According to a report, only about 30% of the family businesses in the US last till the next generation, and 12% till the third. But why? If the family business, be it a small one or a large enterprise, has been successful for one generation, why the succeeding generations do not continue with the same? After all, their parents and founding members have made it so far and took all the challenges to create a smooth transition for their children, right? Then what is it that makes the children somewhat reluctant to join the family business? We will discuss all of this in this post to help you know what is going on in their minds before you decide to hand the business over to them.
Less Freedom of Choice and Decisions
According to the succeeding generations, family businesses do not offer them the freedom of choice when it comes to running the business or making important, critical decisions. The founding members are constantly intruding, monitoring everything, and even telling them what to do and what to avoid. It makes them feel restrained to some extent and they are unable to fulfil their visions, which may not match that of the previous generations.
Even after joining the company and becoming important decision-making members, the children often find their parents meddling with every decision and giving them constant input regarding petty matters. It prevents them from building their confidence and experience. Sometimes, they are also not allowed to take certain calculative risks, which may help business growth. All of these make them feel that they could have done better in some other job, especially in their own ventures.
Not Enough Revenue
Many next-generation members in family businesses complain that they do not make enough money by following the principles laid down by the founding members. That is, if they are unable to change things for the better, or take some risks, the business will never grow, and their revenue will remain the same as that of the last decade. It creates a barrier for growth and development, which is unacceptable by the second and third generations of the family business. Also, the capital that they get from their parents is sometimes not enough to take the business to the next level. There is some kind of possessiveness shown by the founding members that halt new ventures and pathways to enhance revenue generation.
Hence, the succeeding generations feel that they could have made more money if they worked somewhere else and took their ideas to some other business venture apart from the family-owned one. Some members of the next generation also feel that they are underpaid by the founding members, and that they deserve more than their siblings. It fires up jealousy and inferiority complexes, which can be harmful to the company as a whole.
No Work-Life Balance
Unlike jobs and other businesses, family businesses often blur the lines between work and personal life. You may find members discussing business issues at the dinner table, which may not be acceptable to the more conscious and freer-going generations, who understand the consequences of such habits. They may even demand a proper distinction between their home life and life at the office and even refuse to discuss business matters at home. While the founding members can get offended at this, as it has been the way they did business in their times, the succeeding generations can feel trapped and suffocated in their presence. Some of them also get tagged as lazy bones if they say anything against keeping a work-life balance and not discussing business at the dinner table.
Moving From Hometown
It is also one of the significant reasons why many people do not get involved in the family business, especially if it is physically grounded in their hometown. If the business is digital, geographical distances will not matter, but if it is not, one needs to choose between moving to a big city or staying in the hometown to work in the family business. Newer generations are pretty ambitious in their career choices. They do not like to be constricted to a single place. Hence, they tend to move out early in their lives and shape a career of their own. As a result, they cannot get involved in the family business as much as older generations.
Also, leaving your hometown at an early, blooming age, gives you an additional edge to your career. It helps work on your adapting skills and learn new things in life. It also enhances your intelligence and expertise in a certain field, not to forget your overall market experience. Staying in a family business is not reason enough to prevent someone from enhancing his/her career away from the hometown.
Lack Of Common Interest
Sometimes, there is also a lack of differences in the interests between the two generations. While the founding members of a family business might be in commerce and finances, the succeeding generations may have their interests lie elsewhere. They may not even be keen to explore their family business, let alone take it forward. They may be interested in, let’s say, more artistic ventures. They may be creative people, who want to become artists, painters, sculptors, writers, etc. What is the point in forcing them to join the family business? They will not be able to prosper well. After all, every individual has the right to follow his/her dreams, right? This is yet another reason why most succeeding generations are not showing an interest to join the family business.
Not Everyone Is After Money
The current generations have different thinking than the baby boomers. Millennials and Gen-Y people give a lot of thought to where they stand and what they want to do with their lives. It is not all about money and money-making. They want to experience art, craft, be entertained, explore the world, and do exciting stuff that may or may not always be profitable in terms of money. They seek mental peace and satisfaction more than affluence. No wonder most of the current generation of people are more into entrepreneurship and start-ups than jobs!
The same is the case for succeeding generations in a family business. Let us consider a man with an orchard, a family business that gives them good money at the end of every season. What if his son does not want to spend his life in a garden? What if he wants to become an actor or a painter? What if he wants to explore the world, be a digital nomad, and find his calling? It would be wrong to hold him down just because his idea may not seem so lucrative to the father, right? Yes, not everyone is after money, and the founding generations should understand this.
There have been several instances when the board members of a business are asked to write about ten things that they love to do, and they had a tough time doing that. It is because they were so engrossed in the business that they had forgotten about their life on the whole. Newer generations are more conscious about this burnout and try to pave their paths accordingly.
Avoiding Sibling Conflicts
Many people also try to stay away from the family business because they do not want to get into competition with their siblings. In a family business, these things are quite common, especially if there is more than one heir. The siblings may develop rivalry and ultimately turn against each other. It is more evident in a family, where one sibling has to do all the work, because the other one is, let's say, lazier. Even if not lazy, he/she may have his/her hearty in something else other than business. Will the person be deprived of his/her rights if the business gets sold? The working sibling may demand more as he/she has put his/her efforts into the business. This kind of conflict sometimes becomes inevitable and is one of the key reasons why the next generations are not very interested to join the family business.
What Can You Do To Overcome These Challenges?
Well, you can either be the mediator between your kids, or grandkids, who are unwilling to join the business. You can listen to them and help them understand your point as well. You can convince them to start being a small part and if they are interested to explore more, you can give them that opportunity. But mentoring someone in addition to running a full-fledged business can be a headache too. If you are one of the founding members, you get assistance from others. That is why you should hire someone, a mediator or a professional mentor to help convince the next generation or at least help them know why they should be in the family business. The professionals can help them understand the benefits of joining the family business, even if a small role. If they are still not interested, you have nothing to do.
But if you have a chance to level up your family business, why not take it?
All the best!
Purdeep & Harjeet Sangha
P.S. Upgrade your business leadership skills by getting your copy of “The Complete Man” book by going to www.CompleteManAudio.com