Should the Next Generation Work Outside the Family Business First?

When thinking about succession planning, many family businesses debate the merits of the next generation working outside the family business before working in the family business. In our recent Family Business Survey, we found that slightly less than half of the respondents require family members to have outside work experience before joining the family business.

While there is no right or wrong answer to this question, there are a few advantages to succeeding generations working outside the family business first.

1. They'll work hard and achieve success, including promotions and pay raises, on their own. This sense of accomplishment will provide confidence and self-assurance, which will ultimately enhance their role in the family business.
2. They'll gain exposure to another business culture. Our business philosophies are shaped by our experiences. Being exposed to different business cultures and practices can help focus the next generation on the types of culture and practices they would like to see in their own family business.
3. They'll develop a skill set that may complement the family business and that might not otherwise have been developed. Family members may have the opportunity to work in positions in another business that may not have been available to them had they immediately joined the family business. Plus, if the work in the external business is somewhat related to the family business, exposure to new markets or new product ideas may ultimately enhance the effectiveness of the individual when returning to the family business.
4. They'll confirm their desire to work in the family business. Working outside the family business will solidify the desire to either go back to the family business at some point, or to go in another direction. While the family may be disappointed if a decision is made for life apart from the family business, this is ultimately the best possible result for both the individual and the business.

There are numerous reasons that may dictate the next generation jumping right into the family business. Certainly, there are many success stories in which this has been the case. However, for the reasons mentioned above, working outside the family business first can be very advantageous.

Steven E. Staugaitis is a director at Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.

You may also like:

• Kreischer Miller Family Business Survey
• Resources to Prepare the Next Generation of Your Family Business
• 6 Key Elements of a Family Business Succession Plan