Bridge the Generational Gap: How Your Family Business Can Thrive
December 7, 2021 by Interchange Capital Partners
By Ahmie Baum
With today’s workforce consisting of five major generations—Traditionalists, Baby Boomers, Gen-X, Millennials, and Gen-Z—it’s more important than ever to understand how generational differences can impact your family business. (1) If you’re like many of our clients, you either have children in your business or you probably dream of the day you can pass your business to your children and grandchildren. Given the generational differences, you probably also worry about how that can realistically be achieved. Considering only 30% of family businesses survive the transition from first generation to second, and still only 12% survive from second to third, (2) this is a valid concern. But with proper planning and communication, you can bridge the generational gap and your family business can thrive.
In order to understand how to bridge the generational gap, you must first understand each generation’s unique perspective.
The younger generation consists mostly of Millennials and Gen-Z, maybe even some Gen-X depending on when your family business was started. This generation is typically filled with energy and excitement as they are just entering the working world. The family business may be their first or only job they have ever had. The younger generation is eager to make a difference, implement ideas, and build something that is their own. They may have a historical understanding of the older generation but may not grasp the significance of that history (i.e., the hard work, time, effort, and sacrifice it took to build the family business from the ground up). This generation may take for granted the financial security that the family business has provided.
The older generation typically consists of Traditionalists and Baby Boomers. Again, depending on which generation started the business, Gen-X could be part of the younger or older generation. This is the generation that built the business from the ground up. They may have come from little financial security and built a business that is very financially secure, although they don’t necessarily feel that way. They may worry that they are only one bad decision away from losing it all, and so they want to protect all that they’ve built. The older generation has a wealth of knowledge about how to create, manage, and maintain the business, but they may be a little stubborn in their ways and unwilling to try new things. They may also have a desired outcome for the business that the younger generation is not aware of, which can make communication between generations difficult.
How to Bridge the Gap
Now that you have an understanding of the general ways in which each generation thinks, let’s take a look at ways to bridge the generational gap, improve communication, and maximize your family business’s chance of success.
Work Outside the Family Business First
The first way to bridge the generational gap is to have the younger generation work outside the family business first. Depending on your specific situation, this may not be possible. For instance, if you are short-staffed or worried about needing a successor sooner rather than later, you may need the younger generation to take up the reins right away. Assuming this is not the case, however, having the younger generation work outside the family business first can provide several benefits, including:
- Improved skills related to managing responsibility and building work ethic
- Increased understanding of the younger generation’s strengths and weaknesses in a professional setting
- Appreciation for the family business, how difficult it was to build and maintain, and how important it is to be able to effectively manage in the absence of the older generation
Outside work can provide foundational skills that can then be honed and expanded upon in the context of the family business.
Tell the Story of the Business
Another way to bridge the generational gap is to tell the story of the family business. This works to both create a common history that each family member can remember with pride, as well as build a common vision of the future that both generations can work toward. It is an anchoring point for times when there may be mistakes, misunderstandings, or disagreements about how to proceed. When everyone is on the same page about the story behind the business, its goals, and what it represents, navigating generational differences becomes much easier.
Assign Appropriate Roles Within the Business
Next, it’s important to make sure family members are placed in positions appropriate for their age, level of education, experience, and skill set. The more you can play to the younger generation’s strengths, the more successful they are likely to be. Avoid nepotism as much as possible as it only serves to create tension and resentment among non-family employees. The strong foundation you’ve built must be maintained if the business is to pass successfully to subsequent generations, and nepotism works to undermine even the strongest of foundations.
Celebrate Generational Differences
Just because the oldest generation is different (sometimes significantly so) from the youngest generation, doesn’t mean that all those differences are bad. Using assessment tools to identify the core values and strengths of each generation is a great way to bridge the generational gap and open the door to working together collaboratively.
Just as people grow from children to adults to elders, a family business must do that as well. Those that are able to thrive across several generations almost never look exactly the same in the third generation as they did in the first. It is important to embrace innovation and diversification so your company can grow and adapt in the long run.
How We Can Help
Don’t let your family business fall victim to the generational gap. At Interchange Capital Partners, we will help you navigate the unique challenges facing multi-generation family-owned businesses. If you’re worried about exit planning, succession planning, or even just managing day-to-day finances, reach out to us today. You can email us at email@example.com or call our office at 412-307-4230 to schedule an introductory appointment.
Ahmie E. Baum is the CEO and founder of Interchange Capital Partners, an independent registered investment advisory firm providing collaborative, comprehensive, and disciplined wealth management around Transition Planning Unlocking a Lifetime of Work. With over 40 years of experience, Ahmie specializes in serving individuals, professionals, and family-owned businesses, helping them manage the complexity that comes with their unique circumstances. He is known for giving his clients guidance, education, and resources to make wise financial decisions that help them protect their wealth while achieving their goals. Ahmie and his firm strive to go above and beyond with their unparalleled client service and family office services that help their clients experience confidence in their future.
Ahmie graduated from the University of Pittsburgh with a bachelor’s degree in psychology and holds the Executive Certificate in Financial Planning from Duquesne University School of Leadership and Professional Advancement. He is also a CERTIFIED FINANCIAL PLANNER™ professional. He recently received the Certificate for Family Business Advising (CFBA) from the Family Firm Institute. He spent 42 years working at EF Hutton and UBS, where he earned the prestigious Wealth Advisor designation. Nationally recognized, Ahmie has been named in the past to the Barron’s Top 1,000 Financial Advisor List. When he’s not working, Ahmie enjoys spending time with his wife, Sara, their three children, and their granddaughter. He also enjoys investing in his health through yoga, meditation, and plant-based eating. His other hobbies include woodturning, golf, reading, listening to music, and biking. He is active in his community and serves as the Foundation Chair of the Jewish Federation Community Foundation of Greater Pittsburgh and supports the Big Brothers Big Sisters of America (BBBS). To learn more about Ahmie, connect with him on LinkedIn. You can also watch his latest webinar on The Hidden Dangers of Not Having an Exit Plan.
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