HR Can Help Second-Generation Family Business Leaders Succeed

When she was the director of organizational development at a family-run auto parts manufacturer employing 3,000 workers, Amy Schuman had an odd experience.

“I remember when the 10-year-old son of the owner came to lunch at the cafeteria one day. Suddenly, you got the sense that he could be your boss,” she said in an interview with SHRM Online.

As disconcerting as it might be to run into your future supervisor while he’s still a child, HR professionals can help ease the leadership transition from one generation to the next by making sure that upcoming presidents and CEOs have the necessary skills to run the business and that the outgoing leaders are making good choices based on the company’s business needs—and not just the parents’ heartstrings.

Incoming second-generation leaders face different hurdles than their predecessors, according to experts from the Chicago-based Family Business Consulting Group. Where the first-generation founder of the company might enjoy the loyalty and respect of the company’s workers and their own children, the incoming leader is going to have to work to earn that trust—even if he or she does things the same way as the preceding generation.

“When the leader is chosen, [the other siblings working or having ownership stakes in the company] want them to lead the way mom or dad led,” said Otis Baskin, Ph.D., consultant with the Family Business Consulting Group, in a March 2012 webinar. “But as soon as [the leader] makes the first decision the way the parent would have done, there’s pushback from the other siblings. They know you’re not mom or dad. No one can lead that way again.”

Building up skills, trust and rapport with the company’s workers can stave off some of that pushback, said Schuman, now a principal with the Family Business Consulting Group. Long before the new leader takes his or her place in the corner office, the company’s HR leaders can help young family members find ways to be leaders in their schools or community, talking about what skills will be needed to guide the company in the future, creating a career development plan and bringing them into the office to shadow their parent.

Encourage the first-generation leader to “model the leadership behavior you want them to have,” said Kent Rose, Ph.D., with the Family Business Consulting Group. “That will impact them most strongly.”

HR can take the lead with the family in developing policies that incorporate the family’s values and will help select the best next leader, Schuman said—and HR might have to be the one that enforces those policies.

“Set up objective criteria before” the next leader must be chosen, Schuman said. “Have everyone agree that family members [who want to run the business] must be qualified.” And then help the family stick to its policies and guidelines to achieve the best outcome for the business, she added. This can be especially challenging when family members begin making decisions out of sentiment, rather than business savvy.

“You can remind them, ‘I know this is hard, but for several years, you’ve said you want to make employment choices that do not jeopardize the business. You may be doing so through this choice of your son or daughter,” Schuman said.

HR can help other family members find their places in the company, even if they are not the president or CEO, Schuman said. In addition, she said HR can serve as a trusted advisor, communicating, as appropriate, information about the business to family members who might not be involved in the day-to-day operations but who still have financial interests.

Twice the Work, Big Rewards

On their way to the top, incoming leaders might realize they are challenged not just by family members but also by co-workers. Eric Oppenheim, SPHR, COO of Republic Foods Inc. in Bethesda, Md., started working in his father’s company in 1997. At that time, the company—which owns 19 Burger King restaurants in the Washington, D.C., metropolitan region—lacked an HR department. Oppenheim, who was working in the hotel industry, was tasked with starting up the HR function. But he had no HR experience.

Not only did Oppenheim earn his master’s degree in organizational development and HR, he also took classes to learn how to manage the restaurants and oversee operations to build credibility with other employees and restaurant managers in the group. He learned that he had to work to change people’s perception of him.

His father “was very concerned at that time about how I was perceived by others in the organization,” Oppenheim said. Gaining employees’ trust “took longer than I thought it would. They had watched me grow up, I knew them, I’m likable. But in the working environment, people started to think I was a threat to them and their livelihood. …People want to see you fail. They assume you have advantages you don’t have.”

Knowing the business inside and out and “working two times harder than anyone else in the organization” are proving to his colleagues that Oppenheim has earned the right to lead alongside his father, he said. “Every day, I had to prove I was worthy of it and would work harder to get there.”

To be successful, said Baskin, second-generation leaders have to make sure that they sell their ideas to their employees, respect their family members, listen to their families and employees, and communicate their company’s vision as a rallying point. The second generation won’t be the same as the first, but that’s a good thing, Baskin said: “You have to be open to change. Children are different from their parents, and business needs change.”

Oppenheim, who is part of the Labor Relations Special Expertise Panel for the Society for Human Resource Management, encouraged HR professionals to make sure that second-generation leaders “outwork” other company leaders. Warn them that “it’s a long process to earn credibility and trust. [Tell upcoming leaders] to keep an open mind and learn all you can. Go in with a mind-set that you don’t know much and learn from your own people.”

At the end of each day, though, Oppenheim said, “I appreciate the fact that I get to work with my dad. When it’s gone, I’ll look back and cherish it.”

Beth Mirza is senior editor for HR News. She can be reached at Beth.Mirza@shrm.org. To read the original article, please click here.