Understanding Millennials' traits will help you prepare for succession
Whether "family business" connotes small mom-and-pop stores or industry giants like Samsung and Wal-Mart, family-run enterprises have a reputation for innovation and long-term planning. A study published in the Harvard Business Review found that family businesses globally had higher long-term financial performance than non-family businesses. Part of the key to their success lies in the family business model itself: By running their enterprises with future generations in mind, families emphasize resilience and foresight. However, long-term success requires that the business be passed down to the right hands at the right time. As many family business owners know, succession can be a thorny issue.
With Baby Boomers (born 1946-1964) retiring at a rate of 10,000 a day, according to the Pew Research Center, many in family businesses are asking: How, and under whose leadership, do we want our company to continue? Although most business owners prefer to keep leadership within the family, many wonder whether Millennials (born 1982-1992) will want to run the family enterprise. If so, will their business vision be drastically different from that of previous generation? And if it is, will that be a bad thing or a good thing?
A 2015 study of family businesses by PwC noted that 18% of the respondents were considering transitioning ownership in the next five years (primarily to the next generation). Of the leaders surveyed, 40% said it would be difficult to fully let go of their power and status when the next generation takes over. Many Baby Boomers and Generation Xers (born 1961-1981) fear the next generation lacks the dedication or interest to lead the business. While there is great variation within each generation, people are defined by the events and technologies that they are exposed to in their early years. Understanding intergenerational perspectives and expectations is crucial to a smooth power transition from one generation to the next.
Millennials: A portrait
Millennials (also known as Generation Y) are the first workforce of "digital natives." Employees in this age group have a reputation for being "always connected" and innovative. Millennials are said to have unrealistic expectations about the workplace and a propensity to job-hop rather than settle for a career they find unfulfilling. Dubbed the "selfish generation" by some, Millennials value creativity and a flexible work environment over stability. Often, this makes them appear irresponsible or unrealistic to their elders. They are often at odds with their Gen X counterparts, who tend to believe the Millennials need to "pay their dues."
Many Millennials view technology as enabling them to work smarter, not harder. With their digital connectivity, Millennials are used to looking up information for themselves, making them less likely to accept traditional "this is how we've always done it" explanations. Digital platforms have made communication not only faster, but also more transparent and less hierarchical. Many in Gen Y expect to receive thoroughly researched information quickly -- and they expect it to come from a variety of sources in the workplace, not just those at the top.
What to expect
Unlike their parents, Millennials do not view work as the primary focus of their lives, at least not for now. Millennials may have more opportunities than their predecessors, and many want to explore those possibilities.
PwC's survey found that it's common for family members to seek jobs outside the family firm. In some cases, the young people want to obtain outside experience before committing to the family business. Many family enterprises today, however, require several years of work outside the family firm before a family member is eligible to join.
Whereas older generations often shaped their lives around work, today's young people value free time and a work-life integration that meets their needs. They might prefer shorter-term jobs.
Although many Millennials look forward to leading the family company, they may envision it as a five- to ten-year endeavor rather than a lifetime commitment. For senior-generation family business leaders, the trend toward short-term job stints can cause anxiety. Millennials are still relatively young at this point (ages 18-33), making their long-term priorities difficult to predict. So how can family businesses prepare when it comes to Millennials and succession?
Tips for a smooth Millennial succession
Here are some tips for business owners who are considering transferring control to a Millennial family member:
• Understand their perspective. Millennials want to know how their current job will drive them toward their long-term goals, which may or may not involve the family business. Assisting Millennials in developing stimulating action plans to help them advance to their next leadership role can be both engaging and rewarding. They not only will have a clear vision of their role for contributing to the company short-term, but also may move toward a deeper appreciation of the business.
• Be transparent about the succession process. Instead of avoiding the elephant in the room, talk about succession early on. This lowers tensions and may spark greater interest in the business as a career. Transparency will open the door to dialogue about future visions and management styles. It will create opportunities for current leaders to mentor and train their successors.
• Be receptive to innovative ideas. Millennials know that the world has changed, and businesses need to change with it. Opening up to the rising generation's innovative ideas can build trust and create new opportunities for family businesses. Discussing new ideas before the transition occurs can give current leadership a chance to merge incoming ideas with existing business values.
• Take the time to train and mentor your future successors. Some in the older generation tend to overestimate how well they have run the business, while also underestimating their children's competency. Boomer anxiety over their children can be related to "helicopter parenting," or swooping in to rescue, guide and, at times, overprotect their children. A delicate balance must be found between mentoring the next generation and creating a dependence on guidance from elders; it's wise to let family members make and learn from their own mistakes. A training program should be developed that will boost their confidence and capability when it's their turn to lead. Employees in a family business are more likely to accept their Millennial bosses if they have been visibly and reliably learning the business rather than suddenly jumping in to take the helm overnight.
• Parcel out your CEO responsibilities as you prepare to leave the business. As your retirement date nears, slowly begin assigning your duties to your successor. Clearly distinguish which of you should handle specific responsibilities until a point at which they have taken over all the duties and you are ready to hand over the reins. Employees must be kept aware of the successor's new duties, especially as the situation affects them. This contributes to a smoother transition of power.
• Do not become a "ghost"; actually leave the company when you retire. As mentioned earlier, most Boomers find relinquishing control extremely difficult. Often, they don't know what to do with their time. Family dynamics may cause children to be reluctant to assert their own power. Having the old boss on the job can detract from the authority of the new leader and confuse employees. New leaders need time to develop their own management style and vision for the business, gaining respect without standing in the shadows of their predecessors.
The generation gap is challenging for all family business members, but taking time to reflect on the generational characteristics of each stakeholder will make succession easier. Hopefully for both generations, succession will come with gratitude.
Pamela Wasley is CEO of Cerius Executives (www.ceriusexecutives.com), a placement firm for temporary, full-time and contract executives. She serves on several private company boards and is a frequent speaker on the topics of talent management, millennials and contingent workforces.
Copyright 2015 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact email@example.com.