The idea of a generational decline in family businesses is not new. The old adage “Three generations” seems to exist in one form or another in many cultures and languages. The prevailing assumption is that this decline is driven by some kind of generation gap, in which generations become unmotivated and less able to lead the business. But the decline in home entrepreneurial activity is not inevitable for intergenerational business. Instead of focusing on major issues (gaps) between generations, families should focus on correcting inconsistencies in expectations and needs. Emphasizing on improving the entrepreneurial capabilities of the next generation and striving to provide entrepreneurial opportunities for the next generation will increase the willingness of the next generation to take action. There are many differences between each generation, but entrepreneurship is not necessarily one of them.
Overcommunication In building entrepreneurship, the main cause of dissonance is a lack of understanding of expectations and needs. Families tend to adopt comfortable communication patterns, which often create this misalignment. When I teach an executive audience that includes two generations of family members, I often separate the generations and ask each generation the same questions about communication. The agreement between the two groups is always surprising. For example, when asked how well the family understood succession planning, the previous generation felt as if it was well communicated and understood, while the next generation members often told me they didn’t even know there was a plan. The solution to this problem is conscious overcommunication. Share information, then share again. Research shows that one of the biggest complaints about business leaders is that they don’t communicate clearly. Leaders tend to think that they communicate more frequently and more clearly than they actually do. Our interviews suggest that the overcommunication of the previous generation should focus on clearly communicating their desire for the next generation of self-employment activities. The next generation is also not immune to the need for excessive communication. Our interviews showed that the next generation is often intimidated by asking questions and sharing their needs with the previous generation. The next generation of members should focus on overcommunicating their desire to meet the entrepreneurial expectations of the older generation and their need to better understand the values and strategies held by the older generation. Many of my students come to me after class to ask how I can ask their parents questions about businesses or their own entrepreneurial ideas. They are usually disappointed when I tell them there is no easy way. They’re also usually happy when they finally raise the issue with their family and find that it’s not as dire as they expected. Parents are available and open to questions when asked, and can certainly help in the process. Communication alone is not sufficient to adequately promote entrepreneurship for the next generation. As mentioned, some will point to a lack of motivation or drive in the next generation as the reason for this inaction. My research with students suggests otherwise. Core research in organizational behavior shows that behavior—action—is driven by three variables: 1) the organization’s capabilities
The individual takes the expected action; 2) The individual’s motive for taking the expected action; 3) Provided to The opportunity for the individual to take the desired action. Sometimes referred to as “Ability-Motivation-Opportunity,” this research suggests that families should go beyond motivation and focus on enhancing the capabilities and opportunities of the next generation. The method is as follows:
Build capacity Although it is generally believed that Entrepreneurship is an innate ability, but research shows that entrepreneurship is learned. As families improve the entrepreneurial capabilities of the next generation, they will see more entrepreneurial behavior. Capacity building can be done in a number of ways. I’ll highlight two here. First, education. Formal education focused on entrepreneurship has proliferated in recent years. Opportunities exist—from elementary school to graduate school, from degree programs to community-based education and certificates. Business families should take advantage of these formal educational opportunities to enhance the entrepreneurial capabilities of the next generation. Second, participation. The next generation of members benefits greatly from hands-on learning. To do this, family members should be involved in the business from an early age. In particular, parents should look for opportunities to engage the next generation in the entrepreneurial endeavors pursued by the business. The power of following a leader, attending a meeting, or visiting a client should not be underestimated, even if they are not ready to actively participate in decision making or execution. I know a family that is in the restaurant business and has taken the whole family from a very young age, eating at a different restaurant (not owned by the family) every weekend. On the drive home, they talked about their experience and how it compares to what their restaurant has to offer. By the time these young leaders graduate from high school, they are experts at identifying innovation opportunities by analyzing competition.
Provide leadership opportunities
In addition to the ability to start a business, the next generation also Need to have the opportunity to do so. The next generation of members needs a safe space to pursue and test new ideas – experimenting with their entrepreneurial thinking and trying out different solutions. Some families provide this space by setting aside resources for the next generation of entrepreneurial activities. The next generation of members can apply to the family business for grants, loans or equity investments to conduct research or even start new businesses. Other families prefer to keep opportunities in the business, hosting “design challenges” where all family members are invited to develop and submit ideas to solve “real” problems facing the family business. Some families are reluctant to let the next generation engage in business, and instead let the next generation take entrepreneurial action in planning a family vacation or retreat, strengthening the work of a family foundation, or organizing a family service project. The key to any of these efforts is to provide enough autonomy so that the next generation of members really feel like they have a context or space in which they can actually act. It is not inevitable that entrepreneurial activity in family businesses declines across generations. Instead of focusing on major issues (gaps) between generations, families should focus on correcting inconsistencies in expectations and needs. Overcommunication around expectations and needs creates more alignment. Emphasizing on improving the entrepreneurial capabilities of the next generation and striving to provide entrepreneurial opportunities for the next generation will increase the willingness of the next generation to take action. There are many differences between each generation, but entrepreneurship is not necessarily one of them.