Podcast: Play in new window | Download
On Thursday, March 22, 2012, family business consultant Stephanie Brun de Pontet joined Family Business Radio host Dwayne Samples to offer tips to next generation family members preparing to enter the family enterprise.
As a senior associate of The Family Business Consulting Group, Inc., Stephanie often helps family enterprises through important transitions, such as the on-boarding on new family member employees. She has experience working with sibling teams, establishing governing structures for growing enterprises, and developing training programs to educate next generation family members. The 20 advisors of The Family Business Consulting Group, a Chicago-based firm, help families in business unify their values and goals while guiding them in the development of structure around the different systems of ownership, management and family. They work with family businesses and families who have shared wealth in the U.S. and internationally.
Stephanie came to work with family businesses after spending time both in the corporate world and as an entrepreneur. She grew up as part of a family business—though her immediate family did not work in the business daily—and she married into a family business. She became passionate about the world of family enterprises and added a PhD in psychology to her business degree so she could work better with both the business structures and the family dynamics unique to family-held firms.
As Stephanie shared with Family Business Radio listeners, she based her comments on an article she co-wrote with colleague Carol J. Ryan. Published by The Family Business Advisor®, a Family Business Consulting Group, Inc.® Publication, the article is entitled “Should I call you DAD? And other perils of working for your family business….”
Stephanie says that entering the family’s business is a paradox, with the good things about working with family also leading to challenges and pitfalls. Like many of the questions that arise when a new family member arrives in the business, the issue of how to address other family members at work is “it depends,” according to Stephanie. The important thing, she says, is for the family to think through the issues, have conversations, and plan for the best ways to handle situations. There will be tradeoffs with any answer, but it’s helpful if all family members are “on the same page” from the outset.
Living under a microscope
New employees who are also related to the company founder will be more carefully scrutinized by coworkers than another new hire. Even with young family members who have summer jobs, other employees watch for special treatment and mistakes. Stephanie pointed out that all employees mess up sometimes, but with family members, other people remember those gaffes longer.
To handle living under the weight of coworker and family scrutiny, Stephanie says that employees have to set higher standards for themselves. It’s also important for the parents to set clear expectations. She says parents shouldn’t make working in the business too difficult, but give the newcomers an opportunity to succeed. If they mess up now, employees will remember a long time, and it will be more difficult for them to succeed in a leadership position later.
Another means of offsetting the hard scrutiny is to have the coming-of-age family member work two to five years in another company before joining the family business. Stephanie says this is one of the few recommendations her firm makes universally, and she says many family businesses actually require the young family members to prove themselves by earning a promotion at another business before joining the family enterprise.
The benefits of taking that first job outside the family business include the opportunity to make common, early career mistakes in a more forgiving environment and the establishment of the family member as a successful professional in the eyes of other employees. Perhaps most important, the family member who has proven himself outside the family business will be more confident. Mistakes may still occur within the family business, but they will be less likely for the more seasoned professional who is less self-conscious.
Water-cooler talk and the family member
Just as a family member’s actions are scrutinized carefully, so are the comments family members make. Stephanie has observed in many next generation family members, particularly those ages 25 and under, the concept of privacy and confidentiality has developed differently than in generations that didn’t grow up with the openness of social media. Yet family member employees are learning more than their counterparts as they are preparing to become owners of the business. They have to be careful about what information they reveal. Also, if they happen to make disparaging remarks about their supervisors, other employees or family members, those remarks carry more weight than similar comments made by non-family members. Going out to Friday happy hour with fellow employees carries a different burden than it does for non-family members.
Stephanie says the key here is to be deliberate. Think ahead about the situations that may arise—questions, remarks about the family and wealth, potential romantic relationships with employees—and consider how those will be handled. Stephanie says the family member needs to think “three steps ahead” about how anything he or she says will be received. She admits this is a lot for someone of any age to handle, but particularly for young family members.
She shared a story from one family business in which the family wanted to help a young member avoid some of the pitfalls of being a new employee with the family name. He went to work in a store outside of his community, under an assumed name. While he did avoid some of the scrutiny he might have encountered early on, the solution was not perfect. He still faced the same issues when he returned to work in the home office under his given name. He also faces the concern about revealing the deception later, when he assumes a leadership role in the company and his former coworkers realize what occurred.
Living up to the family legend
“Living up to expectations” can be hard for any of us, but when a second generation family member enters a business where employees and even the community have profound admiration for the business founder/parent of this person, it is a special burden. Next generation members often feel pressure to live up to those high standards, and may be compared to their parents by employees. In many cases, the adult children themselves also admire their parents and look forward to working with them and emulating them.
However, Stephanie says that founders, next generation members and other employees alike need to remember that the business is growing and changing. Second generation family members most likely need different skill sets than the founders to keep the company going. Rather than trying to be just like the founders, they need to apply their unique personalities and leadership qualities in a different way. Parents need to understand that different skills are needed as the company changes, and children need to understand that doing things in a new way is not disrespectful to their parents.
As an example, Stephanie explained that company founders are generally entrepreneurial. They’re outgoing by nature and have excellent sales capabilities, qualities that were needed in the early days of the business. She says the parents may be concerned that the next generation members are not as gregarious. However, she often points out to them that as the company has grown, it needs more structures and systems. A more introspective leader may be just the kind of person to build those systems and take the company to the next level.
Next generation family members also sometimes look at the progression their parents made in the company and wonder why their own rise to the top is taking longer. Again, Stephanie points to changes in the company itself. For example, she says that the company may have had only 40 employees when dad became a plant manager at 30. However, by the next generation, it may have 200 employees. Management is more complex and requires more development on the part of leadership before these management roles are assumed.
