Matters Column

Considering employment in the family business

January 10, 2014
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Are members of the next generation of the family business considering working for the family firm? Perhaps they live and work elsewhere and are thinking about returning to West Michigan because they see the incredible growth, excitement and opportunity taking place here. Perhaps they are still in school and are considering all of their options after they graduate.

Here are a few things to help them as they consider this career path.

Pride for family enterprise. In 2001, a GVSU family business study found that West Michigan is comprised of 89 percent self-identified family-owned businesses. Nationally, family enterprises count for 64 percent of the Gross Domestic Product, employs 62 percent of the U.S. work force, and — lest you think these are all small companies — 35 percent of the Fortune 500 companies are family controlled.

Many periodicals and studies are highlighting the comparative advantage family enterprise has over private and publically traded counterparts. In a PricewaterhouseCoopers survey of family businesses (October 2012), researchers found that, compared to their non-family peers, family businesses have more passion for their purpose, flexibility in decision making and patience, and they tend to plan for the long-term. Family firms have strong values, perform better financially and are solidly rooted in their community.

There are several differences between family enterprises and non-family firms, but in my opinion, the main differences come down to family dynamics and the desire to pass the business on to the next generation.

Often in family businesses, you work alongside other family members. As a family member and most likely owner or future owner, you probably feel pride along with the huge responsibility to make sure the company is successful.

Interestingly, I hear less about nepotism and more about reverse-nepotism from the West Michigan family business community—meaning, it is harder to work in the family business as a family member than as a non-family employee. It also may be harder to get employed by the family business due to stringent employment policies for family members and, because “all eyes are on you,” it may be more stressful to work in the family business environment.

Beating the odds. Unfortunately, the success rate for family business succession from first to second generation is 33 percent; from second to third generation, the percentage goes down to 12 percent; and from third to fourth generation, the percentage reduces further to a mere 4 percent. These statistics continue to be scary when studies show that over 25 percent of leaders want to retire in the next five years and more than 50 percent of CEOs set to retire have yet to identify a successor.

Here are a few things the next generation of the family business can do to develop their talents to make those success rates moot:

Stay in school and finish that degree. No matter how much the family needs them right now, they should find a way to obtain that degree, even if they have to go to school part-time.

Set up a basic life plan and communicate the plan to the family. Now is the perfect time to get a few thoughts on paper on what to do in the next 5 to 10 years. They should know why working for the family business is the right decision — and be able to communicate the reasons to the family (passionate about it, obligation, expectations, ownership, stepping stone to something else, etc). They should take this opportunity to find out if there are any family employment policies so they can start to plan now. Some policies require an MBA and outside work experience (a best practice). Some require them to start working in the company by a certain age (a “use it or lose it” scenario).

Join a peer group. There are many options out there, and if they can, they should find a peer group especially designed for the next generation of family businesses. It’s a great way to meet others who “walk in their shoes.”

Start a business. What better way to learn about business than to start one.

Run and grow a division of a company. This is another great way they can prove themselves while gaining the confidence and skill sets needed to succeed in family business.

Work for a competitor. This has been done successfully as an early-career option, but be sure to communicate this strategy with the family first.

Find an internship program. Especially if they are still in school, have them consider interning in other family businesses to help see how other families run their companies, learn different systems and skills, and network with other next generation family members, if possible.

Understand the family history. What are the values and mission of the family’s business? Can he or she relate to them? Why was the family business started, by whom, and what was the story? This is helpful to know because: 1) people will ask, and 2) it will help them better connect on a personal level to the family business if they know the family business shares their same values.  

Get nonprofit board experience. They should start volunteering with organizations they have a passion for and work their way up to the board, if possible. Learning how to be a good board member is a life-long skill and will help them better communicate with family members around the board room table.

Find a mentor. This can be tough, but they should try to find a good non-family mentor to be a sounding board, help reach goals, and perhaps even open doors. A good mentor-mentee relationship goes both ways — he or she has to reach out, ask for advice and help, and be willing to take constructive criticism.

Family businesses are exciting and can offer amazing opportunities to not only family members, but the employees and the community, as well. It’s never too late (or early) to start planning for the future and developing those family business skills.

Ellie Frey Zagel is the director of the Family Business Alliance based in West Michigan. The FBA exists to help family businesses succeed generation to generation. She also serves with her family as the third generation of the Frey Foundation and can be contacted at ellie@fbagr.org.

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