A typical family business could have four generations working to manage and grow the business. “The Traditionalist” 82-year-old founder is cautious, shrewd, still comes to work every day and holds the controlling stock vote. This person has no immediate plans for retiring and feels relevant by providing “practical” advice. “The Boomer” 57-year-old son serving as president has spent his career in his father’s shadow and is responsible for day-to-day operations, but doesn’t have true authority. The “Generation X” 30- to 44-year-old grandchildren are uncertain who will be the third generation successor, but have high financial expectations. The children of the Baby Boomers and Generation X, “Gen Y” or “Millennials” are the keys to moving the business into the future and want to be engaged in meaningful activities, but are the most disconnected from the company’s creation and development.

Generational diversity can contribute to misunderstanding, miscommunication, conflict and loss of productivity. So, how can you get all four working together?

“It is important to bring the generations together to discuss important family business issues with someone who has spent time with each of the individuals involved,” says Ricci M. Victorio, CSP, CPCC, managing partner at the Mosaic Family Business Center.

Smart Business spoke with Victorio about building trust and resolving business issues among different generations.

How can family members address issues to ultimately strengthen the company?

A facilitator/coach often teaches family members how to talk about difficult subjects without blowing up or running away and also how to listen to each other. Feelings that have been bottling up for years can come pouring or shouting out.

The older generation could feel disrespected and uncomfortable, as they weren’t raised to talk about feelings. The younger generation sees nothing wrong with baring their moment-to-moment lives on social media. The retiring generation could feel those who grew up with an entitled lifestyle don’t appreciate the sacrifices and hard work it took to build the business, while the incoming members could resent their inability to fully contribute, or feel unacknowledged for their work.

An outside coach can break problems down into small topics, including unwrapping family and business issues, slowly working toward sensitive areas. It takes time to build trust and learn where everyone is coming from.

What should be in place for new generations entering the business?

Have an agreed upon plan to clarify how family members come into the business, whether as a shareholder or as an executive. As an example, the plan would define what that next generation needs to achieve, both in education and work experience, before they come in as a manager. This document needs to be continually updated as operations become more complicated.

Decide whether all family members deserve stock. Consider having a stock qualification policy where perhaps you have to work in the business in some capacity for a defined period of time.

Another consideration is preventing family members from failing into the business. If the next generation isn’t meeting certain standards, which are higher than those for other employees, there can be conflict. So, set up definitions of control for both entering and exiting family members. Define the point at which authority passes to the next generation, and ensure the retiring generation has personal financial security by redeeming their stock over a period of time.

Do non-family businesses have these issues?

Every organization encounters generational issues, whether in the public or private sector. However, without family ties people tend to be more outspoken and straightforward. Younger workers don’t do well in the non-collaborative environment of cubicles and want to work smarter to have more free time. Baby Boomers prefer to hold employees accountable not only for what they do, but the hours they put in.

As with family businesses, both groups need to decide how to communicate and what they expect of each other. And once the agreements are in place, play by those rules. ?

Ricci M. Victorio, CSP, CPCC, is managing partner at Mosaic Family Business Center. Reach her at  (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

 

Published in National