The generation gap can prove to be a major stumbling block for family businesses, which may refuse to recognise that each generation can bring a unique worldview, has a different set of values, and different interests, aims and priorities. The gap can widen when older generations fail to acknowledge that younger family members have grown up into intelligent, well-rounded adults with substantial contributions to make to the business, or when younger generations see the older family members as ‘has-beens’ who are operating within a redundant paradigm.
Control and conflict
It boils down to perceptions of control – both generations may feel they are being side-lined, which can lead to heated arguments, ongoing conflicts, and political wrangling that can tear a family business apart. How families can work through this:
- Use family council meetings and family assemblies to openly discuss generational differences and how personal issues may be impacting on business
- Empower the younger generation by giving appropriately skilled and talented members partial control of the business – for example, allow them to oversee a project, product line or new business division
- Include older members of the family by having them mentor younger members
- Ensure that proper succession planning is put in place.
Relationships between family shareholders and non-family investors
As a family business matures, outside investors may be assimilated into the business. Whilst they’re an integral part of the business model, family shareholders may persist in labelling them as ‘outsiders’.
Furthermore, family shareholders may consider their ‘rights’ as being superior to those of minority shareholders, driving the wedge deeper between the parties. It’s not unheard of for dissatisfied, disenfranchised minority shareholders to bring law suits against the family – a situation best avoided by all parties:
- Ensure that strong corporate governance policies and procedures and an equitable shareholders agreement are in place to both prevent the abuse of the system (for example, family shareholders using company funds for private benefit) and to protect the rights of minority shareholders.
Family shareholders and non-family management teams
Non-family management teams may find themselves in a similar situation to non-family shareholders – considered as ‘second-class’ members of the family business, despite their tremendous contributions and commitment. Despite having been brought on board to shore up the business and provide expertise lacking amongst family members, they, too, can find themselves fighting an uphill battle when it seems there’s a misalignment between the goals of the shareholders and those of management and even between different factions of the family.
Their ability to be effective managers may be thwarted by a lack of information; when their ideas for taking the business forward are disregarded or when family members block their actions to pursue personal agendas over sound business decisions. Managers disenfranchised thus will simply vote with their feet; and an exit of talent can prove very costly indeed to the business: Their ability to be effective managers may be thwarted by a lack of information; when their ideas for taking the business forward are disregarded or when family members block their actions to pursue personal agendas over sound business decisions. Managers disenfranchised thus will simply vote with their feet; and an exit of talent can prove very costly indeed to the business:
- Formalise relationships between family shareholders and management teams so as to ensure that there’s no blurring of boundaries between the two
- Ensure that family shareholders and management share the same business vision, mission, goals and strategy and that there is a formal platform for parties to address any concerning issues
- Ensure clear lines of communication and the free flow of information between shareholders and management
- Ensure managers are properly mandated and empowered to carry out their duties and responsibilities and that they’re adequately recognised and rewarded for their efforts.