Bridging the Gap #3: Management & Children in a Family Business

by John McAlister and Chris Beringer

Welcome to the third installment in the Bridging the Gap series. Today’s focus is the challenge facing family owned companies as they navigate how children and other family members interact with management, other employees, and the community – whether they are employed (active) or not (non-active).

When a child enters the business, it is often a time of immense pride for the business owner.  It is validation of the businesses sustainability and the continuing of a legacy moving towards the next generation.  Sometimes, that period of elation can turn into a nightmare.  Problems arise from current management not willing to accept the next generation, or giving the child a position of too much authority too soon.  If existing management is not onboard with bringing on  members of the next generation, they are probably not suited to be working at a family business.  Existing management should embrace this change and help teach and develop members of the next generation.  Children should embrace help of existing management and look to their guidance.  Using a music analogy, most successful entertainers prefer that someone other than themselves teach their child the fundamentals of an instrument, as they tend to learn faster. Harry Connick, Jr. said in an interview once about how his father had Ellis Marsalis teach him the piano and his playing style. He said that he was in awe of Mr. Marsalis’ talent and he would never have learned how to play as quickly if his parents had taught him.

Creating a policy of onboarding new family talent is critical.  This policy should lay out what is expected of the family member and what is expected of current management.  It certainly can be intimidating being existing management and training a family member who could potentially be their replacement!  

Bringing new talent into any organization is difficult and sometimes upsetting to the system or culture. This is a perfect reason for the current generation of active family members to put together a formal policy as to how a new family member will be hired and trained. Non-family managers should be expected to train a family member in the normal course of their employment. If they feel threatened in any way, they need to sit down with the active owners of the organization to discuss their issues. If they cannot resolve their differences perhaps they would be better suited to find a different place of employment.

Successful family organizations that are now deep into the second, third, and even fourth generation make it known at an early age that working in the family business is a privilege and NOT a birthright. One of the best ways to hire a family member is to start by seeking out advice from management about areas that either need great attention to correct a problem, or growth opportunities within the organization. They ask a hiring committee interview the family member, and then they step away and tell everyone it is the committee’s decision; however, it would be naïve to assume that a family member would not be granted stronger consideration than a candidate without a history, especially if they have proven their worth outside of the family business. Family members should report directly to non-family management for a period of time.  It will prove invaluable if they begin at the bottom and work their way up. Working a night shift including the weekends, holidays, and cleaning duty can be very humbling - and also rewarding.  In fact, watching an episode or two of “Undercover Boss” should give any hiring manager’s advice on how to begin a successful rotation in the operation. Employees will always remember the time they saw “Harold” get out of his car to pick up trash  or the time “Susan” cleaned up after a colleague fell ill in the lobby.

The same criteria should hold true for spouses and in-laws

When children become engaged to be married, it would be well advised to have a “welcome to the family party” where other family members can have an informal orientation about how these new members of the family are expected to interact with the business. In most cases, discussions mediated by members of the family who are closer in age to the incoming member have greater success. They tend to be much more blunt as to expectations, what is acceptable, and the consequences for what will not be tolerated. They are also told other members of their family must go through the same hiring process as anyone else in the community.

The Beringer Group has helped transition over 2,200 families to the next generation of ownership/leadership since 1979. Many of our original clients continue to seek our advice and we are now working with the third generation of our original clients. We have been fortunate to see firsthand what works best and what works better in many aspects of a successful family enterprise. The Beringer Group is now in its second generation of ownership/leadership with this article’s co-author, Chris Beringer. He was told early on in his life that he would not be able to enter the “family business” without having served a successful internship with at least two companies for a minimum of five years. This appears to be more of a common trend than most people realize. Clients often tell us that the more successful the family business becomes, the more they feel like they are living inside a bubble within the community. “Everyone’s watching” is a truer statement today than at any time in history because of social media and digital recording devices. How often do you have “the talk” with your family members, as well as your employees, that they are being watched? 

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About the Authors

Chris Beringer

Chris has extensive experience advising high net worth families establishing family offices and/or family investment companies, in regard to feasibility, design, staffing, transitioning and IT operations.

John McAlister

After working with CIGNA Financial Advisors, John co-founded an advisory firm in 2000, focussing on complex family transitions. He sold his practice in 2012 to become part of TBG. He is a graduate of the University of Georgia.