Gen Y Rewrites the Rules for Family Biz
For family businesses, succession has never not been an issue. Experts estimate that fewer than 30% of family businesses make it to the second generation, and about 10% to the third. At any given time, about 40% of family-owned businesses face a transfer of ownership, says a report by the Small Business Administration.
But with the nation's 77 million baby boomers—the oldest of whom turned 60 last year—edging closer to retirement, family business is confronting a major demographic shift, as the largest generation in history prepares to hand the reins to the second largest, Generation Y (see BusinessWeek.com, 7/26/06, "A Transfer Tsunami for Family Biz"). It's a shift we focus on in several features in our BusinessWeek.com special report on family-owned businesses.
Raised in the late 1970s and '80s—the height of the self-esteem movement in parenting—Gen Y is an extraordinarily confident group, and its members are entering the workforce with high expectations for both themselves and their employers (see BusinessWeek.com, 5/4/05, "Welcome to the Gen Y Workplace"). Unlike previous generations, for Gen Y work-life balance isn't just something to strive for—it's a given. In a Universum survey of 37,000 recent college grads, 59% pegged balancing their personal and professional lives as their top career goal (see BusinessWeek.com, 2/13/07, "Work/Home Balance? It's Called Life").
Looking for Meaningful Work
But what does "work-life balance" mean for family business, where the distinction between the personal and the professional is blurred, if not nonexistent? For kids who grew up seeing their parents working 24/7, that could be a turnoff. But not necessarily, says Universum CEO Claudia Tattanelli.
That's because an interest in work-life balance doesn't mean Gen Y'ers are resistant to working long hours—they just want to work differently. "Feeling comfortable bringing your personality into the workplace, feeling at home at work, is what's important," Tattanelli says. That means tech-savvy Gen Ys expect to be able to take personal phone calls, chat on instant messenger, and listen to their iPods at the office, as long as they get the job done.
And a comfortable work environment isn't enough. Gen Ys also expect to be doing meaningful work right away, says Bruce Tulgan, author of Managing Generation Y and founder of Rainmaker Thinking, a management-training company.
While Tulgan says it's tempting for boomer parents to think, "I had my period of youthful rebellion, but I kept my head down, paid my dues, and climbed the ladder," those attitudes seem outdated to a generation that has seen the crumbling of once-reliable institutions. "They know the world is an uncertain place," Tulgan says. "If they look at the family business and the work doesn't look interesting or challenging enough, they're not going to want to make that kind of long-term commitment."
The good news is that overall Gen Y'ers get along better with their parents than previous generations did. In a recent Gallup poll, more than 90% reported being very close to their parents. In 1974, more than 40% of baby boomers said they would be better off without theirs. And although a lot of Gen Ys don't feel an obligation to work for their parents, many find they enjoy it.
Take the MacAskill family. Chris MacAskill, 53, is a serial entrepreneur with several successful startups to his credit, including Fatbrain.com, an early Internet bookstore that later sold to Barnes & Noble (BKS). His son, Don MacAskill, 30, a software developer, says he grew up with startups in his blood.
Don worked at two unrelated startups before signing on for a short-term project at Fatbrain.
While he was there, he helped develop a technology that was spun off into a new company, MightyWords, with his father at the helm. Don later returned to work full time for MightyWords while he regained his bearings after a failed startup attempt of his own.
Shaking the Hierarchy
Although Don says he had slight reservations at first (would other employees suspect nepotism?), the two complemented each other well. "We had a lot of fun working together," he says. "It was just a really great match." Other families haven't been so lucky, of course.
Some family businesses have already begun to adapt successfully to better suit the interests and needs of the younger generation (see BusinessWeek.com, Summer, 2006, "Room to Grow"). But Linda Gravett and Robin Throckmorton, authors of Bridging the Generation Gap, say in the future we might also see more companies turning the traditional family-business hierarchy upside-down.
Numerous studies of fathers and sons in family business have shown that while the younger generation is typically eager to assume responsibility, company founders have difficulty giving it up. Experts say Gen Ys are especially eager to prove themselves, but baby boomers are in no hurry to retire (see BusinessWeek.com, 1/16/07, "Lure of Entrepreneurship Beckons Boomers").
A 2005 Merrill Lynch (MER) survey reported that 76% of boomers intend to keep working in their retirement years. In the future, Gravett and Throckmorton predict, we will see Generation Y starting more companies of their own and bringing their parents on board as employees or consultants.
That's what eventually happened with the MacAskills. Although Chris swore up and down that he was done with high-tech startups after seeing two of them through the dot-com bust, in 2002 his son convinced him otherwise and hired him as president of what's now the profitable photo-sharing site SmugMug.
Today, SmugMug is a flourishing family business—headquartered at Don's parents' house in Mountain View, Calif. Don's father, mother, aunt, and three siblings are all employees, but Don says he doesn't have strong feelings about building a family dynasty for his 14-month-old twins to inherit.
"In this day and age, I don't think forcing your kids to take over your business is a good idea if it's not something they're passionate about," he says. "But if I'm still running it and they're still passionate and excited about it in 20 years, I would be thrilled."
For more features in this special report, including a behind-the-scenes look at family-owned business Martin Guitar, a slide show on why the family farm is an attractive option for entrepreneurs again, and a podcast on opportunities for innovation in succession planning, click here.