Stephanie points out that the legend of the company matriarch or patriarch can be a unifying factor for future generations. The sense of pride in the family gives future generations a psychological attachment to the company, and it can motivate them while also building a sense of commitment and stewardship. Having a “legendary” founder available as a resource is also a bonus for family members. The founder can help siblings learn to work together, for example, as they may be more willing to give up some of their autonomy in the service of the greater goals of building on the legacy of their forebears. While there are perils to working for the family business, many next generation members look forward to the opportunity to work side-by-side with older generations.
Relating to non-family member employees
Stephanie says that many founders build their businesses based on family values that employees share. From an early age, family members need to be taught how important the employees are to the business; working members should always speak positively of employees so younger family members learn to respect and appreciate them. When next generation family members come of age, they’re more likely to be humble, appreciative of employees and ready to pull their own weight as they enter the business.
Stephanie discussed two extreme cases of family members relating to employees. In the first, family members might try too hard to fit in with employees. Stephanie says this is probably a case of the family member being unsure of him- or herself and not quite ready to be part of the business. Yes, everybody is watching, but family members should still have the confidence to be themselves. This might be a situation where the family member should work outside the company first to gain confidence, feel they’ve earned a place in the company and become truly ready to work and collaborate.
At the other end of the spectrum are family members whose attitudes scream, “Do you know who I am?” These are people who are driven by entitlement, and Stephanie says this attitude is the single most toxic poison for a family business. Sometimes, the symptoms are more subtle. Stephanie gave the example of a young third generation family member who had recently had a child. The family had accommodated her by allowing her to set her own schedule, but she still was consistently late to work. Her non-family member supervisor had to watch her carefully and couldn’t rely on her to be there for the schedule she had set for herself. She then complained to her grandmother—the wife of the company founder—that she should be allowed to come in whenever it suited her best, as long as she got the work done. Her actions not only put her supervisor in a difficult situation, but also demonstrated that she doesn’t have a full understanding of her responsibility. While technically she could complete the work at odd hours, the family leaders want her to understand the responsibility that comes with her position in the family. Stephanie says that situations like this are part of a difficult journey, but provide life lessons that will serve the family member well in and outside of the business.
She also used the story to illustrate the importance of carefully choosing supervisors for family members. Ideally, she says, family members will be supervised by non-family members. If that’s not possible, they should not be supervised by siblings or parents (let parents be mentors, not bosses, she says). Non-family members who supervise family members should be trusted by the family and should be people with the courage to stand up to family members. Likewise, they should have the assurance that family leaders will support any difficult decisions or actions they may have to take in regards to the new family member.
Another issue in relating to other employees is understanding that people may assume family members have more information than their non-family member counterparts. Sometimes this will not be true, and other times, the family member may have information that can’t be shared. Stephanie recommends that family members think through situations that may arise and how to handle them, even practicing responses through role playing. For example, think about how family members might respond thoughtfully to comments that might be considered rude.
Realizing that other employees and even people in the community expect family members to have information about changes in the company, Stephanie says family leaders in the business should arm family members with information and appropriate responses shortly before news gets to employees or the public. They might do this through a phone call to family members the night before something happens, alerting them to the change that’s about to take place and telling them what to say if questions are asked. Knowing appropriate responses is particularly important in matters that could have legal ramifications, such as the firing of a key employee.
Managing family relationships inside the business
Once a new family member joins the business, expectations should be set about how and when to communicate with other family members. For example, if a family member employee is having a problem with his supervisor, should he go talk to Dad about it? And if he does, how does Dad handle it? Though the instinct may be to fix the problem right away, that action may cut the authority of the supervisor. Again, Stephanie says it’s important to think through such situations, set expectations, and act thoughtfully.
While family member employees will probably have some access and training their non-family member peers do not have, families may want to set policies to ensure access and training occur at appropriate times and frequencies. For example, will the family member go out to lunch with the patriarch every day and enjoy unlimited access? Or will they set up routine monthly or bi-monthly lunch dates, possibly also with key non-family member employees, for mentoring? Stephanie encourages families to think about balance and think about what other employees see and feel.
Stephanie says it’s also important to think about the relationships between family members who work in the business and those who have ownership but are not employees. Working members will naturally have more knowledge, and it’s important for them to communicate well with those who aren’t working so they understand what’s happening. As a possible solution, Stephanie gave the example of a company where the working family members are forming the habit of writing regular mini-summaries of what’s happening in the business for the benefit of non-working family members. These are similar to reports the company sends lenders and investors. While the working family members need to get in the habit of communicating regularly, the non-working owners must take the responsibility of reading the summaries and learning about the business, according to Stephanie.
Compensation for working and non-working owners
Stephanie says that roles of ownership and management are often blurred, especially in the second generation. However, family members should understand the difference in compensation for work and ownership. Family members who work in the business should earn a market-rate salary for performing their jobs and also get the dividends that other owners receive. All family members should have a clear understanding of the difference. Stephanie says that on these issues, as on the other situations that might arise, it’s helpful if the family thinks through policies in advance before the onset of problems, whether on their own or with an adviser.
Stephanie Brun de Pontet’s Three Tips for Family Businesses
- Have important conversations before a new family members starts working, even before a summer job. Talk about who the supervisor will be, what the goals are for the family member employee, what the expectations are, and how situations will be handled.
- Plan. Whether you use the help of the consultant or not, plan for issues that are likely to arise rather than just winging it. Set up policies in advance.
- Help the next generation find mentors. A member of the family or non-family member of the Board of Directors, for example, should be available to guide family members as they work in the family enterprise.
Contact our guest:
Stephanie Brun de Pontet, Ph.D.
Senior Consultant
Family Business Consulting Group, Inc.
Phone: 678.773.1675
Email: BrundePontet@efamilybusiness.com
Website: www.efamilybusiness.com
