How to Ready Your Kids to Run the Family Business

An aspect I enjoy most about executive coaching is developing owners’ kids to take over the family business. It’s gratifying to see companies move through generations.

Having started my career much by accident in my family’s business, I’ve known the “good, bad and ugly” from personal experience.

I never planned on joining my father in the business he acquired in 1976, but when I graduated from college in 1977, I needed to build flight time as a pilot to get with an airline. My father said he was going to buy a plane and suggested I could be his company pilot. The long and the short of my story is while waiting for my father to buy the plane, I got involved in various aspects of the business and was successful.

I enjoyed working for the company and grew to love running various distribution operations. I started in customer service and sales – working my way up to a regional president. I had some great successes and certainly hit some bumps in the road. It was a fun ride watching the company grow from $16 million to $375 million during my tenure. My father never did buy the plane and I never did end up flying, but I certainly navigated my share of crosswinds in the family business. My father and I had our final “knockdown drag out” and it was time for me to move on after 11 years with the company. There are some humorous family business stories that led up to my departure…

Family businesses are unique and a challenge for everyone in the company, not just the owner and their kids. Yet most of these challenges are avoidable.

Side note: my father and I have a great relationship today, well worth all the challenges from the years we worked together.

I’ve found that first-generation entrepreneurs transition really poorly to the second generation. That’s not surprising because they are, of course, the ones who started the business with no roadmap. Each subsequent generation gets a little bit better, but succession can be astoundingly difficult. There are relationships, emotions, and “stuff” from when you were kids. “He was always like this” or “she was always like that!” You’ve got birth order sensitivities and embedded conflict that carries over into adulthood.

 Here’s the thing: It doesn’t have to be so hard.

Putting together a strategy to ready your child to take over the business (or not) is an invaluable exercise to set them and the company up for success. Here are a few core guidelines that can help you move through the process:

Talk about succession…a lot. The number of parents who don’t talk to their kids about the transition is unbelievable. It’s not a taboo topic. Everyone within the company probably knows it will happen, so why not be proactive and have discussions with your child. You might be afraid to bring it up because you don’t want to pressure them. It’s wise to present the family business as an option, not an obligation, regardless of how you feel about your child or children following in your footsteps.

Here is an example of a common scenario between generations. I lead CEO peer advisory groups on behalf of Vistage. During a monthly one-to-one meeting with a member, I asked if he talked to his kids about whether or not they wanted to take over his family business.

“Oh yes, they do,” he said.

I kept probing, “Well, have you asked them?”

“Why don’t we ask them right now.” We were in the member’s office with his kids right down the hall. He called his sons into the room.

“Ask them,” he said. It was apparent that they hadn’t spoken about it. Oh, and my member was third generation.

“Guys, I’m assuming your goal is to eventually take over the family business?” I asked.

They replied emphatically, “Yes. That’s absolutely what we want to do.”

The sons mentioned a timetable and a few other finer details.

Then I asked the obvious, “Somebody has to run the business. Have you thought about who is going to be president?”

They both, at the exact same moment, said, “We’re going to be co-presidents.”

It became clear the brothers had discussed taking over the company for quite some time – they just never talked to their dad about it. I turned to my member and said, “I guess that’s that! They’ve got it all planned out! Now, how are we going to facilitate this transition over time?”

The conversation between my Vistage member and his sons turned very positive, but I’ve seen it go the other way. The point is, if you think you’ve communicated enough – communicate even more. Succession discussions need to happen frequently over a long period of time.

Allow your kids to fail. You’ve got to give your child a well-defined job where they have responsibility for something quantifiable, not just special projects. Too many parents put their kids in “special project” positions with no accountability because they think they are going to get exposed to the entire company. While that may be true, at some point they need more than exposure. They must learn all facets of the business – maybe it’s purchasing, finance, operations, transportation, or sales. They should understand all they can, really bite into it, and take ownership of as much as possible. Scuff their knees to get to where they really want to be. Never failing is a disservice to progress and to your child.

Don’t force it. Over a period of time, while your child is working in the business, you have to assess whether they are capable or have the appetite to lead the company. If the answer is no, you have to figure out Plan B. Help them find what they love or a role they can do productively forever that is not part of taking over the business. Remember, if your kid is not capable or interested, it’s okay. You just need to find something they can do that makes them happy and showcases their strengths. Maybe even help them build a business of their own.

It’s important to note, the relationship dynamic goes both ways. My son is an elite triathlete and I was his coach until he turned 12. That’s when I knew dad would eventually become “very stupid.” I fired myself and hired a new coach. Don’t be afraid to let go for the benefit of your child and your company. What some families do is bring in outside companies that evaluate children and they pick the best fit to run the business long-term. This is a smart move because it takes the emotion out of the process by removing the burden and bias of the founder.

Succession is not an event. Many owners believe transitioning a family business is an event rather than something that takes time and planning. Succession won’t just happen without a roadmap and timeline. However, it doesn’t have to take place over decades. With careful thought, communication and a schedule, the transition can happen much more quickly. Also, don’t get hung up on age. I know I successfully ran a distribution operation at 25-years-old. It all depends on your industry, size and the owner’s mentorship in order to properly prepare a child for the succession event. I’ve heard succession likened to passing a baton. Your business will pass to the next generation successfully if your child is running at full speed right beside you.

Is your kid ready to take the reins? Don’t hesitate to contact me with questions that might help you navigate arguably one of the most complex challenges in the lifespan of a family business.

About the Author: I am a CEO Coach, Vistage Chair and CEO of The Hindman Group, Inc., with extensive experience in food service, recruiting, human capital, and coaching that makes me uniquely qualified to empower leaders on their professional and personal journey. I can be reached [email protected].