Children raised in Oregon’s family businesses are one of our community’s greatest resources. Among INC’s 500 fastest-growing private companies just under half were run by entrepreneurs who grew up in a family business.

Whether there is room to return to the business or in starting new businesses, next generation business leaders have learned critical skills for growing Oregon’s economy.

About 25 percent of Oregon State University students grew up in a family business. In fact, 8 percent of these students are shareholders in the family enterprise. I have the opportunity to teach these students each spring term as part of the Family Business Management class at the OSU College of Business.  These students are consistently thoughtful, hardworking and emotionally intelligent young professionals who have much to offer their families, their professions and Oregon.

The seminar format featuring invited guest speakers offers frank discussions from a variety of family business CEOs. These exchanges help students navigate complex career and family issues with helpful insights. Each year a common set of student concerns emerge.

Who will take my work experience seriously if my family’s name is the employer on my resume?

Family business students have more meaningful work experience than their peers do because they are part of the family. Giving young family members appropriately titled positions and delineating responsibilities allows them to document transferable job skills.

How do I work with my cousins who don’t seem serious about the work but have been hired by my family?

Preparation to support the returning business graduate can occur while children are in high school and making post-secondary education decisions. Developing a family employment policy that delineates the requirements of relatives working in the business clarifies expectations and opportunities for a family business career.

One highly talented student did not even consider the family business because of a less committed older cousin. Over the course of the term, she realized, along with her parents, that she had significant contributions to make in leading the family business. They also realized that her cousin would flourish, in a separate division, with his technical skills. The second-generation family team running the business worked to define these roles and contributions based on education, placing the third generation in positions that matched their fullest potential.

How can I have more balance in my life than my parents had in theirs?

Lack of family time is pervasive among students and sometimes reflects their experience of a “missing” parent during their childhood. Visiting CEOs are challenged by this question. Every family business owner meets their family commitments differently. The importance of family harmony should not be overlooked because it will drive the long-term success of the business.

How do I tell my parents that I don’t want to work in the business?

When students honestly examine their experiences, they may realize that they can’t commit to leading the family business if their interests are in other areas. It’s better to have this conversation honestly and early than to build a succession plan based on a promise that will be broken down the road.

Two factors can help in this situation. First, we encourage families to have conversations with their children about their business interests on a regular basis. Interests, and businesses, change over time. The ongoing dialogue removes the high drama and tension associated with a single decision point, often under stressful circumstances.

Also, students can stay connected to the business as shareholders or as part of the advisory board. One of our recent graduates helped his family sell the business after none of the other children were interested. He helped his parents gain more value in the sale of the assets to another family business and honored his grandfather’s legacy in new and related ventures.

Giving young professionals from Oregon’s family businesses the opportunity to plan their entry into the state’s business sector intentionally has longterm rewards. Students appreciate and build on the advantage of their experience. The informed and intentional commitments they make will have lasting impact and honor theie family’s enterprising legacy.

One of the primary challenges for any growing family enterprise is moving beyond the “start-up” mentality to prepare for the next level of growth and complexity. Structures and processes that worked in the less formal earlier stages of the business are usually not suitable for long term growth and eventual succession.

Here are three takeaways from the Family Business 360 podcast episode “Beyond the Start-Up: Taking Your Family Business to the Next Level,” featuring Don Krahmer and Matt Bisturis of Schwabe, Williamson & Wyatt, to help you think about growing and professionalizing the family enterprise. You can also listen to the complete episode online.

Looking outside the family can help fill gaps

As a family business grows there will inevitably come a time when the needs of the business outpace what the founders or other family members can provide. Sometimes this is a result of limited resources (there aren’t enough family members to fill all the roles that the business requires), or limited knowledge or ability (there aren’t family members with the right skill sets to fill critical needs). Bringing in outside help in the form of professional advisors or key employees can help fill these resource and ability gaps. Matt Bisturis, Shareholder at Schwabe, Williamson & Wyatt, also emphasizes that distributing knowledge beyond the founders to other key personnel is just smart for succession planning; “If all of the knowledge is tied up with one or two founders, it makes it very difficult to successfully transition to the next generation.”

