Learning curve: before kids enter the family business, make sure they know the ropes

Entrepreneur, August, 1996 by Patricia Schiff Estess

Both Founders and their children tend to underplay the importance of learning in a family business. Founders think they can be the sole mentors to their children because they know the business inside and out. Children discount the value of their parents, wisdom and think "What's the big deal? Anyone can run the business." Either attitude can spell danger, warns Dennis T. Jaffe, a San Francisco family business consultant and author of Working With the Ones You Love (Conari Press).

Parents must realize, Jaffe says, that the business a child will someday run will not be the same business the parents are running now. Children will have to know more and be better educated than their parents just to maintain the enterprise. And since parents can teach only what they know, learning, the ropes will be different from what it was in the past.

First, there's the question of training. Many second- and third-generation family business heirs worked their way up from the stockroom. "Having kids work in a menial capacity is a good way to familiarize them with the business when they are in high school, after school or during vacations," says Jaffe. "There's no pressure, and they learn good work habits."

But this doesn't work when the son or daughter comes in sporting an MBA and possibly years of experience. Then they should be coming into the business because their skills are needed and at a level that acknowledges their experience.

As eager as both generations may be to join forces right after college, learning aspects of the business elsewhere is invaluable for several reasons. First, it broadens children's understanding of the industry. Often Jaffe suggests children work in a larger, allied or competitive business so they come to the family business with fresh ideas."

College student Keisha Hoskins isn't working at her mother Michele's multimillion-dollar operation, Michele Foods in La Grange, Illinois. Instead, Keisha works part time at an Auntie Anne's pretzel franchise. "Because she's learning about inventory, marketing and how other businesses cost out products, she'll come into my business at a more sophisticated level," explains Michele, a former teacher who admits that when she burst into the food industry 13 years ago with a family syrup recipe, her business skills were miles behind her enthusiasm.

But young people learn more than skills by working elsewhere. Being the low person on the totem pole "teaches humility, respect and appreciation for the responsibility they will have someday," says David Hoffman, president of Red Seal Development Corp., a Northbrook, Illinois, land developer and building firm that his father-in-law, Joe Horwitz, started in

Hoffman has a son and son-in-law in the business, both of whom honed their skills by starting on the bottom rang of other firms' ladders. Son-in-law Todd Fishbein, a lawyer, worked for two major real estate firms; son Brian, who has a degree in international finance, worked in time-share development.

It's wise, however, to have adult children entering the business for the first time supervised by nonfamily mentors, and encourage them to join networks of their peers to share ideas and develop business skills.

* ROLE MODELS

Even if adult children come to the business well-educated and experienced, that doesn't mean parents play minimal roles in shaping their children's future with the firm. That happened early on, when business owners sat at the family dinner table discussing the business's problems and challenges. Though some children learn to run as far from the business as possible ("Who wants problems every day?"), others, are lured by the possibilities.

"I see my role as teacher on several planes," says Hoffman, whose involvement in daily operations has diminished as the heads of his firm's divisions become more skilled.

While not assuming today's problems can be handled the same way yesterday's were, Hoffman still believes in sharing his experience. "There might be something analogous in the situations that the next generation can use," he says.

Still, perhaps the most important "ropes" parents can show children are those they act out, not those they verbalize. Hoskins started her business after a divorce. Her three daughters saw her persevere through difficult, lean years, long before she became the sole supplier of syrup to Denny's restaurants and had products distributed in 5,000 stores in 25 states. "Seeing me maintain my dignity in the struggle and stay strong," she says, gave them the feeling that if there's something they want to do, they can do it - including running the family business.

Patricia Schiff Estess publishes the newsletter Working Families and is the author of two new books, Managing Alternative Work Arrangements (Crisp Publications) and Money Advice for Your Successful Remarriage (Betterway Press).