Family Business – Curse of The Second Generation

In a founding business, there can be many generations involved, of course, if the business turns out to be a success. While the first generation comprises the founders, the people who start the business, the second generation typically involves their children and grandchildren. Now, that’s when a lot of things change. The founders may retire, or take a break, leaving all responsibilities to the next generation, who run the business in their absence. Naturally, they would have different sets of thoughts and opinions regarding the day-to-day running of the company.

Even if the business is not that far-fetched, generation gaps come into play. For example, take an orchard that is run by the founders. The founding generation may consider growing apples more risk-free than cherries. But their children may prefer the latter, as it is more profitable. This is where the clash of ideas generates friction, and the business may topple.

Let us discuss this matter in detail so that we know how to manage the involvement of succeeding generations in a family business.

What Is The Reason Behind The Friction?

The first generation in a family business, the founders, that is, turns out to be as protective of the company, as they are of their children. And that is normal. After all, they have worked hard to achieve whatever they have all these years by putting their sweat and blood into the company. However, the next generations think that they have more clarity and farsightedness than their predecessors to understand what is better for the company. They believe that the market has changed and so should the company principles. They are more experienced in their time, and while they do not disregard the contribution of their previous generations, they generally think that the latter should adapt to changing conditions of the market.

Now, the founding generations may not agree. They want to think that what worked in the past will work effectively in the present and future as well. They want to remain safe when it comes to the company. They can be scared to lose ground while trying to reach up to the sky.

This is the main reason behind the friction between different generations in a family business.

Identifying The Philosophy Of The Business

What is a business philosophy? Well, it is a bunch of ideas and concepts or principles that help a business grow. Any company works on these principles to achieve its goals and be successful in the long run. In other words, the business philosophy is the mission and vision combined. The founding generations think that this philosophy should never change, no matter the time or conditions. Like, in the above example, if the business philosophy is to maintain, growing apples will be the safest bet, but if it is to grow, well, you get the cue. However, if the business philosophy is to grow, the founding members may not object to the needs of the hour and take calculative risks to grow the bottom line of the business.

But when multiple generations are involved in a business, the latter ones even tend to change the philosophy according to the current scenario or market needs. The best thing would be to merge both philosophies and reach a middle ground where no one would oppose the other. And this can be difficult to achieve in one go. The new generation may think that they have contributed a lot to the growth of the business, while the founding members stick to the idea that it is their sweat and blood that has built the thing and that the later generations have only helped.

So, should the new generation take the leap of faith without any experience, while the other should just stand there and watch? NO!

Creating A Balance Is Necessary

The founding generations should understand that their successors have a better idea of the latest trends in the market and that they can be more calculative in risk-taking. They should have faith in that. It is not that they will not make mistakes, but the thing is, will those mistakes really matter if the business grows? Will you not pat their backs for handling the risks and achieving success at the same time? You will!

Then again, the new generations should acknowledge that the founders have built the business from scratch, taken more risks, and overcome more challenges to create the thing that they are being passed over. Hence, they should not take it for granted and go overboard with all their latest plans and strategies. The need to create a balance should be realized by all parties. They should know that instead of fighting with each other about different ideas and opinions, they can, in fact, learn from each other and come up with strategies that involve both the experience of the previous generation and the ideas of the latter.

Now, this is about how to remove the friction between two succeeding generations and reach a middle ground. But certain other adverse scenarios may also be included in the curse of the second generation in a family business. Like, the power struggle between two or more siblings. How to address that? Read on!

The Power Struggle between Siblings In A Business

Let us consider an example where the founders of a company are the parents of two kids. After running the business successfully for years, they want to hand it over, say, to the child (son or daughter), who has more or less an idea about business management and related stuff. Now, the other son (or daughter), who did not show any interest in the family business all these years suddenly start asking questions, like shares, proper profit divisions, and all. How will the parents handle this? Should they give each of them the same responsibilities? This may not be as good an idea, because the second child did not have any idea of the business, and it may take him/her more time than the other in getting used to the ways of running the company.

But, if the founding members do not comply with the requests or demands of the second child, there may be a friction and power struggle between the two siblings, where the latter one may also feel deprived. Then again, even if the siblings get well along, their spouses, who are passive beneficiaries of the family business can start asking questions and demand explanations.

What to do then?

Be Transparent

This is the foremost thing to do to avoid disputes between siblings or their spouses. One should be transparent about the running of the business and involve everyone while taking a decision. At least, if someone does not want to be actively involved in day-to-day affairs, there should always be an open channel of communication to resolve queries and update them from time to time. Holding meaningful conversations is the key to achieving transparency and reaching common ground, even if there is a chance of dispute.

What about money?

Now, what about it? Well, money is the source of all greed, and it can unmask anyone and their true intentions. While talking about profit shares, one should make sure that the deserving one gets their worth. However, there is a problem here as well. Second-generation businessmen (or women) may feel that they are being pressured to prove their mettle by their previous generations. They will get their share in the profit based on how they perform, which, a lot of times, gives rise to performance anxiety. Running a business is too much of a responsibility, and if on top of that, such things come into play, the second generation may feel frustrated and disappointed in their parents. One should handle this delicately and see to it that the performance anxieties do not go over the top.

Not Interested In The Business? But It Is What The Parents Want!

Many a time, the first generation also tends to put pressure on their children, forcing them to get involved when they actually have no interest in the family business. They may want to do something of their own accord or take a completely different path. In such cases, the previous generation should be careful, as forcing an uninterested individual may create more trouble than increase the gains. It is okay and quite natural for you to expect your successors to take the reins, but ask them if they really wish to. A lack of passion or vision is not good for any business venture. Forcing someone may also give rise to an identity crisis, which again, won’t do the company any good.

The success of a family business (or any business for that matter) depends mainly on passion and perseverance. Any dearth of these two qualities in an individual may prove to be a disaster down the road.

The only way to get rid of such adversities is to communicate with the second generation and see where their interests lie. It can be upsetting for you to let go of your dream to hand over the business to your children, but in the end, if they are not interested, you may witness the business go downhill. Surely, you do not want that right? Talk and talk to them more often!

Final Words

The curse of the next generation in a family business should not be considered a curse at all. You can turn things around through proper communication, meaningful conversations, and transparency. You can reduce friction by creating a balance of ideas, mission, and business principles. The generation gap cannot be reduced in a way, but with proper conversations, you can reach a middle ground to achieve a common aim – business prosperity!

All the best!
Business Brothers

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