The Polansky family owned a successful regional chain of supermarkets. The business was in the second generation and owned and led by four brothers. Between the four brothers, they had twelve children.
The Polansky brothers observed one supermarket chain after another be acquired either by competitors or private equity. Their supermarkets were different from your typical stores in that they were integrated into the communities where each store was located, and they developed a loyal customer base. It was important to each of the four brothers that they protect the legacy of the business they had built for the benefit of their family, their employees, the communities they served.
The brothers ultimately helped the next generations through these steps:
- Establishing overarching principles for family involvement.
- Anticipating friction between family and non-family employees.
- Forming a leadership development committee and utilizing this to manage the careers of the next generation employees.
In the brother’s minds, it was essential to have family members engaged in the business because their employees, customers, and partners valued that they are family owned and operated. Family involvement in the businesses protected the company culture and the family values.
By this principle, the brothers adopted a family employment policy for their children in the third generation that was based the standards of:
- Having an open door for any member of the third generation to join the family business if they have three years of relevant outside experience.
- While each brother wanted their children to join the business, they wanted their children to decide to join the business on their own and to have the opportunity to pursue their professional interests.
The brothers had seen other family business owners “make life too easy” early on and they did not want to make this mistake.
Ultimately six members of the third generation decided to join the family business. The brothers were delighted with their recruiting success! There were informal conversations between the brothers and each cousin before they were hired. Then the brothers decided where to place each person based on the needs of the Company and where they thought it was important for a family member to serve in the role. In some cases, the academic and professional backgrounds and interests of the next generation influenced the roles members of the third generation were placed in, but the needs of the Company came first. While there was a well-structured Human Resource function for hiring line works it was for non-family employees and had little influence on the family involvement in the business. Human resources did not play a strategic role in talent development and leadership succession.
Unanticipated challenges started to surface, which put at risk a smooth transition in leadership to the next generation.
- Placement in roles based on the needs of the business rather than the right fit for the family member: The cousins who were placed in roles where a critical need was identified, felt stuck and started to worry about whether joining the family business was really making the best use of what they had to offer and their time. One cousin said, “I was asked to oversee the finance department and we have addressed many of the issues, but I feel like I could add more value elsewhere in the Company.”
- Limited number of leadership roles for family employees to ascend into: Some of the cousins started to look at the leadership roles at the top and expressed concern about their being a potential ceiling in their career progression because there will not be enough leadership roles in the future for all the third generation cousins who build their careers in the business.
- Competition between family and non-family managers: Tensions started to emerge between some of the next generation family employees and managers. The managers had long tenures in their roles, and it was clear there was concern about what it meant for their roles when the next generation started to enter the business and work under them.
- Absence of Career Planning: There was little discussion on how the cousins and their roles in the businesses would evolve. “Perseverance” to push through assigned work was a core value and it felt like this was the barometer used to see who would rise to the top. In one case, a cousin made the decision to leave the business because the role was too administrative, and the sense was he would be more valued elsewhere.
These types of challenges are not unique. This is especially true for later generation business owning families. To effectively address these issues within the family can feel unnerving because often difficult conversations must be had and the options to address the challenges are not straight forward.
In family businesses where there are several next generation family members working in the business, it is valuable to establish a Leadership Development Committee (LDC). The LDC is the “Human Resource” function to represent family members working in the businesses. It provides an objective structure and process to address family employment issues and to ensure decisions are made with a consistent lens, which is viewed as fair.
The LDC should be composed of 4-5 family and non-family representatives, where the family has most of the seats, but 1-2 non-family executives contribute. The representatives should understand the business and have interest and experience with human resource issues. The body should serve as a bridge between the family and the management of the business and be involved in touch points across the family employee’s life cycle:
The challenges highlighted and issues addressed through the family employee’s career lifecycle, underscore that engaging the next generation in your family business is not necessarily straight forward. By the time the family and business transition to the third and later generations, often the family business system is larger and more complex.
Once the LDC is organized and meeting regularly it starts to make substantial progress on family employment challenges. Examples of this include:
- Managing Roles and Career Planning:
- Engage with family employees to have learning conversations to understand their experience working in the business and their perspectives on strengths they bring to the table and areas for development.
- Begin to meet with next generation family members interested in joining the family business to understand their professional interests and how they could contribute to the family business.
- Organize orientation and rotations programs for family members joining the business.
- Managing Expectations for Family Leadership Roles and Competition for Roles
- Map the executive and board roles across the family business. This exercise helps to define the future leadership roles to be held by family members and the qualifications required.
- Manage the process of receiving input from the family owners on the evolution of family leadership roles and in communicating this in separate forums to the third generation and non-family managers.
- Engage non-family managers to discuss the family leadership model, expectations for family employees, and how to manage family members who might be reporting into them.
- Providing Professional Development Support
- Support to define career goals and the professional development support needed to increase competencies in current roles and to help prepare for future leadership roles.
- Ensure family members working in the business receive regular performance feedback.
By Samuel Bruehl
Partner Generation Transition Advisors
