instead of the supervisor providing feedback, "use theperson best equipped to judge the value of a service or aproduct--the client," says Lansberg. "But the owner mustexplain why he's asking the client to do this--[to help hisoffspring grow and succeed]--and, in a way, train the client as tohow it can be done most effectively."

Obviously, the child should be completely aware of the situationand help set up the process by which the ongoing feedback takesplace. "The client should understand that in no way will[anybody] suffer for an honest evaluation, and that the assessmentwill really be appreciated and helpful to the company and theoffspring," says Lansberg.

• Don't give children too much responsibility. Whileoffspring entering the business need some freedom in which tooperate and prove themselves, don't give them moreresponsibility than they can handle or more authority than they areready for. "Overcoming little challenges successfullyperpetuates success," says Handler. One way to give a childfreedom while still providing a safety net is to team him or her upon a project with a more seasoned employee, suggests Handler.

• Provide the tools for success. Make certain the childhas all the necessary information to do the job. That includesaccess to financial information, experienced employees and you;membership in organizations, trade groups or peer groups; oranything 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] unlessthey take risks," says Lansberg. And risk inherently impliesthe possibility of failure. Limit the extent of the failure bytaking certain precautions, such as thoroughly discussing plansbefore taking any action, getting frequent progress updates, orsetting limits on money or time expended (not to be exceededwithout further discussion).

• Let children learn from failure. "When somethingdoesn't turn out as expected, it warrants discussion andanalysis between parent and child," says Handler. Sometimesthe child does everything right, but something beyond his or herpower goes wrong (such as unexpected government regulationssabotaging a terrific expansion plan). Sometimes the problem is toomuch free rein. Sometimes the offspring doesn't fulfill his orher responsibilities. Whatever the reasons, any discussion of theproblem should include ways to correct it and establish newprocedures so failure can pave the way to success.

Relatively Speaking

The Berman family has been in the real estate brokerage businessfor four generations, specializing in buying and selling commercialreal estate such as apartment complexes and shopping centers."So when my son David, who had been in the business for sixyears, saw an opportunity two years ago for us to get involved in a[different] type of real estate vehicle--single-tenant, net-leasedproperties--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 theidea was sound, I wasn't about to change the company'swhole method of operation," says Gerald. "I decided tocontinue what we had always done, and this became our financialsafety net while David developed his concept.

"We set up a schedule to measure his progress," hesays. "My role in David's project was to ask questions tobroaden 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 scopeof the question and start reviewing the basics with me. ThenI'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 toguide him too much. But he's proved himself to be such a fineassociate that I'm learning to mind my ownbusiness."--P.S.E.

Patricia Schiff Estess is the author of Remarriage andYour Money(Little, Brown) and former editor of SylviaPorter's Personal Financemagazine.

Contact Sources

Advance Realty Co., 107 Northern Blvd., P.O. Box 220411, GreatNeck, 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.