Family firms are the backbone of European economies, making up more than 60% of all companies in Europe. Moreover, as outlined by some scholars, “one hundred years ago, ‘business’ meant ‘family business,’ and thus the adjective ‘family’ was redundant.” This highlights the fact that passing the business to the next generation and doing business within the family has always been part of our tradition and economic activities.
In order to be able to maintain the family firm along various generations, one of the main questions family managers and owners ask themselves is:
How can I ensure that my children enter the family business?
The answer could be simple: Just do nothing. In most of the cases of successful succession stories, we have seen that the next generation had a great amount of freedom and liberty to express and develop themselves. Thus, it seems quite effective to leave the option entirely to the children and to do literally nothing, rather than meticulously planning their entry into the family firm.
But what if you are not able to wait and relax? In this case, you can follow the next four concrete action steps to stimulate the willingness of your children to enter into your family business. These reflect the voice of the next generation, as we have built them upon their insights.
- Action step 1: Reduce the founder’s centrality
The lack of entrepreneurial mind-set among next-generation family members is largely due to the fact that family firms are overly dependent on founders, not only for their leadership and management but also for their networks and technical experiences (Feltham et al., 2005; Lansberg, 1988).
“In many Italian businesses, there is the idea and strong attachment to the family and the father, whose footsteps you must follow. There is deep reverence for the father. You owe it to him. He is your father; he is the owner of the business. But from an entrepreneurial point of view, it is a disaster, as the children are completely under the patriarchal figure and are unable to do what they want,” Giacomo declared after taking over, at the age of 28, the role of leader in the family business and becoming fully responsible for the decision-making process.
- Action step 2: Promote individuality
A strong element is to let your children be themselves, develop their own individual interests and provide them the opportunity to express those ideas also within the family firm.
Melanie and Michael worked for six years in science publishing in cities such as London and New York, drinking the best wines from all over the world. After all these years, they decided to come back to Germany in 2013 to work in the family winery. Based on their rich experience, they transformed the winery into 2Naturkinder, a winery that focuses on natural wines. “The juice becomes wine without additives and gets bottled without fining, filtering and despite our Vater & Sohn blend – no added sulphites,” they state on their website. By doing so, they are able to express their own style and personality within the family business, which stimulates innovation.
- Action step 3: Focus on experiential learning
Throw them in the deep end. It is quite known that children learn by doing and observing, not through discourses. This is why parents should act as mentors. They have to create the right learning environment where kids can explore, try things, make mistakes and possibly judge by themselves what went wrong and why. The main idea is to accompany the next generation through experiences and personal passion, instead of telling them what to do.
An interesting case is German winery Forster, in which the son was able to gain international experience in South Africa, develop his own style and way of doing things by learning from experts outside the family firm. After joining the family winery, he was also able to experiment with internal processes and the design of the labels.
- Action step 4: Satisfy exploration need
Having worked for the family winery for over five years, Fabio developed a strong desire to ‘do his own thing’ while simultaneously continuing to work and be a part of the family winery. The Satta family thus decided to form and enter into a network contract, allowing next-generation family members to set up a business network. Although both businesses remain independent, this particular type of contract allows the family to cooperate, exchange knowledge, equipment, or any commercial services, as well as carry out joint business activities.
The next generation of a family business is keen to explore new products and is curious to try new things. They are happy to critically reflect the current status quo, and want to challenge it by following the latest trends and being up-to-date.
We observed that there are two possibilities: (1) The process of letting the children integrating their personality into the family firms happens in harmony and provides elements of innovation and entrepreneurship or (2) The interests and passions of the children are so far away from the family business that it would generate conflicts and rebellion; they might then express their entrepreneurial attitude outside the family business. Just as in the famous case of Karl Lagerfeld – whose father had a firm producing condensed milk and to whom, when asked if he could imagine himself taking over the firm, he replied that “condensed milk was not my passion.”
So, you might first ask yourself:
Are you really sure that my children should enter? Or are their passions simply too different?
Alisa Sydow is an Assistant Professor of Entrepreneurship and Innovation at ESCP Business School’s Turin campus. Her research interests are in entrepreneurship in developing economies, entrepreneurial decision-making processes and family entrepreneurship. Alisa is also one of the founders of a start-up that focuses on natural and organic products.
Chiara Succi is an Associate professor of Organizational Behaviour and the Academic Director of the Bachelor in Management at the Turin campus. She has been working for several years as a consultant for family firms, with a focus on learning dynamics and interpersonal relationships.