Family-owned distributors would be wise to send any heir apparent for company ownership to work in another industry. This will give them valuable experience that will pay dividends when it comes time to take over, according to Justin Craig, Ph.D., in this month's Executive Briefing.
Parents should tell their son or daughter after they graduate from college to "Go out and make some mistakes on other people's money," Craig said. "Go out there and learn discipline, learn from other people, learn what's happening out there, and work for another boss before you come back and work in the business."
It is important for whoever in the next generation has been tapped to take the company reins to pursue a career in an unrelated field after college to enhance the depth and breadth of their business acumen and leadership experience, he said. This will give them a break from having worked in the same company for too long – many distributors have children sweeping warehouse floors at an early age – expose them to other business models and management strategies, and give them perspective for when they do return.
"That's what most leaders and patriarchs and matriarchs are challenging their next generation to do," Craig said. "There is an increasing awareness of the need to do that because it's a changing economy. The challenges are different running a company now to what it was to 10 years ago. It's a global market, there's opportunities everywhere. These next-generation leaders are looking outside before they're coming back inside. And they're bring that knowledge back in."
Craig said the most successful businesses aren't just asking the next generation to seek gainful employment in another field before joining the family company, they are requiring it. And when they do return to the family business, Craig said, instead of relying on their birthright they must compete for jobs with other qualified candidates and prove their worth.
"There are many benefits for doing this," Craig said. "They build their confidence. They build their legitimacy as managers or leaders. They get outside experience. They get outside ideas. They get networks. As well as that, in the eyes of many stakeholders, including financiers, they build confidence in the next generation."
Read more about succession planning for family businesses in the most recent Executive Briefing.