Family-owned businesses have been the backbone of the American economy since our country’s beginnings. According to the advocacy group Family Enterprise USA (FEUSA), there are roughly 5.5 million family-owned businesses in the U.S. today.
These businesses contribute more than half (about 57 percent) of the U.S. gross domestic product and employ almost 63 percent of our nation’s workforce. However, only about one third of family businesses survive the transition from the first to the second generation of owners, and half of those businesses do not survive the move from second to third generation.
With the graying of the Baby Boom generation, a survey by Mass Mutual American shows that 40.3 percent of family business owners expect to retire by the end of next year. In addition, less than half of the survey respondents expecting to retire within five years have chosen a successor.
This situation is due in part to the fact that many millennials desire more flexibility in the workplace than their grandparents’ or parents’ businesses may offer. In fact, Thomas Rainer and Jess Rainer point out in the book The Millennials: Connecting to America’s Largest Generation that about eight out of every ten millennials prefer jobs that provide a flexible schedule.
If you are weighing the advantages and disadvantages of joining the family business, you are not alone. Let’s take a look at the pros and cons of this important decision. First, here are five pros of joining the family business.
- Deeper relationships in your family and in your community. Chances are good that you know your family business inside and out. You probably worked there as a teen and maybe as a college student. As a result, you are experienced in the company and knowledgeable in your industry. You also may already have important business contacts, and even if you don’t, your name will open doors for you based on your family’s reputation. There is also a satisfaction in carrying on the tradition your family members started, and your family will appreciate you doing so.
- You won’t have to work your way up the ladder. In many ways, you have already done that by working there throughout the years. In fact, you may be able to move right into a management position, rather than having to take an entry-level job in another company. The salary and benefits of this advantage speak for themselves. This advantage is especially important if you are a woman. Women are increasingly participating in family businesses leadership. Nearly one-fourth of all family businesses are led by a woman, and 60 percent of all family businesses have women in top management positions. In addition, about one-third of surveyed family businesses report that their next successor is a woman. By comparison, only 2.5 percent of firms that are not family owned in the Fortune 1000 are led by women, according to Fortune magazine.
- You get to work with people who care about you. Many people who work in a family business report that the shared sense of priorities and goals makes working in a family business very satisfying. Since the owners are family, you also can bring your ideas right to the top decision-makers without having to go through committees or other red tape.
- You can put your ideas to work. There is a sense of pride and accomplishment in working for and building a family business. When you put your knowledge, experience and education to work in the family firm, you can effect real growth and change. You can be part of moving the business solidly into the future with what you bring to work.
- You can pass on the legacy. When you take part in the family business, you are working on something that will ultimately benefit your children and grandchildren. You can pass along the same legacy – or even an improved legacy – to the next generation, just as it was passed down to you.
Now let’s examine five potential disadvantages of joining the family business.
- It’s not your thing. Maybe the family business is construction and you are more artistic in nature. Maybe you balk at all the hours and energy your parents have devoted to the business and want more balance in your life. In these cases, a family business can feel like a trap, rather than an opportunity.
- The business is stuck in the past. In some cases, younger family members are driven away because their ideas are not accepted. Perhaps you feel as if your ideas for moving the business forward fall on deaf ears, and your relationships with family are suffering as a result.
- You have limited opportunities for taking the helm. Some of the advantages of inheriting a family business can be lost if an older sibling is the heir to the leadership of the company, or if you have a healthy, active parent who has no thoughts of retirement. According to a survey by American Family Business survey, one third of family business owners have no retire plans, and nearly another third of owners report that retirement is a decade away.
- You desire a clear line between work and family. Millennials value their down time, and may not want to devote themselves to a 60-hour workweek as their older relatives did. If you join the family business, you may feel you will always be “on call” or have to “talk shop” even when you are supposedly off duty.
- You want to make your own mark. While there are advantages to being the boss’s son or daughter, there are some disadvantages too. Other employees may not show you respect, and others may unfairly compare you to your parents or grandparents, particularly if you are trying to do things differently.
To make working in your family business a satisfying and successful endeavor, here are a few suggestions gathered from people who have been in your situation:
- Communication – or rather, the lack of communication– can be the root of all family troubles. Communicate clearly and often about any work-related issues that could result in tension or issues with your family.
- Do not rely on just the spoken word. Create and follow clearly defined job descriptions for yourself and others.
- Carve out time that does not involve work. Be honest with your family that you need to spend time away from the office, both literally and figuratively.
- Do not share family disagreements or family secrets of any kind with other employees.
- Develop other areas of your life, including mentors and other professional contacts, so that you have support and friendships outside the family business.
For more information, here are a few helpful sites:
Smith Family Business Initiative at Cornell
IMD Global Family Business Center