Training the next generation

To ensure a smooth transition to the next generation, family businesses need to have a well thought out career development plan. How can younger family members be enticed into the business? How can they be trained? How can the business ensure that these members are qualified to run the company someday?

Talent, competence, interest are usually the basis for entry into the company. Most family businesses think about succession in terms of management (CEO, COO, president, vice-presidents), but in today’s technological world, they also have to consider the technical track.

Take Peter, a fresh college graduate of engineering. He has no interest or inclination to manage other people, but he has a strong desire to improve existing systems or develop new ones. Instead of forcing Peter to get an MBA, the older generation can encourage Peter to pursue his interests and see how they align with company goals.

Peter can be placed not on the management track, but on the technical track. After training under a trusted and competent, certified non-family professional, Peter can eventually head the engineering or the research and development division. Peter knows he will never be CEO, but since he does not like the position anyway, he can aspire to be a very good R&D vice president.

Many family businesses are starting to recognize the importance of science, aside from business. They encourage their children to major in engineering or computer science, for example, rather than business or accounting in college.

Identity building

Indonesian business consultants A. B. Susanto and Patricia Susanto have identified the six stages of career development in a family business.

The first stage, orientation, occurs when younger members are generally 21 to 25 years old.

They discover whether they like or are suited for the job. They can be management or technical trainees. The former are rotated from one department to another, while the latter enter the technical department. Both work under the tutelage of middle management, to have a more complete understanding of what is needed.

Introduction to knowledge and basic responsibility is done at this stage.

Making money is not the prime objective (they are trainees, after all). But young people need to take this seriously, since doing well during orientation is often a prerequisite to continue on to the next stage.

The second stage, identity building, occurs at 26 to 30 years old. After training, young people involve themselves more in the daily routine, joining meetings where they share ideas and suggestions. They start to negotiate interpersonal relationships and are given responsibility to deal head-on with relatively minor problems.

At this stage, family members are already expected to be finished with management or technical training done in-house. They are expected to be certified professionals, if the job requires it, and if not, they are encouraged to complete certification as soon as possible. They can join further training outside the family business, such as in business or professional schools.

At the same time, they are exposed to decision-making in their departments. They learn more about the industry. They start becoming leaders, with the expectation that they will soon play major roles in their departments. As a reflection of their added responsibilities, they get a raise in pay.

Maturity and stability

The third stage, maturity, occurs when family members are 31 to 40 years old. They need to be able to navigate company politics, plan strategically, deal confidently and deftly with crises. Now leaders, they are in middle management, possibly vice presidents, so they need to lead a team and work with others. They implement programs in line with the mission of the company, and represent the business in the community.

Most likely, they are supporting families at this stage, and require higher pay, which is given them based on performance.

The fourth stage, stability, occurs at 41 to 55 years old. As presidents or CEOs, they set the vision and goals for the company. They spearhead or influence change, develop relationships with key people outside the business, take risks when needed. They expand the business and marshal the company to achieve their aims.

The fifth stage, transition, occurs when members are 56 to 65 years old. As they prepare for retirement, the sixth stage, they become mentors to the younger generation and start to choose their successors from among the people they have trained. Next Friday: Business secrets of the mafia.

(Queena N. Lee-Chua is on the board of directors of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press [e-mail [email protected].]. E-mail the author at [email protected].)