How parents can promote sustainability in family businesses

Parents in family businesses often want to know how they can prepare their children for the challenges they will inevitably face as they move into leadership positions in the company. The concern is as much about continuing the family legacy through the business as it is about the success of the next generation as an individual. The most important thing parents can do to foster competence and resilience in the next generation is to provide opportunities for children to develop an internal locus of control—a belief that they can control what happens in their lives; not that their lives are controlled by outside forces. For members of the next generation to understand that they can control their own outcomes, parents must 1) encourage active experimentation, 2) embrace failure, 3) ask children to identify multiple solutions to a problem, and 4) avoid micromanaging. A reduced emphasis on storytelling and a greater focus on providing a learning experience can make all the difference.

As a professor of family business, I have been teaching the “next generation” for almost 20 years. As you might expect, my role has led to many conversations with parents of these next-generation leaders. In almost every one of these conversations, questions about parental influence come up. The specifics of the question may vary from family to family, but the intent is the same: How can I get my son or daughter to…? A common theme in this question is sustainability. Parents are desperate to know how they can prepare their children for the problems they will inevitably face. The concern is as much about continuing the family legacy through the business as it is about the success of the next generation as an individual.

After listening to this line of questioning for many years without being able to give a definitive answer, I decided to look for one. Over the next several years, I interviewed the next generation of students in an attempt to understand what factors had the greatest influence on who they were, what they believed, and how they behaved. Although researchers should not begin such endeavors with ideas about what they expect to find, I fully expected that my findings would ease the concerns of my inquiring parents. I expected that the people with whom they had close relationships—especially their parents—would be a major source of influence in my students’ lives. I also expected to discover how parents could better interact with and teach the next generation to create competent, sustainable leaders.

I couldn’t have been more wrong. In interview after interview, my students rarely mentioned parents, grandparents, or even friends as defining factors in their lives. Instead, almost every student, without much variation, talked about how safe it was experiences have shaped who they are.

These “defining” experiences, while unique to each student, had something in common. They changed the way the student understood themselves and their ability to influence the world around them. One student talked about how they were given the freedom (as teenagers) to work unsupervised on marketing materials for the family business and how this changed the way they saw their own abilities. Another talked about moving away from home for school and how that experience helped them recognize the unique perspective that growing up in a family business gave them compared to their peers. In an extreme example, a student talked about a fire in the family factory. When the fire broke out, members of the leading generation were traveling and the student, as a teenager, had to deal with the immediate response to the tragedy. This student talked about how the experience helped them see their potential as a leader and solidified their desire to join the family business.

Where then are the parents in these stories? Do parents have no influence? Absolutely not. In most cases, parents are the orchestrators of these defining experiences. But it wasn’t the direct conversations, the training, or even the examples parents set that were most impactful; instead, it was the parents’ role in providing experiences as learning opportunities.

Not all experiences will lead to this kind of transformative learning, and some experiences can do more harm than good. How, then, can parents approach this process of providing learning experiences for the next generation that will foster competence and resilience? In 1989, developmental psychologist Emmy Werner completed a research project in which she studied 698 children from birth to age 40. The purpose of the study was to examine the impact of various risk factors, such as poverty, conflict, low education, etc. , over time. In two-thirds of children considered high-risk, the risk factors led to significant behavioral problems. In one third, however, children continue to lead productive lives despite significant risk factors. In essence, they were resilient in the face of adversity. One of the key factors that distinguished the productive children in the study was that they were able to develop internal locus of control. A component of personality psychology, locus of control refers to the degree to which individuals believe they have control over outcomes. An internal locus of control indicates a belief that one is in control of what happens in one’s life, and an external locus of control is a belief that external factors are in control.

Combining what I learned from my student interviews about the importance of experience with these findings about locus of control, parents who wish to instill resilience in the next generation should focus on providing learning experiences that develop an internal locus of control. This will require helping members of the next generation understand that they can influence their own outcomes. This is how:

Encourage active experimentation:

The world we live in is unpredictable and becoming more so. Members of the next generation must have the opportunity and capacity to learn through active experimentation—testing hypotheses and trying something to see if it works builds the belief that “I can figure it out.” Of course, parents who have more experience may be able to predict the outcome, but saving the members of the next generation from having to discover the “trouble” for themselves will only encourage an external locus of control.

Hug Failure:

I once asked a group of family business leaders how they use their wealth to “help” the next generation. One parent responded that wealth is used to increase the likelihood of success. Phrased this way, effort sounds positive, but what if I flipped that around and said that wealth is used to reduce or eliminate the possibility of failure? If resilience is the ability to recover from adversity, how is it practiced in the absence of failure? How will the next generation believe they are resilient and capable if every obstacle is removed?

Define several solutions:

The impact of failure on locus of control depends on how the next generation responds to failure when it occurs. Helping members of the next generation consistently identify multiple possible solutions to any problem can support the development of an internal locus of control. With only one decision, failure represents the end and a sense of inevitability. With multiple solutions, failure becomes one idea that didn’t work. The simple question: What will you try next? or What’s your next idea? can help members of the next generation focus on their reaction to the outcome rather than the outcome itself.

Avoid micromanaging:

Building an internal locus of control in the next generation requires parents to relinquish some of their own control. However, functioning families and family businesses require a certain level of structure. Parents working with the next generation risk fostering an external locus of control when supervision emphasizes tight control over every aspect of the process (process control). Instead, parents should focus on the desired outcome, providing clear direction to the next generation about expected outcomes, but allowing them to use their own ingenuity to figure out how to get there (outcome control). This approach builds an internal locus of control without compromising high standards or expectations.

As parents, we often feel that what we say or do will have the most impact on what our children believe and how they behave. Instead, my research shows that the experiences that parents provide to the next generation do shape who they are. Understanding this, business families that wish to build resilience into the next generation must focus on providing experiences that support an internal locus of control, or the belief that they, not external factors, have control over their life outcomes. When it comes to parenting the next generation, a reduced emphasis on storytelling and a greater focus on providing learning experiences can make all the difference.

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