Family business is the engine that fuels the U.S. economy, yielding major impact on job creation and economic growth. Yet many struggle with basic objectives such as communication, mission, shared values and succession.
A 2018 report from SCORE, the largest network of volunteer, expert business mentors in the U.S., outlines the scope of family businesses' economic influence, showing that family‐owned businesses employ 60 percent of the nation's workforce, create 78 percent of all new jobs and generate 64 percent of Gross Domestic Product (GDP). Although most family businesses are well governed, often controlled by supervisory or advisory boards, nearly half of family business owners who plan to retire within five years have not yet identified a successor, according to SCORE.
Obviously, family businesses hope to succeed financially but most also desire to use the business to strengthen the family itself and provide careers for those family members who are interested and capable. However, those desires can lead to challenges and complications concerning what the business needs to do to succeed and grow, the family's goals and needs, and finally, the goals and needs of individual family members. It is critical for the leading generation to balance those often competing elements while managing the business itself and setting the stage for future, enduring success. To help manage issues before they arise, business owners can benefit from consulting a trusted financial advisor who can assist with long‐term planning.
If you are a family business owner, you're concerned about the future of both your family and your business. You likely want your next generation to carry on with the values you hold dear and have used to build your company. But it can be difficult to know just how to transfer those values to your children or others in the next generation.
One common approach is to put the values that are important to you in writing. They might be posted in the lobby, listed in an employee handbook or printed on the back of business cards. It's important to be intentional about your values because their true power is in what happens in the daily operation of the business. The choices a family makes in conducting business are far more effective than words on a wall or in a handbook. For example, how employees are treated, how innovation is rewarded, or how struggles are overcome communicate the leading generation's values to the next generation much more clearly than mere words can.
How you spend time and money outside of work also communicates your family's values. Being involved in charitable efforts—perhaps through a family foundation—is a powerful way to live your family values.
Discussions about values are more productive if they are a dialogue rather than a monologue. As a parent, it can be tempting to simply tell your next gen what to do rather than have a conversation about how to do the right thing. Engaging in a conversation takes more time and requires more thought but it's important to present the family's values to the next generation in a way that's meaningful and will draw them in. After that, you must genuinely listen to the response.
However, although each family member's opinions should be heard, they don't necessarily all carry the same weight. There's value to having gone through more of life's experiences, and both generations should recognize that.
Shared experiences can be helpful in creating a dialogue, because although each participant may have his or her own perception of the event, they are bound by a common set of facts. For example, perhaps both the leading generation and the next generation experience the successful launch of a product. With that common experience, they can discuss what worked, what didn't, and what could have been done better. Families find out which values they really care about through answering questions together such as “How did you perceive that?” and “What could we have done differently?”
Multi‐generational family stories can play a strategic role in sharing values from one generation to the next: the key is to allow all family members who are involved to see themselves in the story. Rather than making it the story of one person, such as the company's founder, try to position the stories so they represent the whole family unit. A good way to start can be “Our family has a history of…” which allows each generation to see themselves as part of the tradition and how they fit into it. The importance of these stories is less about defining a particular set of values, and more about feeling like the whole family is working to accomplish something together.
Although some family business owners believe they should have a formal narrative to present to each generation, research suggests that's not the most effective approach. People tend not to engage with formal narratives in the same way they do with everyday conversation. Effective family stories are the ones that are told around the dinner table or while you're on vacation. Or they may be conversations that arise in reaction to a news event or watching a movie together. Family stories are far more powerful when they occur in the flow of life.
It's important for families—especially the leading generation—to recognize that values can be expressed in different ways from generation to generation. For example, perhaps a family values hard work. In one generation that may mean putting in long hours. But in the next generation, working hard may mean something else. That doesn't mean the value has been lost; it's just being expressed differently.
As the owner of a family business, you have a tremendous opportunity to take the values that have helped you and your company to succeed and use that as a foundation to share your vision for the future for both your family and your business with the generations who will follow you. Taking time to share your knowledge, your experiences, your hopes and your dreams for your business—and for your family—can pay off far beyond financial rewards.