That can be an exciting moment or an anxiety-ridden one, depending on what has gone on before to prepare for the momentous occasion.

“Laying the path to a successful family-business transition requires a bit of threading the needle,” said Henry Hutcheson, author of the book Dirty Little Secrets of Family Business.

“On the one hand you don’t want to paint an overly rosy picture to the next generation. That could create a sense of entitlement and the false perception that running a business is easy and all you need to do is count the money and show up every now and then to check on things.”

At the same time, he said, if you put too much emphasis on the difficulties of running a business and the stresses that come with it, your sons and daughters might not clamor to be first in line to take over.

Ideally, it’s best to think ahead and start grooming the next generation long in advance, Hutcheson said. Give them summer jobs while they are in high school and college so they can start testing their abilities.

When they join the family business full-time, find initiatives for them to work on that involve group dynamics. But also hand them individual projects where they hold sole responsibility for the results.

“It’s critical when you are selecting the next leader to realize that it’s not all about who will lead,” Hutcheson said. “It is also about ensuring that those who are not selected are in support of the decision and can work as a team with the new leader.”

Hutcheson said there are four key ingredients to developing the right person to take over the family business.

• Independence. Next generation leaders must have confidence in themselves, their thoughts, and their beliefs. “Much of this can be developed while working in the family business by constructing and leading significant projects,” Hutcheson said. But one shortcut to accomplish this is to work for some other company early on. Many multi-generation family businesses like to make that a requirement for family members.

• Competence. This is more than just being able to do the work. It means developing bottom-up experience. Not just being the accountant, but being able to reconcile the accounts and perform the journal entries. Not just being sales and marketing manager, but having been on a quota and worked the trade shows. Experience doing some of the day-to-day grunt work can pay dividends down the line.

• People skills. “It’s not enough to just be smart and confident,” Hutcheson said. “You need to be able to work with people.” He notes that in the book Emotional Intelligence, Daniel Coleman outlines two studies that measured the success of a batch of high school valedictorians and Harvard graduates. Those who were able to perceive the emotional state of others and react to it appropriately proved to be the most successful.

• No special privileges. The person in line to take over the family business needs to be willing to show up to work on time, stay late, take on special projects, and be measured by the same metrics as everyone else. “This will show that you are part of the team and that you want to be judged on the merits of your work, not your bloodline,” Hutcheson said. It will also help the next generation gain the respect of co-workers.

Henry Hutcheson is president of Family Business USA and specializes in helping family and privately held businesses successfully manage transition, maintain harmony, and improve operations. His newest book, Dirty Little Secrets of Family Business: How to Successfully Navigate Family Business Conflict and Transition, is available at http://dirtylittlesecretsoffamilybusiness.com.

Publication date: 2/2/2015

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