Finding investment partners that share your vision and values is critical

Access to capital through outside investment can be a key driver in growing the family business. It’s important to be thoughtful about who to bring in as a partner; not only will this person or entity bring money, but they will also be part of a long-term relationship and potentially have decision-making ability within your business. As Don Krahmer, Shareholder at Schwabe, Williamson & Wyatt, puts it, “Choose your partners wisely in life and otherwise.” He adds that it’s critical to take the time to really get to know the professionals with whom you plan to do business to ensure there is a values and chemistry fit.

An outside board of directors brings several benefits

Having outside perspectives in the form of a board of directors or advisors can be a huge boon to a growing business. A board can add a healthy level of formality to the business, provide expert insight on critical business decisions, and even help groom family members for leadership positions. In addition, embracing opportunities and taking risks to grow the business is easier with a solid team of trusted advisors around you. Aim to have a board that meets together in the same location rather than relaying information individually; the group dynamic is well-suited to addressing critical business questions.

Listen to the complete episode on the Family Business 360 podcast for more insights on taking the business to the next level.

Visit our website for a listing of upcoming Family Business 360 breakfast events.

Thank you to Don Krahmer and Matt Bisturis of Schwabe, Williamson & Wyatt for contributing their expertise to the podcast.

As your business grows and family members mature, family dynamics and the decision-making process become much more complicated. When the enterprise prepares to move beyond the founder phase into succeeding generations it is important to consider not only business governance, but how the family will be governed in relation to the business. Effective family governance can serve as a framework to provide clarity on roles and relationships and reduce conflict among family members.

Here are three takeaways to get you thinking about your family governance from the Family Business 360 podcast episode “Ownership, Business and Family Continuity: How Family Governance Builds a Stronger Business and Personal Relationships,”  featuring Don Bielen and Paris Powell of Perkins & Co. You can listen to the complete episode online.

Family strategy is more than just wills, trusts, and buy/sell agreements

These items are important and families should consult with their professional advisors to make sure they have these contingency tools in place, but an effective family strategy takes a higher level approach. Family governance acts as a blueprint to manage the complexities of a growing family business. It can help manage communication, roles and responsibilities, and provide a tool where family members can come together to work toward a common vision of the family and business.

It’s also important to understand that just as estate documents should be reviewed on a regular basis to ensure they are up to date, governance structures can evolve over time to adapt to the changing needs of the family.

Understand how each member of the family fits into the overall system

Roles in the family business are much more nuanced than just determining if someone is part of the business or not. It’s helpful to look at the family business as a system where each member occupies a place depending on a combination of three key attributes; do they have an ownership stake in the business, are they members of the family, and are they involved in the operation of the business? Knowing where each family member fits can clarify roles and expectations, leading to better communication and less conflict. The commonly used “Three Circle Model” below gives a visual illustration of this concept.

Three circle model
Above: The three circle model, first developed by Harvard Business School faculty Renato Tagiuri and John Davis in 1982.

Family meetings are important

Structured family meetings are one of the most practical activities a family business can undertake to start building the foundations of family governance. Family meetings can provide a venue for family members to identify common vision and goals, and provide younger family members an introduction to the values and history of the business. They can also help families identify competing interests and potential areas of conflict between members and help reduce or prevent serious conflict from occurring.

Listen to the complete episode on the Family Business 360 podcast for more insights on family governance.

Visit our website for a listing of upcoming Family Business 360 breakfast events.

Thank you to Don Bielen and Paris Powell of Perkins & Co. for appearing on the podcast.

References

Bivalent Attributes of the Family Firm (1996), Renato Tagiuri and John Davis, Family Business Review, Vol IX, No.2, pp. 199-208

Perpetuating the Family Business: 50 Lessons Learned From Long Lasting, Successful Families in Business (2004), John Ward, Palgrave Macmillan