In most family businesses, succession to the next generation is the goal; however, it can be one of the most difficult challenges facing current ownership and a key reason that so few family businesses make it to the 2nd or 3rd generation. How can you increase your chances of a successful transition to the next generation? By planning and mentoring.
Many books are written about succession planning and the numerous ways that businesses can maneuver the complex tax laws, entity structure, being fair to family, etc. But few are written on mentoring and developing the next generation to lead and succeed.
First, what is mentoring? Mentoring is a developmental partnership through which one person shares knowledge, skills, information, and perspective to foster the personal and professional growth of someone else. We all have a need for insight that is outside of our normal life and educational experience. The power of mentoring is that it creates a one-of-a-kind opportunity for collaboration, goal achievement, and problem-solving (USC Mentoring Program).
Not every parent can wear three hats: parent, employer, and mentor. Many find that they have to discard one of these roles; however, this is much more easily said than done. Obviously, the parent hat would not be the prime choice to shed. If the parent is already the employer, expecting the child to leave the business so the employer hat can be shed is not a great choice either. However, the third hat, the mentor hat, is the least problematic hat to remove and therefore, that role can be turned over to someone else.
In my experience, the next generation seldom desires to be “mentored” by mom or dad. The relationship and past history often cause parents to see their kids through a lens that can be filtered by a few past negative experiences. An outside mentor will usually not focus on these negatives, but will concentrate instead on the potential they see in their protégé.
Regardless of who does the mentoring, I suggest that you start early, be intentional, and focus on self awareness.
Waiting too long to start introducing the next generation to the business side of the organization can backfire. I have seen kids develop a spirit of entitlement viewing the business as more of a cash cow and not something to be nurtured. Starting early to teach them not only the inner workings of the operation, but leadership skills as well, will help them have a better understanding of what it means to be a business owner. The coaching can start as early as school age and will help them gain a new found respect not only for the business, but for their parents as well.
I also think it is wise to make it a priority to schedule time for the mentoring to occur. Every business owner I know is overloaded with their day to day operations and will often put off that which is important, but not urgent. Stephen Covey speaks about spending more time in the important, but not necessarily urgent quadrant in his book The Seven Habits of Highly Effective People. Mentoring the next generation would be located in the important quadrant of most family business owners, therefore, it is imperative that mentoring your child is not only scheduled, but takes place.
As leaders, we see ourselves as being right and having the correct leadership style, but we tend to lead based on our personality. We also expect our children or our successor to lead just like us when, in fact, each person needs to be true to themselves and lead based on their individual strengths and talents. Even though as parents we want our kids to be just like us, when mentoring the next generation, we instead need to celebrate how they are different and will bring their own perspective into the environment.
Too often when I speak with family business owners and ask them if they are mentoring and teaching the next generation, their response indicates that they are frequently focused only on the operation side of the business (they teach junior the secret recipe). While that is important, it is not enough to lead a company. We need to spend time instilling values, teaching what it means to be a leader, what it means to be a business owner, and understand risk and reward. I encourage you to start the planning and mentoring process early; therefore, when the time comes to transition the business to the next generation, they will be ready.