Mike Vetch and his wife Sue own a successful transportation planning services consultancy based in Queensland-Veitch Lister Consulting. They are in the process of transitioning their business into the capable hands of the next generation – their two sons. Below are a few key points in “Engaging the Next Generation in the Family Business”- by David Harland, Managing Director of FINH
The role of the next generation has long been known as critical to the long-term success of a family business. A family firm’s ability to engage their younger family members and guide their development into family business leaders is one of the most important hallmarks of successful family firms. While many businesses don’t start out planning to become multi-generational, sometimes they find themselves becoming so when the next generation of family members take an interest in the business and begin working within it.
Mike Veitch and his wife Sue started Veitch Lister Consulting (VLC) in 1986 as a transportation planning services consultancy in Queensland. Since then, the company has grown from only a handful of employees to a thriving business with over 20 employees providing consulting services in Queensland, Victoria, New South Wales, Western Australia and overseas. Mike has always considered the consultancy to be a family business, not just involving blood relatives, but also employees who have worked in the business for many years.
Like many business owners, Mike and Sue never planned for their children to work in the family business; they left the door open, but gave their two sons the freedom to choose their own path. However, from a young age, their sons took on small roles earning holiday pocket money by working casually in the company, but it was only when they went to university that they “caught the bug” , realising how complex and challenging the planning and designing of future transport systems for our major cities actually is. Mike and Sue are currently in the process of transitioning their business into the capable hands of the next generation.
Research actually shows that young successors who don’t feel pressured into entering the family business develop a stronger sense of psychological ownership of the business.
Empowering and Communicating With Successors
Based on our work with family businesses around Australia, we know that open communication is the key to engaging the next generation and guiding their development. The next generation family members who show early interest can benefit from family dinner conversations about the business and summer jobs. Family members already working in the business should be included in strategy sessions and meetings with important stakeholders. Many businesses institute regular “all-hands” meetings involving all employees; VLC has bi-annual workshops involving all employees to discuss strategy, marketing, and build rapport among distant team members. Family council meetings, either formal or informal are also a great way to keep the family involved in the strategic direction of the business.
While large companies or family businesses with many departments would benefit from a formalized training program for their successors, many successful businesses simply bring younger family members on and let them get to know the business organically. At VLC, Mike’s sons work side-by-side with their parents on company projects and are learning to manage the business by taking ownership of project needs and working with clients. Both sons have naturally fallen into important and complementary roles within the business. Tim has taken over the development of the computer software that supports VLC’s technical products, such as the company’s travel demand forecasting models for Australia’s capital cities. Nick is more interested in the application of the models and the management side of the business.
The next generation often has different ideas of what path the business should take in the future. It’s very common for younger family members to see opportunity where their elders see risk. At VLC, the junior Veitch’s were keen to spin off a successful business function in order to increase revenue through licensing of the company’s travel demand forecasting models to third parties; however, Mike and his wife believed that the plan was too risky and chose to keep the operation in-house, while still agreeing to license to third parties. When dealing with a conflict between generations, it’s critical to address the issue as dispassionately as possible without allowing it to degrade into a power struggle between the old and new guard.
Learning to Let Go?
Knowing when to let the next generation take over is one of the most challenging decisions faced by family business leaders. Unfortunately, there’s no easy answer as each family business is different. By developing succession plans early and giving the next generation time to ease into their role as future owners, as VLC have done, family business leaders give themselves the opportunity to plan their exit in advance. If successors have already been identified, it’s important to communicate with them early, letting them and everyone else know that they are being groomed to take over the business. Many business owners choose to exit the business slowly, taking on a consulting role or a seat on the board as a way to stay involved while allowing successors to drive. It is critical to identify and communicate with successors and plan for an exit before illness, age, or other unforeseen crisis events force retirement.