If you work for a family business, you are not alone. About 60% of workers worldwide work in family businesses. Such businesses, McKinsey & Company note, thrive because they are “adaptable and resilient.”
One set of employees faces a specific set of opportunities and challenges. These are the owner’s children. Although there are undeniable benefits that can be gained from working for a family member, there are also some difficulties; and the children will face the elders as the business passes to the next generation.
My son, Bart Egnal, and I have experienced all those concerns. He is now the CEO and owner of the Humphrey Group, a company he founded 37 years ago. I interviewed Bart to get his perspective on this experience.
He suggested five rules for turning potential challenges into winning solutions:
1. Know that at work, your parent is the boss
First, realize that the parent you are working for is the boss. That is a relationship that may be difficult to accept. In general, parents are there to raise their children, just as the child grows up and becomes independent. Ultimately, cooperation is like that between equals. But businesses don’t work that way.
Bart, who started working for me right out of university, says “no matter how good the relationship is, as a business owner, the parent has to put the long-term interest of the business first. That can create two different and conflicting relationships.”
Bart reminds me that, at one point, he said he could run the business for a few months. But then I backed off when I felt that the company was facing challenges that I could better solve. My concern for the success of the Humphrey Group had to come first.
2. Commit yourself to study and work hard
Bart emphasizes that if you want to succeed in a family-owned company and perhaps eventually take over, you must commit to working hard, expanding your skills and learning as much about the business as you can.
“What you can control is your own behavior. So, work hard and learn,” said Bart. “Doing that will give you the independence to be able to decide if you’re just doing this [child] or you’re in business because you’re good at it.”
Bart says, “I found early on that I enjoyed the training and coaching that our company is known for. And finally, I learned to sell. That success helped me develop my confidence and business appreciation.”
3. Avoid complacency
Don’t think that just because you’re a family member, you’ll get a free ride on the business.
Family members get many benefits. They are rarely fired and often earn higher wages than they would get elsewhere. But, over time, Bart says, “these benefits can lead to complacency. And that indifference can turn into a feeling of being trapped or stuck.”
“It’s important to test the waters outside of your family business,” says Bart. “In the four years I worked with my mother, I explored other opportunities until I received an offer from one company. I was proud of this gift. It reassured me and showed me that I have marketable value.”
“What did my mother do as the owner and CEO? He didn’t want to lose me, so he raised me a lot. I saw opportunities to grow with the Humphrey Group. Me he chose stay, leading to higher engagement and confidence. “
4. Start sequencing early
For an interest hoping to take one day, start the conversation early.
Bart has been active in this discussion, and rightly so. After seven years working for the Humphrey Group, he developed a business plan that would prove his readiness to eventually run a business. Although we had a number of international businesses, we only had one Canadian office, in Toronto. His plan involved setting up offices in two other Canadian cities: Calgary and Vancouver.
It took a lot of effort on his part to convince me that this expansion was a good idea. The plan we agreed upon was the first important step towards his eventual identity. He received the authority to hire teams in the two cities, set their salaries, and oversee the business.
Significantly, we have written the words clearly. It can be tempting in dealing with a family member to have only verbal agreements. But that will not work well for either party.
5. Finding ownership can be difficult
Finally, both parties involved in the sale of the business must have the grit for what can be a difficult set of negotiations.
Bart recalls that interaction: “I saw that my mother wanted to increase her retail value, even if it meant that I had to buy [to leverage] I have business loans. Strictly speaking, this was reasonable, but when it’s your mother doing it, it’s hard to bear,” he said. “However, I wanted 100% ownership, and if you want that, you have to be prepared to pay. The good news is that after taking this journey together, we are now closer than ever. Sometimes, the most rewarding things are the hardest.”
Bart’s advice to others is to be prepared for some challenges along the way. “There are no easy answers in a family business. Expect challenging times. But if both parties handle the transaction with grace, the result is financial gains for all and still strong family ties.”
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