Rice Paddy to Rice Paddy in 3 Generations

pass-batonSociologists have discovered there is a saying in every culture that is best illustrated by the title to this article (which is the Chinese version). Basically, it refers to the lowly peasant who works hard to break out of the rice paddy life by starting a business which he then passes on to his heirs. The heirs live off his efforts for a generation but their heirs are back in the rice paddy. So what is the difference between family businesses that thrive for multiple generations and those that don’t?

I have just returned from a visit to see Schoedinger Funeral Home’s (Columbus, OH) newest facility. WOW!! If you want to see the future go see it.

But that’s not my point. Schoedinger’s is now in their sixth generation. Some day maybe they will let me do a case study. But I have known them for years as well as a few others like them and their are some common characteristics.

Some of the basics that you most commonly see is an ingrained respect for one another, treating the business as a business not a means to a lifestyle, minimizing that sense of entitlement, clearly defining roles, intentionally developing skills and gifts and a solid, formal governance structure.

As an aside, I recently worked with a family on their succession plan. The parents insisted that the two children have equal ownership. My response? I challenged the successors to work together to come up with a formal system of governance that would clearly address the question: “how are you going to break a tie?” I expect one of two things to happen: a) they will demonstrate they can’t break a tie…or, b) they will come up with a plan.

Back to my original point: How do families succeed beyond 2 or 3 generations?

Kennesaw State University’s Cox Family Enterprise says that, for those families that succeed, succession planning is built into their DNA. There is no entitlement only merit. Yes, you get a genetic preference but you MUST be able to contribute meaningfully to have a management role. This means an intentional plan to:

  • Expose potential successors to all aspects of the business
    • operations
    • finance
    • management
    • vendor relations
    • vision casting
  • Be fully transparent
    • with each other
    • about true competency
    • roles
  • Have a clear sense of mission
    • Know who you are
      • and who you aren’t
    • have clear expectations
    • hold stakeholders accountable for results
  • Everyone earns their role
    • You don’t get to be an officer until you demonstrate ability

Of course, not everyone wants to be a multi generation business. But, if you do, being intentional about it through a clear plan is a requirement.

 

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