The Entrepreneurial Family
The term entrepreneur is usually used to describe driven individuals who take risks and create great businesses, often overcoming many obstacles and challenges in the process. Family enterprises go through this stage like every business, during which the financial and emotional commitment of a family is often tested to support the vision of the business founder. But then what? How do some families achieve entrepreneurial success not just once, but across generations?
Parenting
It has been put to me that to understand how families breed entrepreneurs you need to start with parenting, and the difference between sculptors and gardeners.
The sculptor has ambitions for the child and will do all s/he can to guide and form the child so that they turn out right. That is a version of ‘right’ that complies with the sculptor’s design.
In comparison a gardener tries to cultivate the plant/child, caring for its roots and with a bit of careful pruning from time to time waits for the right season in that plant's existence for the flower to appear.
The case is that gardeners are more likely to breed entrepreneurs than sculptors. Gardeners allow space for a child to develop. They acknowledge that life involves making errors that cannot all be avoided by careful planning due often to factors beyond the gardener’s control.
Meanwhile the sculptor is busy trying to mould the heir/ess and for understandable reasons help them to avoid any of life’s pitfalls that do not serve the goal of achieving the sculptor’s desired outcome.
Follow your dreams?
Children are often encouraged to strive for a better education and life experience than their parents and to go out and make their way in the world. But I have encountered situations where this is encouraged only up to a point.
Those children who respond to the challenge of getting on with charting their own course through life can later be knocked off course when the seniors start to speak about how much they’d like the next generation to return and run the family business.
From the next generation perspective, one day you’re happily pursuing your individual career and life goals; next you’re getting the heavy hints that it would be appreciated if you’d come back and lend a hand running the business. In fact, sometimes the sentiment is a lot heavier; like ‘it would break your parents’ hearts,’ if you didn’t come back to run the business.
The effect on inter-generational entrepreneurship when the next generation’s route back into the business is to sacrifice what they’ve been striving for isn’t likely to be good.
Backing the savvy in your lineage
Another practice that some families have adopted in order to encourage entrepreneurship in the next generation involves what I call, ‘backing the savvy in your lineage.’
One way of doing this, if resources allow, is to set up a new venture fund to support family members who want to start a new business. Family members can present business plans and whoever is in charge of the fund (family members, advisers and/or, experienced businesspeople) decide which to back, much as would happen with a conventional private equity or business angel fund.
Usually investments will be made on broadly commercial terms, maybe a bit softer to reflect kinship bonds, but the key driver for many families who back the savvy in their lineage is to diversify the family’s wealth entrepreneurially, thereby managing the risk of family having too many eggs in one basket.
Don’t overlook history
Families who create great dynasties are good at telling the next generation the stories of success and failure from the past. These motivate the next generation to take up the challenge of becoming the authors of the next chapter of the family’s entrepreneurial story. The message to the next generation is that there is an opportunity to develop a legacy, to learn from the past without having to preserve it. The message is definitely not ‘you’ll never be as good as your ancestors’ who are presented as heroes that no-one can ever expect to emulate.
Early exposure to business education
Back to parenting, but this time in the sense that getting the next generation involved and interested in the business at an early age increases the chance of them wanting to be involved in the future. There’s a lot less chance of the next generation wanting to do this if the business is a distant place where unknown things happen, which sometimes cause stress in family life.
Gaining experience elsewhere
Many families insist that family members gain experience elsewhere before they can apply to join the family business. This might be to gain a qualification or work elsewhere and involve the family member gaining a promotion as evidence that they can cut it in the external world before coming back to join the family business.
There is a mixture of reasons for this policy, but one advantage is that family members can bring back to the business knowledge and ideas that will help the keep the family’s business competitively healthy.
Transparent succession planning
If the next generation don’t know when or how they will come into ownership and management control of the family business, they are more likely to feel uncertain about the future and less likely to be willing to take entrepreneurial decisions.
It’s far better for both generations to agree how to manage this transition and in doing so maybe take on some of the other ideas mentioned in this article in order to encourage and support multi-generational entrepreneurship as part of the family’s continuing legacy.